TCS Daily


Dobbs Rogue Fund Returns 72%!!!

By James K. Glassman - February 25, 2004 12:00 AM

In his continuing crusade on behalf of xenophobia and protectionism, the baffling Lou Dobbs posts on his website a list of "companies we've confirmed are 'Exporting America.' These are U.S. companies either sending jobs overseas or choosing to employ cheap foreign labor, instead of American workers."

Dobbs is obsessed with "outsourcing" - which is simply another word for "trade." As The Economist says in its current issue, "Outsourcing actually sustains jobs." Of course. David Ricardo figured this out two centuries ago, and, according to The Economist (and to every reputable economist), it has been "demonstrated to astonishing effect since."

Outsourcing tech and other white-collar jobs is simply a canard, devised by viciously protectionist candidates like John Edwards and John Kerry, to frighten voters. Mr. Dobbs does his part. In truth, as The Economist notes, "The demand for computer-support specialists and software engineers, to take two examples, is expected by the Bureau of Labor Statistics (BLS) to double between 2000 and 2010. Demand for database administrators is expected to rise by three-fifths. Among the top score of occupations that the BLS reckons will see the highest growth, half will need IT skills. As it is, between 1999 and 2003 (that is, including during the recession) jobs were created, not lost, in a whole host of white-collar occupations said to be particularly susceptible to outsourcing."

A quick glance at Lou Dobbs's list reveals that it comprises America's most innovative companies - many that didn't even exist a generation ago and now employ tens of thousands of Americans (Microsoft) or invented new industries (Amazon.com). Among scores of great companies that Dobbs considers evildoers: Boeing, the mega-exporter; Cisco Systems, builder of the world's Internet infrastructure; Intel, which garners 71 percent of its sales from abroad; General Electric, the most valuable industrial company on earth; Pfizer, the world's largest pharmaceutical company; and Yahoo!, the hugely popular global portal.

We decided to turn the list into a virtual mutual fund, which we call the Dobbs Rogue Fund. The analysis wasn't easy since the list itself is inconsistent and sloppy - with subsidiaries listed and double-counting galore. In addition, about three dozen companies are private or unlisted on the stock exchanges.

The heroic efforts of my research associate, Sharon Utz, produced a clean list but we are happy to hear of any corrections. The final portfolio includes 216 publicly traded companies.

Using data from Bloomberg, we calculated that the annual return for the Dobbs Rogue Fund, if it had existed over the past year (12 months ending Feb. 23, 2004), was a remarkable 72.44 percent. That compares with a return of 39.11 percent for the benchmark Standard & Poor's 500-Stock Index over the same period.

Only eight stocks out of the 216 fell in value over the past year. By contrast, 42 stocks at least doubled.

I love this fund. It doesn't exist, but perhaps some smart investment firm will create it. For now, you can pick and choose among the stocks and add them to your own holdings. No guarantees, of course, but Lou is definitely on to something. We will update the portfolio's returns in the future.


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