Mid Morning

I’ve never understood the concept of window dressing or more correctly how anyone can get away with it, assuming it actually goes on. A manager this quarter who bottom fished at the wrong time in financials and made a big bet on Ford (F) and GM is going to have horrible numbers for the quarter. When the results are reported to clients and they show a 10% lag (just to make up a number) for the quarter with no financials and no autos I think an investor might be more concerned. “How did you do so badly with energy and materials?” Is there never that kind of questioning? My hunch is that it would be easier to explain a bad result by explaining what went wrong with the parts of the market that were doing poorly. Maybe it does go on but perhaps that extent to which it occurs is...

Mid Morning

I’ve never understood the concept of window dressing or more correctly how anyone can get away with it, assuming it actually goes on. A manager this quarter who bottom fished at the wrong time in financials and made a big bet on Ford (F) and GM is going to have horrible numbers for the quarter. When the results are reported to clients and they show a 10% lag (just to make up a number) for the quarter with no financials and no autos I think an investor might be more concerned. “How did you do so badly with energy and materials?” Is there never that kind of questioning? My hunch is that it would be easier to explain a bad result by explaining what went wrong with the parts of the market that were doing poorly. Maybe it does go on but perhaps that extent to which it occurs is...

Going New School?

Over the weekend as I was putting the finishing touches on an article for TSCM I stumbled across a concept that is probably not new, relative to this site, but that I did (by accident?) articulate a little differently. Over the last eight or nine years one could argue that domestic indexing has not worked. Since the start of 2000 SPY is down about 10%. Since inception (mid 2000) iShares Russell 2000 (IWM) is up a hair under 40% which works out to about 5% annualized. While very unlikely, what if indexing fails again over the next eight or nine years? Allocating too much to index funds that go nowhere for a decade and half creates a real headwind for reaching financial goals. As I find portfolio construction, and its evolution, to be an interesting topic… What if indexing doesn’t work or more correctly what could you do if you think it might not work? One solution could be some sort of combo of absolute return/low volatility vehicles and potentially more volatile narrow themes. The ratio of absolute to narrow would depend on the investor but the combo chosen would need provide a chance for long term success and allow the investor to sleep. Putting it all into agriculture stocks would create too much volatility and putting it all into a carry trade ETF would not provide enough growth (at least I don’t think it would). Unfortunately this would require a lot more work for folks who are accustomed to indexing but if indexing does not work then indexers need to do something different. As an example, if a...

Going New School?

Over the weekend as I was putting the finishing touches on an article for TSCM I stumbled across a concept that is probably not new, relative to this site, but that I did (by accident?) articulate a little differently. Over the last eight or nine years one could argue that domestic indexing has not worked. Since the start of 2000 SPY is down about 10%. Since inception (mid 2000) iShares Russell 2000 (IWM) is up a hair under 40% which works out to about 5% annualized. While very unlikely, what if indexing fails again over the next eight or nine years? Allocating too much to index funds that go nowhere for a decade and half creates a real headwind for reaching financial goals. As I find portfolio construction, and its evolution, to be an interesting topic… What if indexing doesn’t work or more correctly what could you do if you think it might not work? One solution could be some sort of combo of absolute return/low volatility vehicles and potentially more volatile narrow themes. The ratio of absolute to narrow would depend on the investor but the combo chosen would need provide a chance for long term success and allow the investor to sleep. Putting it all into agriculture stocks would create too much volatility and putting it all into a carry trade ETF would not provide enough growth (at least I don’t think it would). Unfortunately this would require a lot more work for folks who are accustomed to indexing but if indexing does not work then indexers need to do something different. As an example, if a...

Sunday Morning Coffee

  Things have obviously been quite stormy in the market of late so what better time for Barron’s to interview Peter Schiff. I generally agree with him directionally but do not agree at all in terms of magnitude. The US has quite a few things to overcome, clearly, but I think the consequence of that is simply below average growth. It is too soon to know whether the idea of below normal is right or if Schiff’s idea is right. I say too early because decade long round trips to nowhere, which is all we have so far, is not unprecedented. Does anyone get any benefit from his continual pounding of the same idea? I do not. However on the rare occasion that he actually talks about stock picks, it is always very interesting and useful. The Barron’s article was about 90% sparring match which could be summed up with the following; Barrons: Wouldn’t such and such make a difference? Schiff: No it wouldn’t. Just the last little bit was about stocks and there was no depth to that part of the interview. Taking a slightly less dramatic approach to this there is precedent for and current evidence of the big boy on the block becoming a little less important a destination and a less rewarding destination. This is something I have been writing about for a while and investing around longer than that. Anyone without decent foreign exposure during this bull market has had a much harder time making this decade work for them. So we are somewhere in the middle of what I think is a normal...