Gold

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rightway's picture
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Joined: 2004-12-02

Gold is going to $800

htowntiger's picture
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Joined: 2006-04-06

So is gas.

skeedaddy's picture
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Joined: 2005-06-16

so what are you doing about it?

7GOD63's picture
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Joined: 2006-01-29

Good I own a few rings and chains

Indyone's picture
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That's a fairly safe statement, but when?  Six months or fifty years?
As far as the near future goes, I'll believe that when I see it...give me some compelling arguments about why this is likely...I would say that lack of significant inflation is arguing against such a run-up.

rightway's picture
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Indyone wrote:That's a fairly safe statement, but when?  Six months or fifty years?
As far as the near future goes, I'll believe that when I see
it...give me some compelling arguments about why this is likely...I
would say that lack of significant inflation is arguing against such a
run-up.

Great response.  Yeah man, that freaks me out!  Lets start
with looking at the relationship between Gold and the Dow average since
the early 1900's.  Where should gold be today if the spread is the
same?

Indyone's picture
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If the run-up was proportional, my guess is that gold would be a lot higher than $800 even, but the question in my mind is, SHOULD it appreciate proportionately?  I'm thinking no, since we're comparing the change in value of a relatively scarce commodity to, essentially the rate of increase in corporate earnings over the years, and those two variables aren't all that inter-related, unless the company happens to be a mining company.
Now if you adjusted the price of gold for inflation, I'm guessing that would produce a value that would be closer to a fair value, but I don't have that information at hand to be able to make a judgement call.  Interesting stuff, but all I have to contribute is an educated guess, based on pretty thin knowledge, since gold isn't my area of expertise.

rightway's picture
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Joined: 2004-12-02

No, Gold should not track with Equities in the short run.  In
fact, we own it as hedge, as well as a non-correlated asset.  But,
we cannot argue with history.  Eanings growth?  I like it, in
fact I live by it.   What about Earnings decreases?  Do the
bear markets (Gold going up), compensate for the earingins increases to
make your position valid?  I like your response Indy.

troll's picture
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Joined: 2004-11-29

What about the Chinese and their demand for gold, since Asians historically love it as a store of value, and are also big consumers of golf for jewelry?How about folks in the world who are flush with petro dollars who are looking for an alternate store of value for the very long term?What about gold as the 'canary in a coal mine' as it relates to unmeasured inflation(health care, education, etc.), and the possibility that there is simply too much liquidity sloshing around in the U.S. and Japan?I offer these points despite the fact that I'm hardly a gold bug over the years.  I did make a couple of nice $$ in the sector last year, but took my profits too quickly.Ohhh.....my head is starting to hurt......

Indyone's picture
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My head is hurting too...the above posts pretty much sum up my limited store of knowledge on gold.  One last point, though...when everyone starts saying that something is going to the moon, that's when I make my exit.  I've heard a lot about gold going higher recently and it may very well do that, but I'm a contrarian by nature, so I'm backing away from this one.
Good stuff, but it's getting over my head...

Malcolm's picture
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Along with gold check out ETFs for commodities and crude oil and another that pegs the euro v's the dollar.  I like all of them.
DBC, WTI, FXE
Isn't GLD taxed at 28%   Anyone know for sure? 

Cowboy93's picture
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I say it hits $400 before $800.

troll's picture
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Indyone wrote:My head is hurting too...the above posts pretty much sum up my limited store of knowledge on gold.  One last point, though...when everyone starts saying that something is going to the moon, that's when I make my exit.  I've heard a lot about gold going higher recently and it may very well do that, but I'm a contrarian by nature, so I'm backing away from this one.
Good stuff, but it's getting over my head...This is the same thing that has been going through my mind...that mostly the easy $$ has been made.  Let the silly latecomers take all the risk.

Indyone's picture
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Now what do all the experts think?!!!

Revealer's picture
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Indyone wrote:Now what do all the experts think?!!! Guess it all depends on whether or not you think Bennie and the feds are going to be able to stop inflation. I'm not sure they have that ability any more.

Soothsayer's picture
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Joined: 2005-02-24

You may have another buying opportunity at $600/oz. sometime in the next month.

troll's picture
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Indyone wrote:Now what do all the experts think?!!!
 
I have to admit I so hate the ethos of the average goldbug, the incessant negativity, the conspiracy gibberish, the "expert" status they claim based on nothing, that I have a hard time not having that distaste color my view on the subject. In that other thread about the worst clients, I’d have to list goldbugs at or near the top of my list. If you’ve ever talked to one you’ll know what I mean.<?:namespace prefix = o ns = "urn:schemas-microsoft-com:office:office" />
 
Having said that, I see gold as not much more than a roulette wheel. The same “Chinese demand/inflation gone wild/Washington’s crazy spending/panic among equity investors” rationale has been in place for 30 years and gold was dead, dead, dead. Based on that, I don’t bother with it and a single issue, but instead fold it into the natural resources and managed futures part of a client’s portfolio. I’d like to say that’s a reason approach on my part, but it could be my hatred of goldbugs talking….
 

dude's picture
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Managed Futures makes money by playing that roulette wheel you so succinctly disparage, yet you include it in your clients portfolios?  Sounds like your contradicting yourself MikeB.  And here's news for you (someone who has disparaged technical analysis in the past), almost every single managed futures manager out there (and certainly all the ones available under Morgan's platform) use technical analysis as their primary determinant for trades.  Maybe it's the 5% trails that influences the contradiction? 
As far as evaluating Managed Futures, how exactly do you determine what the hell you own, or what the hell they are doing with the $$.  All of the MANY prospectuses and info sheets I collected through the years have never quite answered this.....yes, yes I know they have 'proprietary trading algorithms'....whatever man. 
I think if you are consistent with the investment philosophy you believe in that you would consider Managed Futures a 'roulette wheel'. 
Oh and leave the 'studies' that show managed futures lower volatity at home, they are all bullsh*t since they average the annual volatility, which presents a VERY rosy picture of this investments volatility......I had a client who saw a 30% drop in one month and they were in a 'conservative' managed futures fund.  Needless to say, I took all the monthly returns (the kinds my clients see on their statements ) and did my own 'study' and found that these investments are much more volatile than promoted.  My client was confused why I would tell them that this investment would lower the volatility of her portfolio (yes it was 10% of the portfolio) and I had to dance with the "Well over Looong periods of times they generally perform in non correllated...blah blah blah" spiel.  Clients don't speak the slick, marketing oriented, numbers tailored to fit the case language that Wall Street speaks....when this sh*t falls apart on them because they had a false impression of what these products are designed to do (5% trails is one hint ) it's you they trusted to shoot 'em straight.
I honestly don't know how you can criticize VA's so vehemently, but turn a blind eye to managed futures for retail investors.  5% trails man?!  not 5% onetime commission and .25% annually.  Costs on these products many times will top 9% annually!  AND they are HARDER to understand since you can't DEFINITIVELY tell the client exactly how they will make money except for "Well, if the managers proprietary trading algorithm' works......"
***I'm not debating the merit of managed futures funds with the High Entry minimums and low annual fees that are marketed to pensions and those who have the capital (usually $500k for the 'reasonable' cost funds) to participate, I'm talking your average HNW retail client here......but I still think it's a roulette wheel never the less.

blarmston's picture
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Joined: 2005-02-26

MikeyB, I believe Dude just called you out... A response?????

Revealer's picture
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There are ways to be in commodities (not futures) through ETFs, commod. index funds (I like Pimco Commod). Pretty low cost and YES, non-correlating. (Don't pay 5% trails however.)

troll's picture
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dude wrote:
Managed Futures makes money by playing that roulette wheel you so succinctly disparage, yet you include it in your clients portfolios? Sounds like your contradicting yourself MikeB.

Sounds like you're making an unfounded claim about managed futures to me. If you really equate the trading of a team of futures managers to a single broker or client deciding when gold is a good buy or not we're just not going to agree about much. It also sounds like you have some anger issues….
dude wrote:
And here's news for you (someone who has disparaged technical analysis in the past), almost every single managed futures manager out there (and certainly all the ones available under Morgan's platform) use technical analysis as their primary determinant for trades. Maybe it's the 5% trails that influences the contradiction?

Where to begin.... no, Dude, there are no 5% trails on managed futures....and there are net worth restrictions. I use them because they're a noncorrelated asset class, they diversify portfolios and they have added a great deal of Alpha (not to mention money) to client's portfolios. I fully understand many use T/A as part of their decision making process, I'm also aware most also use relative valuation and hedging strategies. I don’t know of, or use any that work on a 100% T/A basis. I further find a world of difference between a team of people who do nothing but trade futures and an individual broker who tries, on top of all their other duties, to be an futures trader as well.
dude wrote:
As far as evaluating Managed Futures, how exactly do you determine what the hell you own, or what the hell they are doing with the $$. All of the MANY prospectuses and info sheets I collected through the years have never quite answered this.....yes, yes I know they have 'proprietary trading algorithms'....whatever man.

I evaluate them based on their performance history, their correlation to other assets, their volatility and the markets they work in. I don’t know day to day what positions they take. That’s just like most alternative investments.
dude wrote:
I think if you are consistent with the investment philosophy you believe in that you would consider Managed Futures a 'roulette wheel'.

Again, I don’t see quite how you liken a team of managed future managers, who have been doing this business for decades and have lengthy track records to an individual or broker trying to guess which way gold prices are going to tomorrow. I think you’ve conveniently repackaged my investment philosophy to create a straw man here.
dude wrote:
Oh and leave the 'studies' that show managed futures lower volatity at home, they are all bullsh*t since they average the annual volatility, which presents a VERY rosy picture of this investments volatility......I had a client who saw a 30% drop in one month and they were in a 'conservative' managed futures fund. Needless to say, I took all the monthly returns (the kinds my clients see on their statements ) and did my own 'study' and found that these investments are much more volatile than promoted.

OK, Dude, I’ll drop the studies of Nobel Prize winners and take your word for it instead. BTW, what’s your claim that monthly or quarterly volatility isn’t tracked or included in studies come from? My experience has been the exact opposite. My clients were aware of both the monthly and annual volatility. I'm pretty surprised you hadn't looked at month to month and qtr to qtr volatility yourself before you sold them. I also really hope you hadn't told the client hers was a "conservative" hedge fund.
 
dude wrote:
My client was confused why I would tell them that this investment would lower the volatility of her portfolio (yes it was 10% of the portfolio) and I had to dance with the

Seriously, Dude, you found yourself having a hard time explaining that lowering volatility doesn’t mean that every single month or quarter is a smooth ride? How did you ever fall into that trap and why did you let a client shorten their investment time horizon to month to month?
By that thinking you couldn’t even explain that a 10% addition of equities to a 100% bond portfolio lessens volatility, and you don’t doubt the facts there, do you?
dude wrote:
"Well over Looong periods of times they generally perform in non correllated...blah blah blah" spiel. Clients don't speak the slick, marketing oriented, numbers tailored to fit the case language that Wall Street speaks....when this sh*t falls apart on them because they had a false impression of what these products are designed to do (5% trails is one hint ) it's you they trusted to shoot 'em straight.

Dude, you’d do much better debating the merits of managed futures if you didn’t grossly exaggerate the trails (and insinuate that they‘re sold only because of the pay out), didn’t try to argue that managed futures are supposed to make every month a smooth ride and didn’t pretend that (at least in the case of the client you’re telling us about) you didn’t sell the thing improperly to the client.
Again, seriously, and I’m not trying to attack you here as you’ve done to me, but did you really explain managed futures to this client if it came as a shock to her that they’re very, very volatile? Did you show her the history, month to month and quarter to quarter of the volatility? If you had, and if you’d used no more than 5-10% of her portfolio in managed futures you wouldn’t have had to tap dance because it wouldn‘t have come to her as a shock.
Your story doesn’t sound any different to me than a bank broker who had a former CD client have a fit because the bond fund they sold them showed some volatility that the broker hadn’t explained properly in advance because it might have put the kibosh on the sale.
 
dude wrote:
I honestly don't know how you can criticize VA's so vehemently, but turn a blind eye to managed futures for retail investors.

Wow, again, where to begin. First off, I think you’ve mischaracterized my criticism of Vas. I have clients I’ve sold VAs to, so I’m not against them as a product when correctly used. Secondly, VAs are not a separate asset class. They are a vehicle to OWN an asset class and often they’re sold in a less than ethical manner.
Managed futures, OTOH, ARE an asset class. Moreover, I don’t know who you’re talking about when you say “retail investor”, since they have a $50k minimum and shouldn’t be more than 5-10% of a client’s portfolio. That means you’re using them with clients with $500k- $1MM portfolios.
dude wrote:
5% trails man?! not 5% onetime commission and .25% annually. Costs on these products many times will top 9% annually!

I don’t know where you get your 5% figure, but I wish that was the deal. Managed Futures, like hedge funds and other alternative investments ARE expensive. Are you arguing against all of them? Usually the rates are 2% management fees plus 20% of the profits. Are you telling me HNW retail investors should own any alternative investments?
 
dude wrote:
AND they are HARDER to understand since you can't DEFINITIVELY tell the client exactly how they will make money except for "Well, if the managers proprietary trading algorithm' works......"

 
If you can’t explain it, don’t sell it. It’s really not that tough a principle, Dude. That means you won’t be selling anything that’s not cheap, easily understood and not 100% transparent. That then means that none of your HNW clients will own any form of alternative investments.
My clients aren’t as much interested in their (managed futures) day to day holdings and functions (but they do know the markets they work in and they strategies they employ) as they are what 5 or 10% of managed futures have done for their portfolios in terms of absolute performance and diversification. The numbers some of these guys have racked up the past 5 years is just amazing.
dude wrote:
 
***I'm not debating the merit of managed futures funds with the High Entry minimums and low annual fees that are marketed to pensions and those who have the capital (usually $500k for the 'reasonable' cost funds) to participate, I'm talking your average HNW retail client here......but I still think it's a roulette wheel never the less.

 
Well, it really sounds more to me like you didn’t sell them to the right people and didn’t understand them well enough yourself. I’m not sure what sort of net worth you’re thinking of when you’re talking about “your average HNW retail client” but I think they’re not only appropriate for portfolios above $1MM, but they’re an integral part.
On top of everything else, I wonder what this burst of anger is all about….

troll's picture
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Revealer wrote:There are ways to be in commodities (not futures) through ETFs, commod. index funds (I like Pimco Commod). Pretty low cost and YES, non-correlating. (Don't pay 5% trails however.)
 
You're right, they're not in futures, and thus not the same thing. http://finance.yahoo.com/q/hl?s=PCRDX
 
 
 

Revealer's picture
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Whew! MikeB, you must type REALLY fast.

troll's picture
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Revealer wrote:Whew! MikeB, you must type REALLY fast.
 

troll's picture
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Dude,
In the interest of full disclosure, and now that I've had a chance to review the details of payouts and minimums;
 
Depending on what series you chose, trails run from 1% to 4% (single or multi manager funds) upfront commissions from from 0% to 3% and minimum investments run from 5k to 20k.
 

jonesescapee's picture
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What would Alan Skrainka(Onionhead) say about all this?

stokwiz's picture
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The run up in gold reminds me of the internet company craze right before march of 2000.
Think about it- Gold has no earnings, pays no dividends (unless maybe a mining company),it is pure speculation. When clients discuss this with me, I point out where gold was 20 years or so ago- $800 an ounce. Only after an asset has had such a great run up in price does it gather more and more media attention and buying interest- then it is too late to jump on the bandwagon.
Stok

Indyone's picture
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My observation on gold relates to the fact that this thread had gold going to $800 and another poster in another thread put $1,000/ounce on gold.  Given the run-up at the time of these posts, I had some personal doubts about how much further gold would go in the near future.  It did push over $700/ounce, but has since fallen back to about $620 as I write.  History shows that when the pundits start predicting prices are going to the moon (stocks, gold, oil & gas, interest rates, etc.), just as often, that is a sign of an overheated market and prices eventually fall back to earth, leaving the folks who bought after hearing very bullish predictions, holding the bag.
I'm not a fan of gold in general, and with the exception of a few mining stocks in some portfolios (which I apparently sold too early), I missed much of the gold rush.  Given gold's history, though, I'm sure not interested in getting on the bandwagon after seeing the recent 50-60% appreciation.

dude's picture
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When I was at morgan trails ran from 3% to 5% MikeB.....things may have changed though.  I applaud your spin job MikeB, it was a riot.  No anger issues here, just laughing my arse off! 
MikeB said:
I don’t know where you get your 5% figure, but I wish that was the deal. Managed Futures, like hedge funds and other alternative investments ARE expensive. Are you arguing against all of them? Usually the rates are 2% management fees plus 20% of the profits. Are you telling me HNW retail investors should own any alternative investments?
Managed futures at morgan stanley do not charge the same way hedge funds do, you should know this MikeB (at least the funds that I worked with).  In the prospectuses you will see that they are charging in the neighborhood of 7% to 9% annually........you seriously think this is justifyable?
The 5% figure is the figure I got from the some of the funds I was working with (regretably) at MORGAN STANLEY...it was the ACTUAL trail, not a one time commission.
As far as the rest of your post....we can agree to disagree....I still believe this is  a product that is mostly hype and profit for the firm (and you) and the client is getting reamed.  I also know these products are much more volatile than the marketing literature would have you believe. 

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dude wrote:
When I was at morgan trails ran from 3% to 5% MikeB.....things may have changed though.  I applaud your spin job MikeB, it was a riot.  No anger issues here, just laughing my arse off! 

Glad to make you happy, Dude. I trust someday you'll explain the "spin"...you made completely unfounded claims, all with a lot of anger and "moral outrage" and I did my best to be gentle with you in response.
dude wrote:
MikeB said:
I don’t know where you get your 5% figure, but I wish that was the deal. Managed Futures, like hedge funds and other alternative investments ARE expensive. Are you arguing against all of them? Usually the rates are 2% management fees plus 20% of the profits. Are you telling me HNW retail investors shouldn't own any alternative investments?
Managed futures at morgan stanley do not charge the same way hedge funds do, you should know this MikeB (at least the funds that I worked with).  In the prospectuses you will see that they are charging in the neighborhood of 7% to 9% annually........you seriously think this is justifyable?

You weren't right about the trails, you're not right about this either. I believe you're misquoting what are called "break-even" points which is how much the fund has to make to overcome ALL fees, including the 2% management fee, trading costs of the futures contracts themselves, etc.. They do, in fact, carry fees exactly like a hedge fund, Dude, 2 and 20.
 
dude wrote:The 5% figure is the figure I got from the some of the funds I was working with (regretably) at MORGAN STANLEY...it was the ACTUAL trail, not a one time commission.
If you say so, Dude. I've NEVER seen a 5 % trail. BTW, most of the managed futures funds have outside managers, and the fee structure is what you'd see of managed futures anywhere.
As to "regretably", all I can tell you is you mis-sold a vehicle you didn't understand, Dude. I mean really, a "conservative managed future"? You really had to explain again, AFTER the sale that diversification doesn't mean every month or quarter is a smooth ride? You didn't see month to month and qtr to qtr volatility histories yourself before you sold them and you reject MPT studies about adding managed futures to diversify? I have a hard time understanding your anger here.
 
 dude wrote:As far as the rest of your post....we can agree to disagree....I still believe this is  a product that is mostly hype and profit for the firm (and you) and the client is getting reamed.  I also know these products are much more volatile than the marketing literature would have you believe. 
Dude, you're so far off the mark here that it's amazing. The marketing material practically says "don't buy this, it's too volatile". It's sold ONLY to HNW clients and ONLY for 5-10% of a portfolio, and if you and your clients missed the amazing gains (I'll get you performance numbers next week) on, for example Campbell (and outside manager), you cheated them.
In fact, name the fund you used and the time frame and I'll be happy to report back here with performance numbers. 
Oh, and btw, I own some managed futures, and I'vd been very, very happy with them. 

dude's picture
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mike.......It was 3 years ago (can't remember the fund names) I was working with the funds, yes they did pay 5% and it was one of 4 funds offered by Morgan that paid the 5% trail.  The same managers are offered at AGE (although with different fund names) and last I looked they were still paying 5% as well.  the 9% to 11% (I looked at another funds prospectus and these are real numbers) breakeven cost is pretty typical.  I don't know of any hedge funds that have an expense ratio of 9% to 11%......although I'm not too sold on the hedge fund idea anyway, which like managed futures I think are oversold.
As far as your accusation that I missold this product.....I sold it according to the way I was 'told to' and the sales literature promoted.  Obviously I learned my lesson when it comes to selling what the house wants me to sell.  Definitley the beginning of what I consider a healthy skepticism of Wall Street.
All I'm saying is that Managed Futures are often "missold" MIkeB, but it has more to do with the glossy sales literature that shows volatility bars relative to stocks which I believe are misleading.......if you look at the beautiful brochure Morgan puts out showing the up and down years it shows a volatility that looks to be slightly less volatile than stocks when in actuality the returns have been much more volatile than stocks. 
I don't understand why challenging you has to be spinned into some accusation about anger or moral outrage......effective spin tactic.  I have absolutley no anger about your choices MikeB....in fact I don't really care if you screw your clients or not (except for the effect it has on the reputation of our industry of course).  I'm just pointing out what I believe to be a contradiction in attitude relative to some of your criticisms of VA's like: high fees, complexity, usually benefits the broker more than the client, often missold. 
I'm sure you have clients who the product is appropriate for.....I have less issue with the product itself as opposed to the way it is presented in the sales literature which is deceptive in my opinion.
I'm putting this one to rest.  peace.

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dude wrote:
mike.......It was 3 years ago (can't remember the fund names) I was working with the funds, yes they did pay 5% and it was one of 4 funds offered by Morgan that paid the 5% trail.

I don't know what to tell you Dude. I've never seen 5% and I've given you the numbers. I don't know if you're trying to suggest things have changed or that you're saying I'm lying to you. BTW, there are three series of MFs and at least 15 funds.
dude wrote:
The same managers are offered at AGE (although with different fund names) and last I looked they were still paying 5% as well.

That's interesting... after making a big thing of MORGAN STANLEY (in all caps, as from your post) selling these things at 5%, you now tell us AGE does the same and at 5%, no less. I don't know what to make of that, but again, I gave you the real, current numbers. Feel free to call your old pals at MS so they can verify for you.
dude wrote:
the 9% to 11% (I looked at another funds prospectus and these are real numbers) breakeven cost is pretty typical.

I looked at a prospectus today (granted, not one from all three series) and the break even cost of 3.5%. I have no idea what you're getting 9% to 11% from, but you should consider, again, the trading costs associated with managed futures. You might also, while you're fixated on costs, to look at returns as well.
dude wrote:
I don't know of any hedge funds that have an expense ratio of 9% to 11%......although I'm not too sold on the hedge fund idea anyway, which like managed futures I think are oversold.

Hedge funds and that managed futures use the same 2 and 20 structure. There are additional costs in MF due to much greater trading costs. As to whether or not hedge funds and managed futures are "over sold", or if you have the expertise to have an opinion more important than Nobel Prize winners, I'll leave to others to determine. My clients and I have been very, very happy with returns.
dude wrote:
As far as your accusation that I missold this product.....I sold it according to the way I was 'told to' and the sales literature promoted.

Just what sales literature told you to sell managed futures in such a way as to leave a client with the impression that they're "conservative" or to expect that diversification means every single month and every single qtr is a smooth ride? You mean to tell me you hadn't personally looked at month to month and qtr to qtr volatility until AFTER you sold them and a client complained?
BTW, I offered to bring performance details here for all to see if you gave me the name of the MF and the time frame.
dude wrote:
Obviously I learned my lesson when it comes to selling what the house wants me to sell. Definitley the beginning of what I consider a healthy skepticism of Wall Street.

This one's a mystery. It's obvious you mis-sold them, it's just as obvious that the absolute returns of MFs as an asset class have been exceptional and it's even more obvious that it isn't just "the house" (since there are plenty of non "house" managed futures and hedge funds sold, in fact, very few of the ones we have are MS managed) “wanting you” to sell them.
dude wrote:
All I'm saying is that Managed Futures are often "missold" MIkeB, but it has more to do with the glossy sales literature that shows volatility bars relative to stocks which I believe are misleading.......if you look at the beautiful brochure Morgan puts out showing the up and down years it shows a volatility that looks to be slightly less volatile than stocks when in actuality the returns have been much more volatile than stocks.

You’re working on a pattern here, Dude. You jump up and down about a 5% trail which isn’t fact and now you’ve turned your attention to some mythical brochure that downplays managed future volatility. You know, you can paint a firm you don’t work with as evil as you like, but you should at least acknowledge that the NASD, in reviewing sale pieces, isn’t going to let any firm lie about the historic volatility of an asset class, much less managed futures, much less something only sold to HNW clients. You don’t have to agree with historic volatility, you’re entitled to your own opinion, but not your own facts.
 
dude wrote:
I don't understand why challenging you has to be spinned into some accusation about anger or moral outrage......effective spin tactic.

You must be joking. Your post was so filled with rage that there was spittle on my screen as I read it. It was filled with accusations that I sell an asset class for no reason but RTB (return to broker) and that I was a hypocrite and a liar. You managed to do all that by twisting first, my past expressed opinions and then piling on disinformation about managed futures.
 
dude wrote:
I have absolutley no anger about your choices MikeB....in fact I don't really care if you screw your clients or not (except for the effect it has on the reputation of our industry of course).

“…in fact I don’t really care if you screw your clients…” yeah, no anger there….
dude wrote:
I'm just pointing out what I believe to be a contradiction in attitude relative to some of your criticisms of VA's like: high fees, complexity, usually benefits the broker more than the client, often missold.

Pretty lame debating method there, Dude. Create a straw man, then tear it apart. My criticism about VAs has been that they’re often fraudulently sold. “You need the guarantee” VAs are NOT an asset class. They’re a WAY to own an asset class, and an expensive way often sold with fear and no explanation of the costs. Managed futures (and hedge funds, for that matter) ARE an asset class, of alternative investments and whether you care to believe the research (and not MS research, btw) they diversify portfolios.
dude wrote:
I'm sure you have clients who the product is appropriate for.....I have less issue with the product itself as opposed to the way it is presented in the sales literature which is deceptive in my opinion.

I have no idea what sales literature you’re talking about. I’ve yet to see anything involving any alternative investments that didn’t essentially say “don’t buy this”.
I think your big gripe here comes from a combination of your bad experience with managed futures (and again, your story screamed about a broker not knowing the product and not selling it properly. Seriously, did you sell it so that the client thought being diversified meant no part of her portfolio was ever down in any given month?) your continuing crusade on the subject of fees/pricing and your repudiation of all the MPT research that talks about diversification and non-correlating asset classes.

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MikeB said:
“…in fact I don’t really care if you screw your clients…” yeah, no anger there….
Reply:
Actually my words were "in fact I don’t really care if you screw your clients.................OR NOT"....attitude is indifference not anger..big difference, the spittle you envision is your own little delusion which you should keep to yourself.
It's called SPIN Mike to just clip the pieces you want to support your case. 
This was not an issue with Morgan Stanley but Managed Futures (yet another desperate SPIN attempt which we have all come to expect), the numbers are absolutely accurate, I wish I remembered the fund, but I can't so I'm not wasting my breath anymore.  I really don't care if you believe me....OR NOT (just making sure your are picking up on the indifference there MikeB, remember the world isn't out to get you).
It is becoming clear that your own defensiveness makes it impossible to have a real conversation....you just dance to other 'imagined' issues and twist n' spin and accuse others of what are your own dellusional imaginings that have nothing to do with the truth of the matter. 
Reading your last paragraph is so laughable and expected that I've got to end this before I start to get angry.

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rightway wrote:Gold is going to $800
When? 

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dude wrote:
MikeB said:
“…in fact I don’t really care if you screw your clients…” yeah, no anger there….
Reply:
Actually my words were "in fact I don’t really care if you screw your clients.................OR NOT"....attitude is indifference not anger..big difference, the spittle you envision is your own little delusion which you should keep to yourself.

Sorry, Dude, but I don't see how "or not" changes the tone. I leave it to others to judge whether or not your original post with the ALL CAPS parts and the accusations was filled with anger or not.
dude wrote:
This was not an issue with Morgan Stanley but Managed Futures (yet another desperate SPIN attempt which we have all come to expect),...

Not an issue with MS? I guess I just imagined this  "...the funds I was working with (regretably) at MORGAN STANLEY..." maybe the caps weren't meant to make a point...
dude wrote:
 ...the numbers are absolutely accurate, I wish I remembered the fund, but I can't so I'm not wasting my breath anymore. 

OK, Dude, the fund you can't remember charges just what you say, and I've been lying to you.... 
BTW, I've been unable to find one that has had a 30% drop in a single month as you mentioned. 2QTR of 2004 was rough for many, and there's nothing like a 30% loss there.
dude wrote:
It is becoming clear that your own defensiveness makes it impossible to have a real conversation....

Why on Earth would I be defensive with a post or two with this tone....
.....And here's news for you ......Maybe it's the 5% trails that influences the contradiction?  ..... I think if you are consistent with the investment philosophy you believe in that you would consider Managed Futures a 'roulette wheel'. ... Oh and leave the 'studies' that show managed futures lower volatity at home, they are all bullsh*t ...  .....I honestly don't know how you can criticize VA's so vehemently, but turn a blind eye to managed futures for retail investors.  5% trails man?! 
Yeah, that's just the language that stimulates a thoughtful conversation. Just twist the other guy's prior posts and then insinuate hypocracy and a screw-the-client attitude...
BTW, I thought you might enjoy this line from the "glossy marketing material" you were harping about "Managed futures investments are speculative, involve a high degree of risk, have substantial charges and are suitable only for the investment of the risk capital portion of an investor's portfolio."
There's also a MONTHLY chart showing rate of return on the vertical axis and volatility on the horizontal axis. It shows managed futures well to the right and above a 100% S&P 500 portfolio and even above a 100% EAEF portfolio. The marketing piece itself is dated "revised 03/03".

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The comment:

dude wrote:

This was not an issue with Morgan Stanley but Managed Futures (yet another desperate SPIN attempt which we have all come to expect),...

Not an issue with MS? I guess I just imagined this  "...the funds I was working with (regretably) at MORGAN STANLEY..." maybe the caps weren't meant to make a point...
Reply:
Look this was to emphasize that the products I was working with are from the firm you work at not that Morgan is inherenly bad.
Anyone who has managed futures offered at their firm can look it up and I'd bet there are a few offerings at most wirehouses that have 5% trails.  I'm not claiming that your lying or any other absurd SPIN that your hyper defensiveness seems to manifest.
Anyway...this is a waste of time. ~sighs~

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I remember the fund family I was using......
I think I was using the Spectrum series funds maybe the "Select" or Global product MikeB.....check it out and let me know if they are still charging the 5% trail......and yes my clients account was down by around (not exact but very close) 30% in a little over a month or so. 

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MikeB said:
BTW, I thought you might enjoy this line from the "glossy marketing material" you were harping about "Managed futures investments are speculative, involve a high degree of risk, have substantial charges and are suitable only for the investment of the risk capital portion of an investor's portfolio."
Reply:
The difference is what they choose to put in fine print and what they choose to emphasize with 'glossy color graphics' MikeB.  I have kept it really simple for you.......I'm not criticizing the disclosure MikeB, I'm not criticizing Morgan Stanley (no caps this time), I'm not even criticizing Managed Futures all that much (just a little)....I am criticizing the fact that these products are oversold because of enormous trails and that the marketing of these products is a lot of hype and 'number massaging'.  From some of the passionate criticisms I have seen you dish out to those who sell VA's for similar reasons (high commissions, obscure complicated product, overly generous representation of the benefit of the product).
That's it......I think it's obvious we disagree which is no suprise.

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Oops I didn't finish:From some of the passionate criticisms I have seen you dish out to those who sell VA's for similar reasons (high commissions, obscure complicated product, overly generous representation of the benefit of the product) I would think you might be more skeptical of these products  that's all.

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dude wrote:Oops I didn't finish:From some of the passionate criticisms I have seen you dish out to those who sell VA's for similar reasons (high commissions, obscure complicated product, overly generous representation of the benefit of the product) I would think you might be more skeptical of these products  that's all.
The problem with the above is that you've left out my primary complaint with VAs, that they're often sold with the dishonest scare tactic of "you need the guarantee" while buyers aren't told just what that (IMHO) unneeded guarantee costs.
But, again, you can own the asset classes of bonds and stocks w/o putting a VA wrapper and all the costs involved around it. You can't say the same of managed futures, which is an asset class all its own, which had provided great returns and added diversification to protfolios.

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dude wrote:
  I'm not claiming that your lying or any other absurd SPIN that your hyper defensiveness seems to manifest.
 

Dude, seriously I ask you to consider what sort of response you expect to get from anyone who values their word when you insinuate (you did far more than just insinuate) that they knowingly screw clients for the sake of trails, or any other sort of income.
I'm done with this part of our conversation.

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dude wrote:
I remember the fund family I was using......
I think I was using the Spectrum series funds maybe the "Select" or Global product MikeB.....check it out and let me know if they are still charging the 5% trail......and yes my clients account was down by around (not exact but very close) 30% in a little over a month or so. 

 
No, Dude there's no 5% trail, even on the Spectrum series which is a multiple manager (and thus more expected to be more expensive to run) series. The payout is 3% upfront and a 4% trail after 12 months OR 0 upfront and 4% trail immediately.
As far as the performance of the fund, you must be talking about 2000, since it only has had a double-digit down qtr (no monthly numbers easily available) three times in its existance and two of them were in 2000. No 30% down qtr, but for comparison, the NASDAQ 100 was down 34% in the 4th QTR of 2000 and down 36% for the year.
 

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dude wrote:
MikeB said:
BTW, I thought you might enjoy this line from the "glossy marketing material" you were harping about "Managed futures investments are speculative, involve a high degree of risk, have substantial charges and are suitable only for the investment of the risk capital portion of an investor's portfolio."
Reply:
The difference is what they choose to put in fine print and what they choose to emphasize with 'glossy color graphics' MikeB.  I have kept it really simple for you.......I'm not criticizing the disclosure MikeB, I'm not criticizing Morgan Stanley (no caps this time), I'm not even criticizing Managed Futures all that much (just a little)....I am criticizing the fact that these products are oversold because of enormous trails and that the marketing of these products is a lot of hype and 'number massaging'*.  From some of the passionate criticisms I have seen you dish out to those who sell VA's for similar reasons (high commissions, obscure complicated product, overly generous representation of the benefit of the product).
That's it......I think it's obvious we disagree which is no suprise.

* Emphasis mine
 
Two things, as I've explained elsewhere.
 
1) You've distorted my past posts about common problems with VAs sales AND you've confused the very nature of VAs as an investment and not an asset class (mean that you don't have to own a VA to get exposure to the asset class), with managed futures which IS an asset class.<?:namespace prefix = o ns = "urn:schemas-microsoft-com:office:office" />
 
2) You're simply off base about the section I put in red. You're free to have your own opinions, but not your own facts.
 
Managed futures results and comparisons don't come from the various firms playing with the numbers, they come from studies of the Barclay CTA index (from Thompson Financial) versus the NASDAQ and the S&P 500, the research of Scheeweis and Lintner and the studies of Markowitz and Sharpe (Nobel Prize winners).  I can't see how you can contest the fact that adding 10% MF to a portfolio lowers standard deviation (and they use a monthly chart, btw) any more than you can contest the fact that adding 10% stocks to a 100% bond portfolio lowers S.D. while increasing returns. It's the very same mechanism.
 
Even the "glossy color graphics" you complain about talk over and over again about how MFs are for the AGGRESSIVE part of a portfolio, show MFs well above and to the right of a 100% stock portfolio on the standard risk/return chart.
 
I don’t know if there’s much more to go over on this at this point. We can agree to disagree.
 

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I never claimed that the actual performance #'s are massaged.....the volatility bars and 'averaged' annual volatility misrepresent the actual volatility I have experienced......as far as what they are reporting for monthly losses all I can say is that when $20,000 goes to $14,000 (rough #'s) I consider that a 30% loss and it happened in a little over a month and did not break even before I left Morgan.......I believe it was towards the beginning of 2004 (2nd qtr sounds about right) and these are not made up #'s.....as far as the trails they must have come down.  I am certain the trail was 5%.....I was using several funds so it's also possible that I have the wrong fund family (although I was using Spectrum at the time).  Anyway 4% trails are still pretty lush if you ask me.
I never indicated that the managed futures fund was a conservative investment to the client.....just that it was conservative for a Managed Futures fund.
Yes the brochures do make disclosures but I find that clients weigh the pictures far more than the fine print and the way the graphics are presented (the annual up and down years vs stocks which show correlations)  make managed futures look LESS volatile than stocks (even you should admit that the blue bars (Managed futures I think) are more often down less than stocks and up a little less than stocks) this is the crux of my issue......since the actual numbers from the funds I analyzed (more conservative funds supposedly) were far more volatile than stocks.....that is until you averaged out the volatility.  Yeah I know that they are using the managed futures index for the #'s, but still the volatility is averaged which smooths out the jagged edges a bit. 
Look MikeB I have no incentive to make this crap up.....the presented info is honest.  I don't know why the numbers you are seeing are not matching the numbers I'm quoting.

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I'll also concede that Managed Futures do appear to lower standard deviation over long periods of time (which is never something I debated).........It's just that it's the monthly statements that my clients seem to care most about and I have come to doubt some of the value of all these financial metrics that are used to quantify risk.  Markets are truly unpredictable and I think that risk is greatly underestimated by looking at it from a 'standard deviation' perspective....even Sharpe himself thinks that these metrics are misused by Wall Street.   Anyway theres my pov.

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dude wrote:I'll also concede that Managed Futures do appear to lower standard deviation over long periods of time (which is never something I debated).........It's just that it's the monthly statements that my clients seem to care most about and I have come to doubt some of the value of all these financial metrics that are used to quantify risk.  .
 
Dude, we all have clients who fall back to caring about month-to-month variations in values, even though their investment horizon is much further out. That hand-holding is one of the things we're paid for. During that hand holding it might be a good idea to show them that chart from the glossy marketing piece that showed monthly S.D. waaaayyy out there on the right hand side of that risk/return chart and refocus them on the correct time horizon.

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dude wrote:
I never claimed that the actual performance #'s are massaged.....the volatility bars and 'averaged' annual volatility misrepresent the actual volatility I have experienced......

Fair enough, but remember they showed you monthly volatility on their chart, not annual. Secondly, you can't really be claiming that a past performance chart eliminates the possibility of larger month to month swings. It was 10% of the client's account, and the aggressive part of it at that. If the NASDAQ can and did have more volatile months and qtrs (and even years) than did that particular MF, it's hard to indict MFs as an asset class.
dude wrote:
as far as what they are reporting for monthly losses all I can say is that when $20,000 goes to $14,000 (rough #'s) I consider that a 30% loss and it happened in a little over a month and did not break even before I left Morgan.......I believe it was towards the beginning of 2004 (2nd qtr sounds about right) and these are not made up ..
Well, I know we're counting on your memory, and I wouldn't want to be judged for honesty on my memory of a qtr's performance of a MF from 2004, but 2nd Qtr was down 18.23%. It finished down 4.73% for the year.
dude wrote:
#'s.....as far as the trails they must have come down.  I am certain the trail was 5%.....I was using several funds so it's also possible that I have the wrong fund family (although I was using Spectrum at the time).  Anyway 4% trails are still pretty lush if you ask me.

They may have come down, I don't know. What are they now at AGE? 4% for an alternative investment (immediate is sold without a front charge or at the 13th month with 3% up front) isn't out of bounds, IMHO, and the absolute perfrmance has been great.
dude wrote:
 
I never indicated that the managed futures fund was a conservative investment to the client.....just that it was conservative for a Managed Futures fund.

Well, I assumed we're talking about spectrum select because none of the others had the downturn like you mentioned, but it's the most volatile on a monthly S.D. basis (6.5%, perhaps your experience helped shape that number that high) and the highest break-even number at 5.25%
 
dude wrote:
Yes the brochures do make disclosures but I find that clients weigh the pictures far more than the fine print ....

It's your job to make sure they don't ignore "fine print" (the line about aggresive part of a portfolio" wasn't "fine print" and that language appears several times in the piece) and the "picture" showed monthly volatility to be much larger than the S&P 500.
dude wrote:...and the way the graphics are presented (the annual up and down years vs stocks which show correlations)  make managed futures look LESS volatile than stocks (even you should admit that the blue bars (Managed futures I think) are more often down less than stocks and up a little less than stocks) this is the crux of my issue......

What were they supposed to do, no report the truth? From 1980 to 2002 stacks HAD more negative 12 month rolling periods than did the Barclay CTA. Compare that to, say, the NASDAQ and you'll see what I mean, even though the chart shows the S&P 500.
dude wrote:
since the actual numbers from the funds I analyzed (more conservative funds supposedly) were far more volatile than stocks.....

Select was the most volatile of the series and as the chart showed, it had a higher month-to-month volatilty than a 100% S&P 500 portfolio and even more than a 100% EAFE portfolio. What the chart also showed was that month to month, a portfolio of 10% MF had a lower volatility, the same as is the case when 10% stocks are introduced to a 100% bond portfolio. That's an average, as you said, and clients should understand that. Average volatility doesn't mean even month is smooth and client's can be allowed to push that expectation, after the sale, on you, unless you sold it wouldout explaining that.
dude wrote:
... but still the volatility is averaged which smooths out the jagged edges a bit. 

That's true of every asset class we try to measure, not just MFs. So long as clients understand this is the aggressive part of their portfolio, and they keep a reasonable time horizon (and month to month or qtr to qtr isn't reasonable) they're good to go.
dude wrote:
Look MikeB I have no incentive to make this crap up.....the presented info is honest.  I don't know why the numbers you are seeing are not matching the numbers I'm quoting.

Well, you're dealing from memory and I'm not. That gives me a significant advantage, and it doesn't mean I think you're lying. 
Notice also that we're fixated on a single month or qtr of one fund (and in a series I don't use) and have missed the point of the great perfomance of the asset class as a whole.

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Month to month and rolling year performance doesn't always tell the whole story since few people invest on the first of the month or year.......it's very possible and probable that my client invested on an brief upswing before the fall out in '04, that plus the commission hit could easily make up the 10% to 12% difference in our #'s.  When I was evaluating the Spectrum product (if this is the one I'm talking about, although the 5.25 breakeven is about 4% lower than I recall) at the time it was among the less volatile funds.                                                                   

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dude wrote: <?:namespace prefix = o ns = "urn:schemas-microsoft-com:office:office" />
Month to month and rolling year performance doesn't always tell the whole story since few people invest on the first of the month or year.......

I guess there's no perfect measuring system. However, the monthly S.D., expressed all over the sales piece is useful.
dude wrote:
 
it's very possible and probable that my client invested on an brief upswing before the fall out in '04, that plus the commission hit could easily make up the 10% to 12% difference in our #'s. 

Which day of the month they invested could make a great deal of difference in the performance they saw, especially when you’re talking about something with a monthly S.D. of 6%.  Again, our job it to explain that to clients, not make out like we’ve been deceived and that the entire asset class is based on false marketing and hype, since the very same observation could be made about any investment (the “what day you bought it” part).
 As far as commission, and I could be wrong here, but I believe the client buys at NAV and your upfront (if any) comes from the fund.
 dude wrote:
 
 When I was evaluating the Spectrum product (if this is the one I'm talking about, although the 5.25 breakeven is about 4% lower than I recall) at the time it was among the less volatile funds.                                                                   

 
One of the things that’s proven itself to me to be beneficial about this exchange is that it’s caused me to go over some details and look at a particular product (spectrum series) that I’m not familiar with. For example, “break even point” is the total the fund must make minus interest income (usually figured at the T-Bill rate) earned. Thus the prospectus will say “The fund has to make thus to break even” and the figure I gave you is from a fact-sheet, which expresses what the fund needs to make after interest income to break even. The prospectus will say 8.25%, the fact sheet says 5.25%.
 
Some of the issues you’re taking up about fees could well have addressed, if trails did (and I don’t know if they have) dropped from the 5% you mentioned. I know the annual brokerage fee, which is an element in total fees (plus management fees to advisors and incentives) has been reduced to 6% annually.
 

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yeah I DO remember the brokerage fee was at least 7%......so they probably lowered the payout when they dropped the fee. Makes sense considering the 9%+ (now 8.25%) breakeven figure I quoted. 
Maybe deceptive is too aggressive of a word to describe my opinion of Managed Futures..I think that the marketing literature is too optimistic about certain aspects of the managed futures product and that they are very hard to truly understand, and trust me I'm no ignoramus when it comes to derivatives investments.  I am a bit jaded that in a little over a month my client dropped 30% so that is probably coloring my perspective (although my post-mortem analysis gave me some other food for thought that makes me much more cautious about this product than previously)
Anyway good discussion (although a little too much mudflinging on both sides).  I'm glad we were able to pinpoint the fund and that it was beneficial for you.  It was helpful for me as well to read your experiences with the product. thnx
 

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