Ken Kam's Best Ideas Blog

A lot of mutual fund managers and m100 members with superior long-term track records lost money last year. One of the hardest decisions I have to make is how much latitude to give an m100 member who is losing money before I replace them.

At the beginning of December, I decided to stick with Jack Weyland, one of our mFOLIO Masters, eventhough at the time he was down over 34% for the year. Here’s how I made the decision, and also how it turned out.

First of all, let me tell you that I originally selected Jack Weyland because he has one of the best long-term track records at Marketocracy. Even after losing money in 2008, Jack’s portfolio was up 524% over the last 6 1/2 years. Over the same period, the S&P 500 was up only about 22%, so Jack is clearly doing something right. Click here to see his track record.

Nevertheless, when someone is down 34% I have to ask myself whether I’ve made a mistake.

Continue reading (with subscription) "A Skilled Investor I Trust Comes Through" »

Posted by Ken Kam at 04:19 PM | Permalink

The new President and Congress are getting ready to spend close to $1 trillion to stimulate the economy. I hope their plan succeeds in getting our economy back on track, but I am afraid that if the decisions about how to spend the money have to go through the usual Congressional budgeting process, a lot of the money will be wasted and we will have little of lasting value to show for the money.

Even for the Government, $1 trillion is still a lot of money. It is enough to give us an historic opportunity to strengthen the country’s safety net by putting the social security program on a sound financial footing for generations to come. Here’s how we can do it and stimulate the economy at the same time.

Lets set up a new trust fund for social security with a charter to invest the money solely to get a good return. 

In my view, it is important that the trust fund’s investment decisions be made without regard to political considerations. For this reason, I would set it up so the trust is independent of the government, but subject to its oversight. The organizational relationship of the Federal Reserve to the Government is a good model.

We could give the President the authority to appoint 8 trustees who, upon being confirmed by the Senate, would serve staggered 8 year terms so that every two years, two of the trustees could be changed. The trustees would then select the investment advisers who would be judged by and held accountable for delivering returns after all fees.

Right now, the U.S. government can borrow money for 10 years for about 2% a year. If we borrow $1 trillion and invest it in stocks, and stock market returns over the next 10 years are just average, the fund would generate roughly $80 billion a year for the social security program net of interest payments. Actual stock market returns could of course be higher or lower, but adding the returns from a $1 trillion portfolio to the social security program ought to be enough to put it on a firm actuarial footing.

This would restore confidence to a lot of people who depend on social security as well as anyone who, until last year, was planning to retire solely on their 401k or IRA.

The addition of $1 trillion of new capital looking for the best returns would stimulate the healthy parts of the economy by enabling successful companies to expand and start hiring again. I think this is a better approach to creating good jobs than rescuing failing companies or putting people on the Government’s payroll.

If we are going to spend $1 trillion, this plan has a better chance of stimulating the economy and leaving a lasting benefit for generations to come than if Congress decides how to spend the money in its usual fashion.

Continue reading (with subscription) "Save Social Security and Stimulate the Economy" »

Posted by Ken Kam at 02:02 PM | Permalink