Lately I have had to use fiction to tell the truth about our industry. I have to do that because the dissemblers are going full-bore to convince you to keep their money with underperforming managers.
We have a term in the industry for managers who meaningfully underperform the indices. It is called "awful" -- as in, "These managers are awful." I know that seems ungraceful, but most things in life are. If you open your monthly statement and your fund is down 20% or more, do yourself a favor and think, "Hey, maybe this guy is one of those 'awful' managers that
is always talking about."
I know, these guys are tough to spot and even tougher to weed out,
because you have to do the weeding
. It shouldn't be like this. The fund families should do the weeding. But they have spent too much money on their tarnished stars or they are unwilling to pull the plug on their managers lest they signal "turmoil."
What should these firms be doing? They should be sending out letters like this fictional little ditty:
Dear Investor: For the first five months of the year, your Pffutnam OTC Emerging Horror fund dropped a quick 30%. On top of last year's 50% decline, that's just plain awful. We don't tolerate losses at our shop. We have broomed those responsible for this horrendous performance and brought in new people to turn this ship around. We understand your impatience and we sympathize with you. Many of us have money in this fund. We will not tolerate consistent underperformance or losses in the name of shooting the lights out during the good times. Your patience with our new team is appreciated. Sincerely, Mr. Pffutnam
Can you imagine that level of honesty? Can you imagine that kind of pathos and understanding of our psyche? Only in fiction, my friends, only in fiction.
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James J. Cramer is a director and co-founder of TheStreet.com. He contributes daily market commentary for TheStreet.com's sites and serves as an adviser to the company's CEO. Outside contributing columnists for TheStreet.com and RealMoney.com, including Cramer, may, from time to time, write about stocks in which they have a position. In such cases, appropriate disclosure is made. While he cannot provide personalized investment advice or recommendations, he invites you to send comments on his column to