Bull Bear Debate

As a matter of philosophy, I am invested but I’d be hard pressed to take the bull side of the argument with any conviction at...

The Market Is Speaking

The market seems to dislike the Fed news today. Markets were flat and now they are down almost 0.5% (maybe a little less) with the ten year yielding 3.93%. This is not chaos but it seems like a frustration with no new information about what will happen. Market participants can look forward to another six weeks of more of the same dialogue as the last six weeks. Last night in my interview I said they would raise today and again in August but that the guidance would be the most important thing. I didn’t know I’d be six weeks (or more?) early. If the Fed has the same announcement in August as today the markets could have an ugly reaction, unless of course we sell off for six weeks in anticipation of a crappy announcement. Despite all the shenanigans this has been...

The Down Side Of Foreign Investing

This should be a good one. I write a lot about the importance of owning foreign stocks. Well here is an example where it went against me this past quarter and something to understand if you own foreign stocks. Most of my clients own Novartis ADRs (NVS) and I own it personally. It is a fine company doing good things and it has avoided (so far?) the problems that have plagued Merck and Pfizer. The chart shows the three month performance of the ADRs, the ordinaries in Switzerland and the US dollar/Swiss franc cross rate(USD/CHF). The ADRs (the red line) were only up 2% or so but the ordinary shares were up about 7%. The reason for this is the action in the green line, the cross rate. You can see that the ADRs and the ords don’t diverge until the dollar starts to go up against the Swissi in mid May. This is a great chart to clearly show how this can work for, or against, a US investor. It looks like Novartis was the right stock but the Swiss franc was the wrong currency. Next quarter or maybe the quarter after it could be the ADRs that do better. So should you do something to mitigate this? You could fiddle with the Rydex Strengthening Dollar Fund (RYSBX) but this is not my trade. I have written about these funds, and they are interesting but layering in something like this is far from simple. The real take away from this should just be knowing the downside of foreign...

Spring Was Good To Investors

Well that is what Morningstar is saying in it quarterly review. As I write this post the SPX is up 1.7% for the quarter. That is certainly better than being down but was that really good? I’m not sure if they are trying to spin something or if the author really thinks 1.7% is good. I don’t think this is the best way to look at things if you are investing with any sort lengthy time horizon. The market averages 10% per year. That takes into account good, bad and flat. If you are managing your own portfolio all you need to do is stay reasonably close most of the time. I have written many times about taking steps to avoid down a lot. I think it is a sure bet there will be a couple of ugly down a lots over the next 20 years. Missing a big chunk of one of them could add a couple of hundred basis points to your average annual return and spare a lot of mental anguish. There are three things I look at to warn down a lot may be coming; the SPX goes below its 200 DMA, the yield curve inverts or the market averages a 2% loss three months in a row. These are obviously not infallible but they are simple to understand and as I have chronicled in the past you should not go to 100% cash the instant one of them triggers. This was the case when the SPX recently went below its 200 DMA. I tweaked accounts a little bit and was ready to take more...

Here We Go

Met Life has filed a registration statement for a couple of funds that will own ETFs. AG Edwards will be the advisor of the funds. One fund will be the Cyclical Growth and Income and the other will be just Cyclical Growth. There will be multiple classes of shares with varying expenses. Since just about every ETF is a type of index fund, these funds will be funds of index funds. Funds of actively managed funds are bad enough. I have written about what I believe is an investing evolution for do-it-yourselfers in terms tools to manage their portfolios and they way in which information is accessed. Funds like these from Met Life work in direct conflict of that notion. Although it may not always seem like it with some of the content on this site, I really believe in keeping things very simple and clean. Umpteen classes of a fund all with different fee structures and an extra layer of management fees is neither simple nor clean. The article I linked to in the beginning of this post says that these types of funds have had mixed results. Hopefully demand for these will be weak and less of them come to...