"Beliavsky" <beliavsky[at]aol.com> wrote in message
news:1192198672.340411.177190[at]i13g2000prf.googlegroups.com...
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The writer is not communicating his ideas well. I don't think he's (pardon
the pun) off-base, but he's misapplying an analogy. He might have clarified
his point by saying that wild card teams are often better than the teams
they face (though the Yankees didn't have pitching at the beginning of the
season, and they ended the season the same way). So he's looking at "teams"
that had an off year, _regardless_ of the division (category). Let's face
it - categories like Intermediate Term Bond (FPA New Income), or even Mid
Cap Blend (Weitz Hickory), haven't been chart toppers.

Rather, he is agreeing with you, that the pendulum swings both ways, and if
you have good players (fund manager, analysts) and solid fundamentals, that
will pay off eventually.

I think he's wrong with some of his picks, for various reasons, but that's
another matter.

Finally, depending upon how broadly one splits asset classes, there
certainly are studies showing persistence. Equities outperform bonds
outperform cash over the long term, and usually one is wrong betting against
that.

Mark Freeland
BnetOnewsX[at]sbcglobal.net

I read this from Morningstar today

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Fund Spy: Baseball Gives a Lesson On Relative Return Limits
Michael Breen 10-11-07 06:00 AM

"The Chicago Cubs were recently bounced from Major League Baseball's
playoffs by the Arizona Diamondbacks. We should have seen it coming.
Forget goats and curses. This was all about the numbers. And the
numbers said Arizona had the better team. The Cubs and Diamondbacks
both won their respective divisions, but those groups were not equal.
Arizona topped a strong division, while the Cubs barely won baseball's
weakest. In fact, more than a third of baseball's 30 teams had better
records than the Cubs'. Clearly, topping a weak group doesn't always
equate to absolute strength. And just as important, quality teams are
often hidden in the middle of tough groups.

The same is true in investing. We sort funds by similar styles so that
we can make apples-to-apples comparisons among peers. Such comparisons
are important. But, they should always be set against a backdrop of
absolute performance. As the old saying goes, you can't eat relative
returns. A glance at the 10-year annualized returns for Morningstar's
domestic- and foreign-stock categories shows a range from 15.7% down
to 2.3%. In the basement are Japan stock funds. Even the top-rated
funds in this category haven't meaningfully compounded capital over
time.

At the opposite end of the spectrum are 10 categories in which the
typical fund has returned more than10% annually over the past decade.
We trolled these waters and found plenty of funds that we think highly
of, even though their current rankings and ratings don't appear
great."

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I think the logic is poor. The author seems to be assuming that prior
10 year performance of an asset class is predictive of future
performance. Maybe it is, but my default assumption would be that it
is not predictive or predictive in the *opposite* direction, with
asset classes that have suffered for a long time bouncing back. No
evidence is provided for the author's theory. If anyone knows of a
study, I'd be interested to see it.