Worth the Fuss – The Aleph Blog

Helping Institutions and Ordinary People Invest Better by Focusing on Risk Control

Posted on 7 April 20078 April 2007 by David Merkel

I would like to draw your attention to this free Wall Street Journal article on Dan Fuss of Loomis Sayles. Dan Fuss is a fundamental genius in bond investing, and anything you hear about him is worth reading. Largely because of his reasoning, I own a decent slug of Canadian bonds for my balanced mandates.

I will contrast him with the better known Bill Gross of PIMCO. PIMCO is largely a quantitative shop, implicitly writing out-of-the-money calls against their fixed income positions to generate incremental income. Dan Fuss makes big investments on what he believes the world will be like 3-5 years out. His view of the world has been uncanny for several decades. No surprise that he has been the best in bond management over the long haul.

2 thoughts on “Worth the Fuss”

James Dailey says:

8 April 2007 at 9:02 pm

Hello David,

Thanks for linking to that great article on Fuss – truly a master. I found it interesting that you highlighted his interest in Canada which supports your current position but did not address Fuss’s forecast for “slowflation” which is different than your forecast for lower long rates – over the next year or two that is. Am I mischaracterizing your view and if not what do you think of Fuss’s outlook? I always enjoy/value getting both sides from successful investors. Thanks
David Merkel says:

10 April 2007 at 12:09 am

Hello James,

If Dan Fuss disagrees with me, you should trust Dan Fuss. I would love to learn from him, much as I have done well in equity and bond investing.

To explain my position better, I have talked about what I call stagflation-lite at RealMoney and here as well. It is the equivalent of Dan’s slowflation. I recognize the complexity of the current environment, though, and see that changes in pension regulations and demographics wil be a cross-current that will flatten the curve for a while.

These are two effects that fight each other. We need to be aware of both of them, and gauge which is stronger and for how long.

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