Mutual Funds = Massive Failure

Click here for the ugly facts on mutual fund performance in 2008.

"The average U.S. stock mutual fund fell a record 39 percent in 2008, according to Morningstar Inc. in Chicago. The Standard & Poor’s 500 Index declined 37 percent including reinvested dividends.

Of 4,934 diversified U.S. stock funds with more than $100 million, none eked out a gain in 2008, Morningstar data showed."


And as is often the case, last year's hero attracts most of the new money and becomes this year's goat.

"Kenneth Heebner’s CGM Focus Fund, the industry’s top performer in 2007, dropped 48 percent last year as the worst market for stocks in seven decades humbled the best- known managers."


In other news, the top stock cop seems to now side with us.

"The SEC's office of economic analysis is still evaluating data from the temporary ban on short-selling. Preliminary findings point to several unintended market consequences and side effects caused by the ban, he said.

"While the actual effects of this temporary action will not be fully understood for many more months, if not years, knowing what we know now, I believe on balance the commission would not do it again," Cox told Reuters in a telephone interview from the SEC's Los Angeles office late on Tuesday. "The costs appear to outweigh the benefits."

Less liquidity in the markets was one of the unintended consequences, experts have said."


On October 2nd 2008 we wrote :

"History teaches us that the wicked and the dumb need scapegoats and thus sheeple come to believe that shorts are somehow at fault for all of this, yet the markets continue to collapse despite the shorting ban. If there had been shorts covering, the damage in the markets today and on Monday would not have been so extensive.

But pigs are pigs, and they do piggish things, thus the shorting ban was today extended which further prohibits sorely-needed liquidity from entering the market. Instead it goes into put options while the retirement dreams of millions have trouble finding a bid.

The fact is that shorts provide extensive research and put their own money where their informed sentiments are, yet they are villified as crooked rumor mongers. By contrast our "leaders" spout off with no clue or qualification whatsoever and put the money of innocent taxpayers into a black hole, all the while spreading the very confusion and fear which causes the selling in the markets, and they are cheered as good men of action.

How low can we go? Much lower, and so we shall go."


With the above chart in view and the events of 2008 in mind, may we emphasize that in May of 2008 we wrote :

"While the DJIA has recently tentatively breached 13000, we continue to see significant resistance above that level thus we have not turned away from our bearish stance and we proceed with caution since we continue to believe that the general markets, commodities, and the majority of individual stocks are considerably overvalued and overbought at present."

"We respectfully suggest investors do not put too much on the line based merely on hopes of eternal share price increases and hype. Check the stock listings from 10 years ago and notice that many - most in fact, if small caps - of those companies are now long gone along with the funds of those who held the shares too long."


And in September of 2008 we reiterated :

"We will not be fooled into the idea that these markets offer "investment opportunities" or "value"."