S&P Now negative since Bush took office (7yrs ago)

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josephjones107's picture
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After both Reagan and Clinton were in office for 7 years the S&P was up over 100%.   Bush has now been in office for 7 years. Total return is negative. I know he is probably just in the wrong place at the wrong time, but that's pretty bad.

Lakers's picture
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Yeah, it's all Bush's fault.
 
(Sarcasm for those of you in Rio Linda)

Broker24's picture
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Well, he walked into a colossal market meltdown seven years ago. Clinton's term was propped up by inflated, imaginary earnings, and PE's of 125 (on blue-chip stocks). It all disinigrated in a matter of months. If Bush were that lucky, the whole mortgage meltdown would have held on another year or so until he was out, and left it to the next administration.

It's a good example of why NOT to invest in indexes.

Spaceman Spiff's picture
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Exactly.  Had you invested in something like CAIBX or CWGIX you'd have averaged well over 10% sine 1/20/2001. 
 
I don't remember the chapter in my Series 7, 63, 24, AAMS studies or any of the CE classes that I've had to do over the last 10 years that have said it is the president's job to control the stock market.  Maybe the Fed.  More often than not, it's the general public that decides when the stock market goes up and down.   

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Broker24 - It's not about what the Pres walked into in 2001, it's about what he made out of it in the past 7 years. Was this guy bookended by bad markets? Yes. Could there have been an alternative ending? Maybe.

Choices he made:

- Not vetoing anything during the Republican led Congress:
Source: Alan Greenspan's comments in regards to Bush's lack of financial prudence: "My biggest frustration remained the president's unwillingness to wield his veto against out-of-control spending,"

- The cost of the war in Iraq. $400 Billion as of 7/31/07.
Source(See page 14): http://www.cbo.gov/ftpdocs/84xx/doc8497/07-30-WarCosts_Testimony.pdf
I'm counting this as a choice that the Bush team made. Say what you will, but Iraq was not supporting Al Qaeda(and we knew that prior to invasion) & there were several elements in the intelligence community that were running counter to the Iraq has WMD argument(Hans Blix, Joseph Wilson)

- Not insisting that tax cuts & spending be offset by reductions in spending elsewhere(Congress writes the laws, but Bush certainly didn't use the bully pulpit to address this important matter.): “We need PAYGO, which is an important—in my judgment, critical—issue in budget programming… I think it was a mistake not to extend PAYGO, both for tax and expenditure programs, and let it expire in September 2002.” —Alan Greenspan, Chairman, The Federal Reserve Board (July 21, 2004)

Broker7's picture
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none the less...this was the worst administration in any of our lifetimes...not my opinion, just the fact.

josephjones107's picture
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He does not care about having a balanced budget; consequently, the national debt has balooned to over 9 trillion.

The only time budget was balanced was when he took office and instead of paying off some of the national debt, he gave out rebate checks.

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Still, is it the president's fault that the market moves up or down?  Would we have seen the market of the 90's without Clinton?  If Bush wouldn't have won in 2004, could the sub prime mortgage and financial stock blowup have been avoided?
 
BTW, PAYGO wasn't a Clinton bill.  It was George H. Bush bill.  The Congress started finding ways around the bill in the mid and late 90's.  Clinton's solution?  Raise taxes.  He's the one who created the larger marginal tax rates that Bush eventully did away with.  
 
Every president has done some sort of tax reform.  All of them trying to undo the mess the previous president started.  Blaming the president for what happens in the financial markets is stupid.  It's like your clients blaming you for the market going down.        

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paygo is a fraud because they do not include social security and medicare/medicaid in the calculations.  Lyndon Johnson is the worst president in our lifetime.  Jimmy Carter is second.

Ashland's picture
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Spiff - never suggested that PAYGO was a Clinton thing. Don't really care, in fact.

I am faulting(and so is Greenspan) GWB for not taking the bully pulpit to insist that Congress renews the PAYGO program.

I am also not suggesting that Bush is at fault for the sideways market. I am saying that we may have had a different result had there been more restraint on spending, and a call for sacrifice while we were spending big money on a war. Would we have avoided this subprime mess if someone else was president in 2001 - 2008... Obviously, we don't know. So, we have the history that we have... It's the same question we ask about our businesses. If the market had gone up instead of went down, that client would have... I think it's fair to want to stick to the reality we have and hold people accountable from there.

henry - you suggest PAYGO is a fraud. I guess that you're smarter than Bernanke & Greenspan, then. Because they both suggest that such a program is critically important.

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I sure henryhill meant to add IMVVVVVHO (V=Very)

Broker24's picture
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Ashland wrote:Broker24 - It's not about what the Pres walked into in 2001, it's about what he made out of it in the past 7 years. Was this guy bookended by bad markets? Yes. Could there have been an alternative ending? Maybe. Choices he made: - Not vetoing anything during the Republican led Congress: Source: Alan Greenspan's comments in regards to Bush's lack of financial prudence: "My biggest frustration remained the president's unwillingness to wield his veto against out-of-control spending," - The cost of the war in Iraq. $400 Billion as of 7/31/07. Source(See page 14): http://www.cbo.gov/ftpdocs/84xx/doc8497/07-30-WarCosts_Testimony.pdf I'm counting this as a choice that the Bush team made. Say what you will, but Iraq was not supporting Al Qaeda(and we knew that prior to invasion) & there were several elements in the intelligence community that were running counter to the Iraq has WMD argument(Hans Blix, Joseph Wilson) - Not insisting that tax cuts & spending be offset by reductions in spending elsewhere(Congress writes the laws, but Bush certainly didn't use the bully pulpit to address this important matter.): “We need PAYGO, which is an important—in my judgment, critical—issue in budget programming… I think it was a mistake not to extend PAYGO, both for tax and expenditure programs, and let it expire in September 2002.” —Alan Greenspan, Chairman, The Federal Reserve Board (July 21, 2004)
 
I just made a simple statement.  I'm not getting into a political debate.  Whenever you talk about the administrations and the economy, it usually turns into a lot of shoulda-woulda-coulda talk.  Hindsight is 20/20.

josephjones107's picture
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9 trillion dollar national debt is about 85% of our GDP.

This would be equivalant to someone who makes 100,000 a year and having $85,000 in credit card debt. This country is in terrible financial condition now

Ashland's picture
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josephjones - What's your source, please?

josephjones107's picture
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http://www.treasurydirect.gov/NP/BPDLogin?application=np

National Debt went up 35% while Clinton was in office, it went up 60% while Bush has been in office (so far).

I thought I was voting for a fiscal conservative when voting for Bush, apparently it was the exact opposite

troll's picture
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Broker7 wrote:none the less...this was the worst administration in any of our lifetimes...not my opinion, just the fact.I gather that means you weren't alive during either the Carter or Ford administrations?

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joedabrkr wrote:
Broker7 wrote:none the less...this was the worst administration in any of our lifetimes...not my opinion, just the fact.I gather that means you weren't alive during either the Carter or Ford administrations?Watchit Joe....I have fond memories of the peanut-eater, and his beer loving brother, Reagan's still my hero though, we shoulda made that man king.

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josephjones - if you take a look at which presidents borrowed the money you'll see dramatic upticks in the Reagan, Bush I & Bush II years. There was a moderation of the growth of the debt during the Clinton years(if he only wasn't such a lying ..., but aren't a great many politicians?) The pace certainly picked up dramatically in and after 2002. The numbers under Carter are hidden, of course, because of the size of the recent numbers, but he was no slouch at borrowing money, either.

Sacrifice was not and is not part of Bush's vocabulary, but these folks get voted in & reelected for the money they promise to spend on and for their constituency, not for the restraint they show.

Source: http://www.cedarcomm.com/~stevelm1/usdebt.png

Indyone's picture
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Based on what I'm seeing, you'd all best stop playing the blame game and start calling your clients to give them a heads up on what's coming tomorrow.  Are we near the bottom after that?  I'm inclined to think we're at least close, but wherever we are, you'd best be talking to your clients and either reinforcing their strategy or deciding what needs to be changed and quickly.  Nothing is worse for a client than seeing a tough decline and hearing nothing from their advisor.
 
Back to the phone...

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Indyone wrote: Based on what I'm seeing, you'd all best stop playing the blame game and start calling your clients to give them a heads up on what's coming tomorrow.  Are we near the bottom after that?  I'm inclined to think we're at least close, but wherever we are, you'd best be talking to your clients and either reinforcing their strategy or deciding what needs to be changed and quickly.  Nothing is worse for a client than seeing a tough decline and hearing nothing from their advisor.
 
Back to the phone...

Feels alot like Jul 2002 and Oct 2002 right now, hard to tell if it's bottom but it sure feels like it

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Broker7 wrote: none the less...this was the worst administration in any of our lifetimes...not my opinion, just the fact.

You must be quite young...In my lifetime, LBJ sent me to Vietnam, Richard Nixon was hounded out of office, I don't even want to think about Jimmy Carter and I'll certainly take the present administration over William Jefferson Clinton's.

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josephjones107 wrote:He does not care about having a balanced budget; consequently, the national debt has balooned to over 9 trillion. The only time budget was balanced was when he took office and instead of paying off some of the national debt, he gave out rebate checks.
 
And the budget was balanced during Clinton's tenure? Puleaze! Conveniently, the media and Clinton never included Social Security, when spouting-off about the balanced budget. Yeah, and my house is paid-off...if you don't count the mortgage.
 
Yeah, the Dems want to balance the budget...with higher taxes! Bush lowered taxes, but blew it by not controlling spending. Both Bernanke and Greenspan blew it by refusing to recognize that the politicians were playing games with how the economic measurements were reported; thus, failing to keep inflation under control. Now, the Fed is running out of levers to pull and the Bush/Congressional "stimulus" is being greeted by a decidedly cool reception by both US and foreign markets. 
 
 

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I don't think the markets are down because they are disappointed with the stimulus plan. (media tends to pick one thing and run with it)

I think the markets are spooked at the seriuousness of the mortgage meltdown and the fact that the Fed/US gov. seems a bit panicked at the situation.

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doberman wrote:Yeah, the Dems want to balance the budget...with higher taxes! Bush lowered taxes, but blew it by not controlling spending.
 
Amen and Amen.
 
Clients called this evening are taking the potential meltdown tomorrow in stride and thanking me for the call.  Most clients have plenty of cash to take care of this year's distributions so they feel they can wait this thing out.  A couple of them asked me to deploy some excess cash and one asked me to reduce her distribution until this thing is over.
 
Again, if you're not talking to your better clients, you'd better start in the morning.

troll's picture
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ExPropTrader wrote:
joedabrkr wrote:
Broker7 wrote:none the less...this was the worst administration in any of our lifetimes...not my opinion, just the fact.I gather that means you weren't alive during either the Carter or Ford administrations?Watchit Joe....I have fond memories of the peanut-eater, and his beer loving brother, Reagan's still my hero though, we shoulda made that man king.Billy was good for plenty of laughs, but I'm talking about what his brother did(or didn't) for our country.He's been a great retired president and elder statesman, but hardly distinguished himself at the White House, IMHO.

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josephjones107 wrote:I don't think the markets are down because they are disappointed with the stimulus plan. (media tends to pick one thing and run with it) I think the markets are spooked at the seriuousness of the mortgage meltdown and the fact that the Fed/US gov. seems a bit panicked at the situation.
 
 
Market's down because we are spooked by the mortgage meltdown?  Thats a part of it.  There is more to it than that.  The feds make an unprecidented 3/4 point emergency (out of meeting) rate cut, which should have sent the market skyward.  And another .5% is already priced into the market for next weeks FOMC.  These rate cuts will provide liquidity.  LIQUIDITY is not the issue..liquidity is what got us in this subprime and credit problems in the first place.  Plus, there are very few borrower in todays consumer market.
 
Just keep an eye on the solvency of banks..not just here..but all aroung the globe.  This has no comparison to 2000-02!
 
 

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Philo Kvetch wrote: Broker7 wrote: none the less...this was the worst administration in any of our lifetimes...not my opinion, just the fact. You must be quite young...In my lifetime, LBJ sent me to Vietnam, Richard Nixon was hounded out of office, I don't even want to think about Jimmy Carter and I'll certainly take the present administration over William Jefferson Clinton's.
 
I'm not talking about my lifetime..I said any of our lifetime..let us say the last century.  That is current national sentiment, further unravelling to come soon.

Philo Kvetch's picture
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Broker7 wrote:Philo Kvetch wrote: Broker7 wrote: none the less...this was the worst administration in any of our lifetimes...not my opinion, just the fact. You must be quite young...In my lifetime, LBJ sent me to Vietnam, Richard Nixon was hounded out of office, I don't even want to think about Jimmy Carter and I'll certainly take the present administration over William Jefferson Clinton's.
 
I'm not talking about my lifetime..I said any of our lifetime..let us say the last century.  That is current national sentiment, further unravelling to come soon.
 
Since I qualify under "our lifetime", my statement stands. 
 
Since you want to expand your statement of opinion (note: not fact) to include the past century, you're trying to say that the admnistration of GWB was worse than that of Herbert Hoover (1929-1933), which includes the crash and the start of the Great Depression? 
 
I'd suggest to you that you take a hard look at history before making sweeping statements that are patently false and trying to pass them off as 'fact'.

Ashland's picture
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This is nothing like 2000 - 2002. It's much more like 1987 - 1988. Check out the August to August returns of the S&P that year. Then go make some money for your clients.

josephjones107's picture
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Ashland wrote: This is nothing like 2000 - 2002. It's much more like 1987 - 1988. Check out the August to August returns of the S&P that year. Then go make some money for your clients.

down 14.64%, what is your point?

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Sorry, that was meant to be 1989. 3 months down. About 21 months to the next new high. The time to start buying is when you feel you're at least half way down or more. Which may be now.

Philo Kvetch's picture
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In the general scheme of things, this might ultimately be viewed as little more than a correction.

Ashland's picture
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It should retest...

josephjones107's picture
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Anytime anchors on CNBC sound scared, buy as much as you possibly can
When they sound excited, sell.

josephjones107's picture
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Spaceman Spiff wrote: Exactly.  Had you invested in something like CAIBX or CWGIX you'd have averaged well over 10% sine 1/20/2001. 
 
I don't remember the chapter in my Series 7, 63, 24, AAMS studies or any of the CE classes that I've had to do over the last 10 years that have said it is the president's job to control the stock market.  Maybe the Fed.  More often than not, it's the general public that decides when the stock market goes up and down.   

CAIBX only has 70% of it's assets in equities. Only 54% of it's assets are in the US. This is a good example of why/how American funds has been beating their benchmarks. Invest in asset classes that aren't in the benchmark and invest in countries that aren't in the benchmark. I'm surprised they're able to get away with that.

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Here's the goal of CAIBX:  "The investment seeks a level of current income that exceeds the average yield on U.S. stocks generally and a growing stream of income over the years; growth of capital is a secondary consideration."
 
I see no reason why that means that they need to invest in US equities.   After all, it is a world allocation fund.   Why would they invest in all US equities if they feel that the best way to achieve their goal is to invest in something else?

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anonymous wrote: Here's the goal of CAIBX:  "The investment seeks a level of current income that exceeds the average yield on U.S. stocks generally and a growing stream of income over the years; growth of capital is a secondary consideration."
 
I see no reason why that means that they need to invest in US equities.   After all, it is a world allocation fund.   Why would they invest in all US equities if they feel that the best way to achieve their goal is to invest in something else?

Then their benchmark should not be against the S&P. It should be against MSCI World (which has had much better returns than CAIBX)

5 year
MSCI World 16.12%
CAIBX       13.78%

Indyone's picture
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You really need to blend that benchmark with a world bond benchmark before you beat on CAIBX.  You said yourself that they are about 30% bonds and cash...it's hardly fair to benchmark them against a 100% stock index.

Indyone's picture
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Hey where did all the "sky is falling" crowd go?  I haven't heard much from you lately...

josephjones107's picture
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American funds doesnt seem to have many boundries with what they are doing. This is much different than most of their competitors. It becomes very difficult to stay properly allocated with them.

At EDJ they won't count the % of cash and % international, in these types of funds. There is alot of this going on, and it's kind of dangerous as clients aren't really allocated the way they think they are.

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Let's read the goal of the fund again:  "The investment seeks a level of current income that exceeds the average yield on U.S. stocks generally and a growing stream of income over the years; growth of capital is a secondary consideration."
 
With that being their goal, how does is make sense to compare to MSCI World?

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josephjones107 wrote:American funds doesnt seem to have many boundries with what they are doing. This is much different than most of their competitors. It becomes very difficult to stay properly allocated with them. At EDJ they won't count the % of cash and % international, in these types of funds. There is alot of this going on, and it's kind of dangerous as clients aren't really allocated the way they think they are.
 
In EDJ portfolio system CAIBX is allocated 30% income, 70% Growth and Income with 45% of the Growth and Income being international.
I would have to disagree that CAIBX is kind of dangerous.

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You take us as a whole as a group of simpletons, not knowing what we are investing in.  As a group, I believe we know exactly what we are investing in.  There are some exceptions within that group that are blissfully unaware that CAIBX is not simply a balanced fund like ABALX.   
 
I've never sold CAIBX as an investment that is designed to beat the S&P.  It just happens to do it pretty routinely.  I use it to give some conservative exposure to the markets, whatever they might be.  And I agree with Max that I wouldn't consider CAIBX dangerous.  1 down year out of the last 10 (and that only 2.77%) , beta of .68 and a SD of 1.72 isn't dangerous.  If it is, it's the best dangerous investment out there. 
 
Now, VFINX, that's what I call dangerous.   

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Problem is many are comparing American Funds that are heavily invested in International stocks versus the S&P (including some on this very website).   That is just wrong

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josephjones107 wrote: anonymous wrote: Here's the goal of CAIBX:  "The investment seeks a level of current income that exceeds the average yield on U.S. stocks generally and a growing stream of income over the years; growth of capital is a secondary consideration."
 
I see no reason why that means that they need to invest in US equities.   After all, it is a world allocation fund.   Why would they invest in all US equities if they feel that the best way to achieve their goal is to invest in something else? Then their benchmark should not be against the S&P. It should be against MSCI World (which has had much better returns than CAIBX) 5 year MSCI World 16.12% CAIBX       13.78%
 
They have an international limitation by prospectus.  I think it's like 30 or 40%?

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anonymous wrote:Let's read the goal of the fund again:  "The investment seeks a level of current income that exceeds the average yield on U.S. stocks generally and a growing stream of income over the years; growth of capital is a secondary consideration."
 
With that being their goal, how does is make sense to compare to MSCI World?
 
Fortunately or unfortunately, AMF doesn't give rat's a$$ what benchmark they are compared to.  They don't manage to benchmarks, they manage to objectives.  Yes, it is sometimes difficult to analyze them in a world of "style boxes" and "indexes".  But pop it into to Morningstar, and it dissects the whole thing for you, cash, bonds, int'l, etc.  You can't neatly compare them to any benchmark (unless you use blended benchmarks).
 
But, more return with less risk is really all I am looking for, so, there ya' go - CAIBX!

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But, more return with less risk is really all I am looking for, so, there ya' go - CAIBX!

This is the case when International markets outperform US. It will be reversed when US outperforms Intl over a long enough period of time

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"This is the case when International markets outperform US. It will be reversed when US outperforms Intl over a long enough period of time"
 
and when this happens CAIBX should continue to be  looked upon by how it succeeds in it's goal, ""The investment seeks a level of current income that exceeds the average yield on U.S. stocks generally and a growing stream of income over the years; growth of capital is a secondary consideration."  as opposed to how it performs against some benchmark.
 
 

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I like American Funds alot. I just think their are too many reps that think they are superior stock pickers. They are not. Their outperformance is a result of International exposure.

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The funny thing is that it just doesn't matter WHY they outperform.  What matters to clients is that they DO. 
 
You are correct that they are not superior stock pickers.  Saul Pannell is a superior stock picker.  What makes American Funds superior is their discipline.  Like B24 said before, they just don't care what everyone else thinks about them.  They do what they do, and have always done, and it works.  It's the same thing individual investors should be doing, but aren't. 
 
I also don't think their performance can be linked only to their international exposure right now.  Do enough research on them and you'll find out that they outperform in most markets.  The only exception might be out of control growth markets (see 1998-1999) where they fall behind.  But, they stick to their processes and disciplines and don't get get sucked in to the latest fads.  It has normally paid off for them. 
 
Think what you want, sell what you want, but don't be suprised when the local Jones guy takes accounts from you using those non index following, over-internationally exposed American Funds.

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"The funny thing is that it just doesn't matter WHY they outperform. What matters to clients is that they DO."

This is almost exactly what my mentor at EDJ told me in 1999 about Putnam Growth Opportunities fund. It's funny how Jones reps are always chasing performance.

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