Read without ads and support Scribd by becoming a Scribd Premium Reader.
See Premium Plans
 
Never mind that Cliff guy.
Cale’s Notes
A free summary of an investing book you should have read...if you’d only had the time.
 
Cale Smith • csmith@islainvest.com • Islamorada Investment Management • Issue No. 1
Distributed with permission of the publisher.
 
The Investor’s Dilemma 
By Louis Lowenstein
Summarized and distributed with permission of the publisher.
Note from Cale:
“If you continue to do what you’ve always done, you’ll continueto get what you’ve always got.” ­ Yogi Berra
Louis Lowenstein died in April of 2009.  He was, as his obituary noted, an in;luentialbusiness law professor and former corporate executive who for almost thirty yearschronicled the excesses of Wall Street while warning of the dangers of short‐terminvesting.I prefer, however, the description that 
Barron’s
magazine gave of Mr. Lowenstein in1998:“Merrill Lynch, meet your worst nightmare.”I had the pleasure of an all‐too‐brief email exchange with Louis a year prior to hispassing.  I’d read “The Investor’s Dilemma” and had enjoyed it thoroughly.  Weshared a common philosophy in value investing, and perhaps more notably, a shareddistrust of mutual funds.A few months later, as the credit and subprime mortgage crisis began to rock themarkets, I left my job, took out a blank sheet of paper, and began to ;igure out how tobuild a fund I would be proud of managing.  The result of that effort is now called aspoke fund.  This book served as a blueprint in more ways than one.So, please enjoy.  The ideas in here are worth spreading. And long live spoke funds.  
Cale SmithIslamorada Investment Management csmith@islainvest.com 
 
 
The Investor’s Dilemma
By Louis LowensteinSummarized by Cale Smith, Managing Partner, Islamorada Investment Management
Reproduced with permission of the publisher
 Introduction “There is something rotten in the mutual fund industry.” That’s how Louis Lowenstein begins – by relaying his core belief about the mutual fundindustry: the industry has betrayed investors by changing the goal and character of theindustry. Originally designed to support the well being of investors in the long term,mutual funds have become instead a large repository of cash and funds to be abused bymanagers whose primary concern is not to invest wisely, but to accumulate assets undermanagement to fatten the coffers of the management company.  The industry, accordingto Lowenstein, has abandoned its fiduciary duty to investors and has instead turned into amarketing machine, “making a nice business for themselves.”  Chapter 1- Mutual Funds: A Painful Birth Chapter 1 examines the birth of the mutual fund industry and the changes to the industrysince its established foothold in the 1920’s. Lowenstein explains that although theindustry has seen various abuses and scandals since inception, the original idea of poolingfunds was a simple and good one that delivered many benefits to investors.Unfortunately, mutual funds no longer deliver those benefits today. The industry began in late 19
th
century Britain, when a pool of funds opened for smallerinvestors who were willing to purchase government debt. The idea was not new: it wasbased on an earlier idea held by the Dutch who correctly reasoned that pooled moneywould give investors the opportunity to diversify, enter into large markets which wereotherwise inaccessible, and afford them greater liquidity. The pooled money industry hada heyday in the 1920’s, when a complete lack of any meaningful regulations enabledeverything from dramatic fund implosions to outright embezzlement.  Soon after, the newSecurities and Exchange Commission expressly outlawed the more egregious practices of the funds. In 1924, with the birth of the Massachusetts Investor’s Trust (MIT), the beginning of themutual fund industry as we know it today formally began. This MIT fund was unique inthat it was the first “open end” fund, which provided a degree of liquidity and fairnessthat had not been present before. In an open-ended fund, investors wishing to cash outtheir holdings in the funds could sell their stake back to the issuer at a price that reflectedthe price of the portfolio securities divided by the shares outstanding at the time. Thevalue of the idea, other than increased liquidity for investors, came in the form of greatertransparency (disclosure of securities present in the fund) and greater liquidity. 
Search
Search History:
Searching...
Result 00 of 00
00 results for result for
  • p.
    • Notes
    Load more