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The money doctors perform horribly. Surprise. Surprise.

When I sold our business in 1997, the “professional” money managers homed in on me like bees to the nectar. They were entranced by a small Wall Street Journal entry on the sale — that was not mean to appear. Our sale agreement specifically said “no press releases.”

Professional money managers are really good at self-promotion, marketing and selling their services. They are often not good at managing their clients’ money. Hence this recent trend — away from actively managed funds to passively managed ones, e.g. index funds like VGT and VTI.

The latest Economist has a big report on Asset Management. Here’s small excerpt:

It is a business unlike any other. Managers charge a fixed fee on the assets they manage, but customers ultimately bear the full costs of investments that sour. Profit margins in asset management are high by the standards of other industries. For all the talk of pressure on fees, typical operating margins are well over 30%. Yet despite recent consolidation, asset management is a fragmented industry, with no obvious exploitation of market power by a few large firms and plenty of new entrants.

In many industries firms avoid price competition by offering a product distinct from their rivals-or, at least, that appears distinctive. Breakfast cereal is mostly grain and sugar, but makers offer a proliferation of branded cereals, with subtle variations on a theme. Asset management is not so different. Firms compete in marketing, in dreaming up new products and, above all, on their skill in selecting securities that will rise in value.

The industry has not performed well. Ever since a landmark paper by Michael Jensen in 1968, countless studies have shown that managers of equity mutual funds have failed to beat the market index. Arithmetic is against them. It is as impossible for all investors to have an above-average return as for everyone to be of above-average height or intelligence. In any year, some will do better than the index and some worse. But evidence of sustained outperformance is vanishingly rare. Where it exists, it suggests that bad performers stay bad. It is hard to find a positive link between high fees and performance. Quite the opposite: one study found that the worst-performing funds charge the most.

If you have an Economist subscription (and everyone should), then go here and start reading. Click here.

More tomorrow.

Nice venture returns

Moderna Therapeutics was founded in 2011 in a conference room of the Massachusetts-based venture capital firm Flagship. It raised $2.1 million in a first round funding at a valuation of $8.4 million, pre-money.

Today it is worth $37 billion and has developed a vaccine for the virus.

More tips

+ Add the following line to your email signature:

Please do not click on links or attachments unless you have checked with the sender.

Over 90% of computer viruses appear in links or attachments. Hence these words.

+ I’m losing faith in LED bulbs. Some work. Some blow out quickly. My solution: Buy two and test them. I’m increasingly going back to incandescent and halogen.

+ If you spend your life on Zoom Video, get yourself a decent microphone. My recommendation: This $35 lavalier mike:

Click here.

+ The FDA cleared Boeing’s 737 Max to fly. Personally I wouldn’t fly the plane for all the money in China. Some people (including me) believe the 737 Max is fundamentally flawed and should never be allowed to fly. Boeing took a wonderful plane called the 737 and “upgraded” with heavier, stronger engines mounted in the wrong place. They then designed bad software to stop the engines from sending the plane straight up like a rocket and then stalling. Don’t get me started. For more, USA Today has a piece. Click here.

+ I prefer the cheaper Apple AirPods.

The pricier ones are too tight in my ear, and thus uncomfortable. Get the original AirPods here.

When trouble strikes, learn to Shake It Off

Taylor Swift writes her songs for 15 to 30 year old girls who are treated poorly, and hence hurt by their male dates.

When I hit my tennis ball into the net, my tennis pro tells me to “Shake It Off.”

The faster I Shake a setback off, the better for my tiny brain.

Play this song when you need a quick fix.

Nice photos of my favorite place.

The first snowfall in Yosemite.

It’s getting much worse

Sen. Grassley, Republican,  just tested positive for Covid. He’s 87.

I started pulling up images of Republican events. I couldn’t believe the close-in crowding and lack of masks.

I thought the virus attacked both Democrats and Republicans. No distinction. What am I missing?

Tennis today

Mark and I played our 248th tennis game today. Sadly last night’s snowstorm and the weekend’s thunderstorm have cut two days from our consecutive record. We’ll play twice one day and catch up. It was 21 degrees outside this morning. We played inside because we’re not complete idiots.

I bought a handful of PLTR.  It’s getting buzz. My GE and Ford are making a few bucks. This is ridiculous.

FedEx is doing better than UPS. I suspect a little of each will do even better.

I’m stunned at how many FedEx and UPS trucks are now trafficking the byways of Columbia County, NY. Today the UPS lady appeared at our front door driving a Subaru Outback. I guess her own car. Normally everyone leaves their packages in the mailbox on our dirt road. I tipped her $10 for bringing them up to the house. They were all for our neighbor. But the nice UPS lady had left before I could get my $10 back. Shucks.

See you tomorrow. — Harry Newton