Nick Knacks

This is a YTD chart of the US dollar index. It appears to be down quite a bit. I don’t think I would describe it as a crash but it certainly is noticeable.

I am not in the panic-in-the-street crowd that says the dollar will crash. The decline this year, and further back really, has been somewhat orderly and does not appear to be the source of the biggest problems we face; sub-prime, liquidity and GDP growth.

It could be argued that the weak currency has been enough of a lift for the multi-nationals to help GDP not be weaker.

Obviously, if this is even correct, I am not describing a healthy situation but it is not calamitous either and for now I think whatever it devolves into, it won’t become calamitous.

There are investment implications however. Weak growth, for example may not be a calamity but it may not get you to where you need to be either. I pick on EFA a lot but it is better than no foreign equity exposure. To be clear I don’t think is a great choice, especially with all the other options available but it should do well if foreign continues to beat domestic. Let me be clear because someone will add 1+1 and not get 2; better than nothing but worse than just about everything else.

under ticker In case you missed it Wisdom Tree is launching a small cap emerging market dividend ETFDGS that, according to an email I received, should start trading on Tuesday. The fund is heaviest in Taiwan 23%, South Africa 14%, South Korea 12%, Thailand 11% and Malaysia 10%. Sector-wise it favors capital goods 12%, materials 12% and transportation 12%. Interestingly the fund is light on telecom. Telecom is usually a good way to access emerging markets but the big phone company in most of these places is a big cap not a small cap.

The index underlying the fund yields 4.44% less the 0.63% fee means the yield checks in at 3.81% to start.

If you missed it, there has been an avalanche of commodity ETFs that have come lately. I am supposed to have an article about the Rogers, as in Jimmy, Commodity Index product line out sometime on Tuesday on TSCM, the free site, for anyone who cares.

I am headed back to Arizona on Tuesday as well after a two week stint in the islands. When we got hear the house was empty, save for a DSL modem.

We spent almost the entire time going back and forth to Home Depot, Walmart and people’s house’s we were buying second (or third?) hand stuff from on Craig’s List.

We had to hang blinds/curtains on nine windows/sliging glass doors fix a leak in the roof around a vent, wait in the dark for the power to get turned on on the first night and crawl through a window that thankfully was not closed properly due to a defective dead bolt that we have since replaced.

Next time should be more relaxing. Joellyn is staying another two weeks; as I leave her parents arrive…read into that whatever you like, lol.

Brett Favre, oh snap!

24 Comments

  1. Roger.
    With the US dollar remaining weak, is FXE a good investment?

    And I love both South Korea and South Africa (EWY & EZA). DGS may go well with DLS since DLS is 17% in Australia, 18.8% in the UK & a rather heavy weight in Japan at 22.69%. Some analysts believe that Japan is a value play though right now.

    I may have to divide up my 10% holding in DLS in my model portfolio and use 5% in each for it’s better diversification. Thanks for the heads up.

    Jack S.

    Reply
  2. Roger,

    You’ve mentioned several times about not being a huge EFA fan and that there are probably better ways to gain foreign equity exposure. I’m not a big individual stock picker but would perhaps you could share what sort things you are looking for when you are investing internationally (both for emerging and developed markets). If your process narrows down to certain countries or regions then exposure to those specific areas could gained through a more specific ETF perhaps. Thanks.

    Brad

    Reply
  3. the term good investment has many meanings so i will pass on saying yes or no in the way you framed it.

    I disclosed recently buying FXE for clients in the low $141s. I had just sold FXS after holding it more than a year. I bought FXE on the idea that the path to the euro becoming more of a world reserve currency, if that pans out I think the euro will keep going up, subject to normal bumps in the road. If my thesis is wrong then the position will not work out very well.

    Reply
  4. Brad you can find plenty of detail on his throughout the archives.

    In picking countries, I look for economic diversity like australia and norway. Extreme pro growth policies like Ireland. what I think is a clear path to more economic relevance like Iceland. Mature stability like UK and Switzerland. Emerging like Brazil. Slow and steady like Sweden.

    Reply
  5. Looking at that dollar chart, do you think it’s due for a bounce back versus the Euro? Unless of course there is lots more downside for the dollar. I don’t know enough about currencies to know whether they have regular pull backs to the moving average the way stocks do.

    Yes that was a great game with Favre, awesome long bomb in OT.

    Reply
  6. look i’m not trying to nimle this, so with that said the dollar has been declining for a while now and there have periods of dollar strength the entire ride down.

    the occasional counter trend move is normal in any market. I could guess when the next one would come, that guess would either be right or wrong but if you were to ask where do I think the dollar will be two years from now I would say lower. two months from now, who knows?

    Reply
  7. Back to a fav topic here…recommendations sought for a lazy style portfolio. This is for a family friend, not well, in his 50’s, and wants to have it as a buyhold for the next 10 years or more for the purpose of leaving it to his children. He wants to do this NOW and of course is too stubborn to hire a professional mgr. The more about how the world is changing, etfs do not appear to me to be a good vehicle if one is just going to abdicate responsibility..but that’s the deal. He already has a suitcase full of stock certificates. Instead of the usual all etf cap-style diversification, my thought is to have half in the following asset classes.
    Hussman strategic growth is top of the list in order to help smooth the ride.
    Next my thought are three asset classes with low correlations but need active management as in a mutual or closed end fund.
    Any suggestions for currency/bonds:?
    Any suggestions for microcap:?
    Any suggestions for commodities?
    …Permanent Portfolio/prpfx reflects 2of3 of these groups.
    After that my thought is to add the usual diversified equity exposure, easily picked up by etfs….or a good OEF, for
    a single intl multicap fund, Acorn is the one I like.Bottom line, 5-6 funds, ok to be oef’s.

    Reply
  8. hopefully you get plenty of feedback from readers but based on what you describe the ten year timetable means nothing if the purpose is for his children. The time horizon would appear to be for them which, if correct, is much longer than ten years, unless i am missing something.

    Reply
  9. Roger,

    Just read your post from the 26th on your top down approach to foreign investing. That was exactly what I was looking for. I look forward to your bottoms up stock selection approach in a future post.

    Brad

    Reply
  10. Roger, re my post on lazy port for cousin….In ten years, to 15 yrs, I would imagine that his chn will be in a position to assume a more active role and then decide what to do.

    Nice write up at street.com on Rogers’ funds. Is the goldman sach ag index/$gdx any differnt from the dow jones one? In the past three years, as far back as I can go, the former has doubled plus some.

    Reply
  11. off the top the GS fund is a lot heavier in energy

    Reply
  12. …..$gkx is the “agri sub index”…not an etf,or broad commodity index.

    Reply
  13. i took the comment to mean the GSP ETN.

    Reply
  14. sorry, i actually mis spelled ticker first time….

    Reply
  15. Anon 9:26.
    If you like Hussman for growth and safety why not use his HSTRX for your bond holding? Another fellow also suggested LSBRX.

    If you don’t like ETFs and prefer managed funds to hold over the long haul, I would suggest that you take a good look at expenses when you buy. That being said, why not choose from Vanguards managed funds in the class allocations that you want?

    And I can’t see why you think that ETFs bought to be held for a long time is not a good idea. They have very low expenses and many pay a good dividend. And for a buy and hold portfolio I would suggest that good dividends should be a strong consideration on your part.

    For commodities I like EWA, EZA, SLX & XME. Brazil would also be good. (EWZ)

    Jack S

    Reply
  16. Stevescoot.
    I didn’t get a chance yesterday to comment on your portfolio holding of PPA with your 10% allocation.

    Isn’t 10% a little high for a sector funds like that? If the election polls next year look anything like the Dems will be cleaning house that holding will drop like REITs did this year.

    I suggest at most a 2-3% allocation for sectors, outside of energy of course.

    Speaking of next years election, and with the possible tax implications that we can all look forward to…

    http://tinyurl.com/2owumx

    Jack S.

    Reply
  17. jack s,
    today it’s commodities, maybe tomorrow, maybe not, along with some broad etfs I thought a managed fund with more flexiblity would be good. remember, this guy is not going to touch this for a long time, not even balance which is crucial to long term holding of indices. I think. Some time ago someone listed a slew of conservative oef’s and I sent this list to my cousin…but some hedging with the usual low correlation candidates would be good. For me it’s a challenge to present something to him, but that may be as far as it goes.

    Reply
  18. This play here reminds me of the market. Just when it appears that the market is going to get stopped and go into a bear market it keeps forging forward.

    http://tinyurl.com/2qkhbt

    Reply
  19. Roger:

    If someone were to ask you (like me!) to pick 8 (or less) ETFs and the percentages you would put into each one right now, what would the portfolio be? Add the constraint that it’s 100% equities. High risk tolerance. Thx.

    Reply
  20. a few weeks ago someone commented on an alternative long/short fund run by someone associated with the u of wisconsin–similar to hussman but with a seemingly monotonically increasing unit value through the summer downdraft. can anyone please give me the “ticker” for that fund?? thanks in advance to whoever does so.
    –gjg49

    Reply
  21. Great reference to the new WisdomTree EM Small Cap fund (DGS). I read an in-depth look at it on SeekingAlpha at this link:

    http://tinyurl.com/2ob8k8

    Reply
  22. The fund is called Nakoma Absolute Return-NARFX.

    See tomorrow’s comments for more.

    Reply

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Nick Knacks

This is a YTD chart of the US dollar index. It appears to be down quite a bit. I don’t think I would describe it as a crash but it certainly is noticeable.

I am not in the panic-in-the-street crowd that says the dollar will crash. The decline this year, and further back really, has been somewhat orderly and does not appear to be the source of the biggest problems we face; sub-prime, liquidity and GDP growth.

It could be argued that the weak currency has been enough of a lift for the multi-nationals to help GDP not be weaker.

Obviously, if this is even correct, I am not describing a healthy situation but it is not calamitous either and for now I think whatever it devolves into, it won’t become calamitous.

There are investment implications however. Weak growth, for example may not be a calamity but it may not get you to where you need to be either. I pick on EFA a lot but it is better than no foreign equity exposure. To be clear I don’t think is a great choice, especially with all the other options available but it should do well if foreign continues to beat domestic. Let me be clear because someone will add 1+1 and not get 2; better than nothing but worse than just about everything else.

under ticker In case you missed it Wisdom Tree is launching a small cap emerging market dividend ETFDGS that, according to an email I received, should start trading on Tuesday. The fund is heaviest in Taiwan 23%, South Africa 14%, South Korea 12%, Thailand 11% and Malaysia 10%. Sector-wise it favors capital goods 12%, materials 12% and transportation 12%. Interestingly the fund is light on telecom. Telecom is usually a good way to access emerging markets but the big phone company in most of these places is a big cap not a small cap.

The index underlying the fund yields 4.44% less the 0.63% fee means the yield checks in at 3.81% to start.

If you missed it, there has been an avalanche of commodity ETFs that have come lately. I am supposed to have an article about the Rogers, as in Jimmy, Commodity Index product line out sometime on Tuesday on TSCM, the free site, for anyone who cares.

I am headed back to Arizona on Tuesday as well after a two week stint in the islands. When we got hear the house was empty, save for a DSL modem.

We spent almost the entire time going back and forth to Home Depot, Walmart and people’s house’s we were buying second (or third?) hand stuff from on Craig’s List.

We had to hang blinds/curtains on nine windows/sliging glass doors fix a leak in the roof around a vent, wait in the dark for the power to get turned on on the first night and crawl through a window that thankfully was not closed properly due to a defective dead bolt that we have since replaced.

Next time should be more relaxing. Joellyn is staying another two weeks; as I leave her parents arrive…read into that whatever you like, lol.

Brett Favre, oh snap!

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