Clean Bill Of Health

Recently I turned 40 and so I went today for a check up just make sure everything is OK (it is). I think there is an analogy here for managing your portfolio. There is not much that is pleasant about getting poked and prodded but it is what you do so that small problems, if there are any, don’t become big problems a little later. A small problem in your portfolio might be having too much of one thing and not enough of another. Over the last month I have heard from a lot of people with too much in emerging markets, that’s been one problem (large or small depends on how much you have) and although it has not come up a lot in the comments perhaps people have too little exposure to consumer stocks. As the S&P 500 has fallen close to 4% this month consumer stocks have only fallen 2% (as measured by IYK and IYC). This is important. If you had little or no consumerexposure this past month and too much in emerging markets you are probably down a lot more than 4%. Not everything in a portfolio will work or be interesting for a given period of time. One idea that I have written about before is not knowing where leadership might come from. You can think it will be tech, for example, but the consequence of being wrong depends on how much you tilt your portfolio toward your expectations. The typical investor (as differentiated from a trader) does not need to hit a home run every quarter. An occasional checkup of sorts to...

Barron’s Gets Into Blogging

Barron’s is rolling out the blogs. For months Barron’s Electronic Investor column has helped create awareness of the blogosphere. This site was first profiled in December 2004. Now Barron’s is trying its own hand and you do not need to be a subscriber. There will three in all (for now). The first one up and running is the Tech Trader blog written by Eric Savitz. There is also a daily version of Up and Down Wall Street but it is not formatted as a blog with the ability to leave comments. At some point in the near future, Kopin Tan will have a blog about the options...

More Emerging Market

Yesterday as I was reading an article by Tim Middleton about selling out of emerging markets I had the following question hit my in box. what do you think about this increasing emerging markets nervousness? Do you think money flow might come back to the US as a flight to safety (or maybe lately I’ve been thinking to Europe due to the strengthening euro)? I think maybe the the bear market does not really start until money flow to the US is at a high (like in 2000). As I read Tim’s article he clearly thinks more downside is ahead, based on past declines, and he is on board with selling now but I am not sure if he explicitly thinks investors should sell to zero weight. To be clear I do not advocate zero exposure. I wrote several times before the month long slide about the potential for emerging markets to correct at some point. I was not making a prediction so much as pointing out that hot asset classes usually correct in one way or another. In these posts I noted that markets are attractive investment destinations for different reasons. Brazil and Chile have resources that the world needs. The pricing of their resources may fluctuate but in the big picture, global demand is increasing in China and India (soon Vietnam and Pakistan) and there is not much correlation to the western economic cycle. Places like Singapore and Malaysia manufacture and export electronics and other things so they are more dependent on western demand and more susceptible western economic cycles. Turkey, Hungary and Vietnam are really living...

Will Cheap Stocks Get Cheaper?

The Big Picture: Will Cheap Stocks Get Cheaper? This is a great read over on Barry’s site. It is a thorough exploration of the bearish case for equities. It does not have to be correct but it should get you...

Predictable?

The decline today seems kind of predictable. Well, I did not predict it but a lot of folks did call for some snap back, which came last week, followed by more selling. Today we have more selling. While I would not want to have zero exposure to equities I do think the returns we will see will seem disappointing. My prediction for year end of 1180 to 1219 for the S&P 500 still feels right to me which would not be the end of the world. The volatility of the last few weeks, despite still not being that high, will probably lessen in the next few weeks. I discount the probability of a 20% decline in very short order (be it one day like 1987 or a few weeks like 1998). So many of today’s investors have lived through those other declines and I think are very worried about something similar coming now that I just think it is unlikely (gut call here with no science). A milder decline is more conducive to a bear market, which is also not the end of the world but is a part of the normal stock market cycle. If this plays out you will have time to reduce exposure, if it is incorrect and the market goes up a lot you can capture most of that move provided you do not try to outsmart the market. So far my only sales have been of holdings that grew too large. I have more cash raised but am not positioned in such a way that I will be completely left behind in the face...