Free Fidelity food!

[Nords]

Years after they closed their Honolulu investor's center, Fidelity is returning to Oahu for a "Client Appreciation Dinner". The stock market must be really making a lot of money for Fidelity but this sort of "irrational exhuberance" means that it's time for me to call the top.

Anyway it's at the Halekulani Hotel next month, where they promise an hour of reception followed by an hour of dinner & presentation. (There's even complimentary parking!) The presentation is being given by http://myfidelity.members.fidelity.com/investorsWeekly/cms/FEAq3recap061027.dyn;mfSessionId=JLFJEYEIDFS5UCQEFEPCFFI?keyword=interviews&sourcecd=FEA]Jurien Timmer[/url], their Director of Market Research. It'll be interesting to see if they have anybody local to coordinate the whole affair or if they're going to ship in the Seattle team for a couple weeks' temporary duty.

As SG said I can afford to buy my own dinners, but when Schwab was doing these they were a hugely entertaining "guy's night out" for my FIL and I (and thus greatly appreciated by my MIL). So we'll probably go just to listen to the words and enjoy the rubber chicken.

Has anyone heard Timmer speak before or been to one of these dinners? Does "market research" mean that he's in charge of researching stocks or is he in charge of researching customer markets to whom he could sell Fidelity's Active Trader products? He spent last week at a money expo where he could have been doing either one...

Any interesting conversational topics that I should add to my list of prepared questions?

If any of you are planning to be in Waikiki on 19 December then dinner's on me, but let me know now so that I can give Fidelity a head count!

 

[riskadverse]

You might ask them if they ever plan to notify their taxable account holders before they plan to distribute 18% of the NAV in one year.


http://tinyurl.com/ykarth

 

[2B]

You might ask them if they ever plan to notify their taxable account holders before they plan to distribute 18% of the NAV in one year.

This is an interesting problem for all of the mutual fund companies. Since the 2000 bust, mutual funds have been able to shelter any paper profits with losses. Thus, they've avoided significant capital gains distributions. Things have gone so well lately that most funds are now going to have some wopper distributions.

FYI -- Mutual funds, by law, can not distribute capital losses but may only use them to offset future gains. Gains must be distributed (or offset) in the mutual fund fiscal year realized. Most have their fiscal years start in October.

 

[Nords]

You might ask them if they ever plan to notify their taxable account holders before they plan to distribute 18% of the NAV in one year.

OK.

I also plan to ask them why minors can't open IRAs. I've asked their customer service people to take it up the chain and the answer was still "No thanks." T. Rowe Price has been very helpful, and it seems Fidelity is missing a big opportunity to catch 'em while they're young.

I bet Fidelity wants to spend most of the time talking about the market. I bet we want to spend most of the time talking about customer service...

 

[mickeyd]

25-cent dividend and a $22.11 long-term capital gain, a total distribution of $22.36

Ouch, I feel your pain.

 

[Billy]

This happened to us years ago with 20th Century Ultra. The distribution put us into a higher tax bracket and caused some headaches. When the market fell in 2000-2002, I sold it and moved everything into Index funds.

Low cost, tax efficient funds is the way for us to go.

Billy
RetireEarlyLifestyle.com

 

[Nords]

This happened to us years ago with 20th Century Ultra.

But oh what a ride that was... fun while it lasted.

 

[mickeyd]

When the market fell in 2000-2002, I sold it

Yea, buy high, sell low used to be my investment philosophy also. Now I just give it to Vanguard and tell them to look after it forever.

 

[Billy]

yeah..I didn't mention I bought it in the 80's....so not all was lost.

Billy
RetireEarlyLifestyle.com

 

[Nords]

A lovely time at Fidelity's client appreciation dinner!

They sent several people from the Seattle office along with Jurien Timmer, Fidelity's investment director. He seems to be a macroeconomic quant geek in charge of the direction of the funds (tactical asset allocation) as well as publicizing the new offerings. (He said Fidelity incubates a lot of funds but few see the light of day.) He put out a lot of interesting facts & graphs that led to his conclusions, although of course the graphs may not actually pinpoint the relevant variables. He's quite articulate and credible, but hey-- you can see the same presentation right here.

Big picture-- economy cooling nicely but not too cold, no Fed moves, housing market bottoming out (except in CA, FL, HI, & Boston). Barring unforeseen earnings shocks the market is already pricing in the legendary soft landing. We're ending a four-year bull cycle and there could be an 8-10% correction before starting four more up years... or the market could just skip the correction (perhaps it already has) and keep on going. S&P500 is only up 85% from 2002 despite a tripling of earnings. Timmer's bullish on commodities, financials, consumers, tech, international, and b33v3r ch33s3 EM. Although it might have been quicker for him to list his bearish sectors, Fidelity doesn't sell any bear funds. Stock market float has actually dropped over the last few years, which apparently is good for now but somehow (I don't understand this mechanism) could turn bearish.

One interesting factoid (among many on the slides) is that the U.S. per capita oil consumption is about 25 barrels/year. Japan/South Korea/Hong Kong are at about 15-17 bbl/year. China & India... 1-2. Even with rising reserves & refineries it's not hard to imagine a rising worldwide oil demand leading to $100 barrel in the next five years.

Other details:
- Mortgage payments have risen from 24% of income (2002) to 29%. The ratio of home prices to household income has peaked at 5 and dropped to 4.76. Home ownership has risen from 63% to 69%. Forecast: overall soft landing with a few isolated hard spots. Sideways for a year or two.

- Bond yields are lowered by about 1% from where they "should" be due to foreign demand for Treasuries. This appears to be a major source of our economic stimulus and is having more of an effect than the current account deficit. Forecast: flat or inverted yield curve will continue.

- He claims that foreigners owning over half of American debt is a side effect of globalization (which started when the Berlin Wall ended). Foreign countries want to keep their currencies weak (great for exports!) so they buy $$ on the open market. Awash with useless dollars, they redeem them for Treasuries. China is selling yuan as fast as they can print them and buying $$. (Perhaps China should be printing $$ instead, but the Bureau of Engraving & Printing is reluctant to outsource this business.) Timmer also claims that other economists buy this line of reasoning, but not the Senate Finance Committee. Forecast: the trend will continue.

- M&A has gone from 1980s debt LBOs to 1990s stock swaps to "third millennium" private equity cash deals. Valuations are peaking but the craze will continue throughout 2007. Forecast: everybody (but the buyer) will recognize the peak (most stupid) deal when it's announced, a reprise of AOL buying Time Warner, but that could take as long as five years to happen.

In a stunning yet apparently unrelated coincidence to this year's M&A, Fidelity is trotting out a "personal endowment" fund of funds that will include illiquid assets like hedge funds & private equity. The idea is that it'll be an open-end mutual fund (vice a personal account or a CEF) and the challenge will be daily pricing of those illiquid assets to determine NAV. Somehow this NAV uncertainty will be marketed as an advantage over "old school" mutual funds.

The affair was held at the Halekulani, one of Waikiki's most opulent hotels at the edge of Lewers' "beachwalk" renaissance. If it wasn't on the beach we wouldn't have been allowed inside. As it was, crossing the street lobby in shorts/t-shirts/slippers after 5 PM ("evening resort attire requested") earned some stinkeye from the staff who were all too happy to tell us where to go. The meeting rooms were filled with well-dressed older folks and I brought both averages down by at least a couple decades. Fidelity hosted open bar (beer, wine, cocktails) and a huge buffet spread (crabcakes? salmon mousse?!? ah, there's the sushi), so I guess the emphasis was more on marketing than on signing annuity contracts. My beer bottle and my pupu plate never emptied. There was probably a crowd of $150M 100 people to about 10 Fidelity reps (and 25 Halekulani staff). Since Fidelity kept the bar open during Timmer's presentation, there were no hostile questions.

Timmer claims that Fidelity doesn't let minors open IRAs due to legal concerns over minors having ownership of securities. Apparently T. Rowe Price and other minor-IRA-flogging firms are flagrantly stupid or evil not to be so concerned for their customers.

Jurien also mentioned that he managed to stand up during his surfing lesson, so clearly he's a regular guy who can't be all company shill. He ended his talk with "See you next year!" and hopefully I'll be invited back too...

 

[mathjak107]

now tell us about the menu

 

[audreyh1]

Hey thanks for taking notes and benefiting us with the summary!

Now I'm going out for Xmas lunch. Roast Duck I think! Not free though.

Audrey

 

[REWahoo]

Now I'm going out for Xmas lunch. Roast Duck I think!

Roast duck? On Christmas?

"Fa-rah-rah, rah-rah, rah-rah--rahh-rahh!" (Don't shoot your eye out!)

 

[dex]

thanks for the post - greatly apprciated

 

[Ed_The_Gypsy]

Even with rising reserves & refineries it's not hard to imagine a rising worldwide oil demand leading to $100 barrel in the next five years.

Praise the Lord!

I have a chunk in Vanguard's energy index and I work in the tar sands business. (Sorry--"oilsands" is now the PC term.) And one scenario is a sojurn in Venezuela (Merida) in retirement ($0.25/gal gasoline).

We have a chance of not having to live in a cardboard box and live on dogfood in our golden years.

 

[Lancelot]

Good report Nords! I wonder when Fido will open a Bangkok branch office

 

[mickeyd]

Excellent report Nords.

Since Fidelity kept the bar open during Timmer's presentation, there were no hostile questions.

Nice touch.


Either you are an excellent note-taker, or you recorded it. Even though I have cast my financial lot with Vanguard, I value very highly any information that Fidelity puts out.

I had never heard that 25 barrels/year figure either. I find that an interesting way to compare US usage to other economies in the world.

I'm trying to keep my consumption under 24 next year.

 

[Delawaredave]

The oil metric was interesting. Actually I was suprised Japan and other developed nations were so close to USA (I think it was 15 barrells or so).

I think the USA is 5% of the worlds population but consumes 20-25% of the world's energy.

Used to be that a lot of our energy was used to "make stuff" - industrial production consumed domestically and exported.

Now we don't make anything and all our energy is used to power SUVs and lights at the mall.....

If the rest of the world approaches our behavior, we're toast.....

 

[bbuzzard]

Now I'm hungry. Why doesn't Vanguard do these sorts of things? Oh, I guess that's b/c of the 20 basis point expense ratio .

 

[Nords]

Either you are an excellent note-taker, or you recorded it.

Four pages of notes. I'm a military-trained professional student.

It was fascinating stuff but I've noticed that it's very hard to find a year later when you try to benchmark Fidelity's predictions. Hence this post on Dory's server!

 

[clifp]

So how big of a Fidelity account to you need to go this shindig. For some reason Schwab didn't have a Xmas party in their Honolulu office this year...

One comment on the oil stuff, IIRC. Back in the 1970 it took roughly 3x as much energy in the US to produce one $1 of GDP. )(I am pretty sure this wasn't just oil but things like coal). So the US despite being energy pigs is improving.

 

[Nords]

So how big of a Fidelity account to you need to go this shindig.

I don't know how they picked the guest list, but I bet it's cheaper to invite everybody on Oahu than it is to re-open the Honolulu investor's center. My FIL doesn't even have a Fidelity account and they were happy to include him. I'd call Fidelity and ask to be added to the mailing list!

For some reason Schwab didn't have a Xmas party in their Honolulu office this year...

My FIL hasn't been invited to a Schwab affair since 2004, but I thought that's because we didn't buy anything. I'm glad to see we don't have to take it personally...

 

[shtg42012]

but I bet it's cheaper to invite everybody on Oahu than it is to re-open the Honolulu investor's center.

Still remember the first time I went into a Fidelity Invest Ctr. It was a free-standing bldg in SoCal with some very nice wood trim interior, high quality carpet/flooring, real nice TI type imps., etc. Have to admit I thought about maybe it was almost TOO nice.....

 

[sailor]

One comment on the oil stuff, IIRC. Back in the 1970 it took roughly 3x as much energy in the US to produce one $1 of GDP. )(I am pretty sure this wasn't just oil but things like coal). So the US despite being energy pigs is improving.

Clifp,
Is it expressed in inflation adjusted money? If not it means that we are getting worse.
According to official CPI calculator ( http://data.bls.gov/cgi-bin/cpicalc.pl ) one 1970 dollar is equal to $5.19 2006 dollars.
Do you remember the source of the energy/GDP statistic?

 

[lazyday]

Another Free Fido Food report (not mine) for those who are interested in such things: http://66.223.18.76/wwwboard/messages/175012.html

Hi FundAlarmers,

Last night I attended a reception hosted by Fidelity Investments
celebrating the opening of a Flagship Investment Center in Los
Angeles. It’s only the third such Flagship facility in the United
States. Bruce Johnstone, a senior marketing investment
strategist at Fidelity, was the keynote speaker for the event. Mr.
Johnstone successfully managed Fidelity’s Equity Income Fund
for 2 decades, but his most recent area of expertise focuses on
foreign markets.

Mr. Johnstone’s keynote presentation centered on an individual
investor’s current asset allocation decision dilemma. His
bottom-line is, although still positive about US returns, he
forecasts superior returns for foreign equities.

The basis for that conclusion is an assessment of 3 support
pillars that Johnstone examines to formulate his judgment.
Those 3 pillars are corporate earnings growth rate, inflation/
interest rate environment, and equity evaluation measures (like
market P/E ratios). For the US equity marketplace, he finds
corporate earnings growth potential subdued (single digit down
from double digits), inflation rate/interest rate environment
acceptable, and evaluation measures in neutral (not likely to
expand thus not enhancing returns). Overall, over the next few
years, Johnstone expects US returns to be single digit positive.

In contrast, he is much more constructive in his assessments of
near term foreign investment prospects. He emphasized foreign
GDP growth rates and national movements towards democratic
reforms that give people freedom to own property. By the way,
he fears the negative impact that the US residential housing
market and its supporting industries can have on the US
economy in the next several years.

Mr. Johnstone only invests in actively managed mutual funds.
Even at an age of 66, he only holds equities, no bonds. He
advocates and practices broad worldwide diversification
including currency elements. His neutral asset allocation would
roughly follow global capital weightings. In today’s world, a
neutral position would allocate 45 % of holdings in the US
markets and the other 55 % in foreign investments. But
Johnstone’s evaluations suggest an edge to the foreign markets.
Last year, Johnstone’s portfolio had 65 % foreign tilt. As of
yesterday he estimated a 72 % foreign holdings tilt. Mr.
Johnstone recommends all individual investors consider a
foreign holdings overweight asset allocation. He believes the
foreign investments will offer higher returns beyond US returns
for many more years in the future.

He emphasized that none of the Fidelity Funds are currency
hedged. Therefore, a private investor can benefit from any
falling US dollar scenario by using non-hedged foreign mutual
funds without entering the risky foreign-exchange marketplace.

This is the third time in the last 2 years that I have attended a
lecture given by Bruce Johnstone. His presentations are well
documented and also entertaining. They have been consistent
in their viewpoint. That viewpoint highlights broad
diversification, especially into the international equity markets.

I hope this helps all you in forming your own global asset
allocations.

Best Regards,

MJG