Sunday Morning Coffee

Barry had a post about Bob Rubin’s diminished credibility and while the post was a good read there was a secondary point in there that I think is a very useful learning tool (or reminder) for just about anybody. In there was a snippet from the WSJ that included the following; “Mr. Rubin… acknowledged that he was involved in a board decision to ramp up risk-taking in 2004 and 2005, even though he was warning publicly that investors were taking too much risk.“ My take on this (and if you click through and read the whole thing you might agree) is that he knew there was greater risk but felt the bank would be able to out-maneuver that risk. I imagine there was some sort of complex plan of exactly how they were going to that. No doubt that going in it probably sounded pretty good. Conclusion (fair or not): They were too smart for their own good. This is a behavior that does in all sorts of people. This is something I have tried to be aware of over the years and why I try to make the big portfolio decisions based on very simplistic things like yield curve inversions and the market going below its 200 DMA. Both indicators warn you trouble is coming. They do nothing to tell you the magnitude of the trouble. I don’t believe magnitude is the most important thing, certainly not as important as heeding the warning. Heeding the warning is more difficult than it sounds because there are so many people telling you why this time is different. A good example...

Sunday Morning Coffee

Barry had a post about Bob Rubin’s diminished credibility and while the post was a good read there was a secondary point in there that I think is a very useful learning tool (or reminder) for just about anybody. In there was a snippet from the WSJ that included the following; “Mr. Rubin… acknowledged that he was involved in a board decision to ramp up risk-taking in 2004 and 2005, even though he was warning publicly that investors were taking too much risk.“ My take on this (and if you click through and read the whole thing you might agree) is that he knew there was greater risk but felt the bank would be able to out-maneuver that risk. I imagine there was some sort of complex plan of exactly how they were going to that. No doubt that going in it probably sounded pretty good. Conclusion (fair or not): They were too smart for their own good. This is a behavior that does in all sorts of people. This is something I have tried to be aware of over the years and why I try to make the big portfolio decisions based on very simplistic things like yield curve inversions and the market going below its 200 DMA. Both indicators warn you trouble is coming. They do nothing to tell you the magnitude of the trouble. I don’t believe magnitude is the most important thing, certainly not as important as heeding the warning. Heeding the warning is more difficult than it sounds because there are so many people telling you why this time is different. A good example...

The Big Picture for the Week of November 30, 2008

Videos will resume next week. One of my RSS feeds had this from a site called TickerSpy about the ETFs (and a couple of individual stocks) owned in the Harvard Endowment. You can click here for the full list which includes position size. The ETFs are all either broad based (like IWM, EEM, VWO) or iShares single country funds (like Brazil, Taiwan, South Korea and India–that one is an ETN). Eyeballing the list these holdings total $2.3 billion out of about $36 billion so I’m not sure how much this tells us about overall positioning. The article makes it seem like this is a portfolio withing the endowment (maybe I have that wrong though). If that is correct then I am surprised there are no sector decisions expressed. Clearly many ETFs would be difficult for Harvard to access due to the endowment fund being too big (a couple of the positions are close to half a billion) but I’d think that iShares and the Sector SPDRs could accommodate. This is a potential advantage a do-it-yourselfer has over the endowment. If you deem a narrow based ETF with only $30 million in assets trading $75,000 dollar volume per day as the best way to capture a given sector you can buy that fund pretty easily. There is obviously risk of that fund closing but a fund that closes for lack of interest is not a total loss. It doesn’t necessarily have to be a loss at all. If the market was up 30% this year then most of the HealthShares that are being closed would also be up but probably...

The Big Picture for the Week of November 30, 2008

Videos will resume next week. One of my RSS feeds had this from a site called TickerSpy about the ETFs (and a couple of individual stocks) owned in the Harvard Endowment. You can click here for the full list which includes position size. The ETFs are all either broad based (like IWM, EEM, VWO) or iShares single country funds (like Brazil, Taiwan, South Korea and India–that one is an ETN). Eyeballing the list these holdings total $2.3 billion out of about $36 billion so I’m not sure how much this tells us about overall positioning. The article makes it seem like this is a portfolio withing the endowment (maybe I have that wrong though). If that is correct then I am surprised there are no sector decisions expressed. Clearly many ETFs would be difficult for Harvard to access due to the endowment fund being too big (a couple of the positions are close to half a billion) but I’d think that iShares and the Sector SPDRs could accommodate. This is a potential advantage a do-it-yourselfer has over the endowment. If you deem a narrow based ETF with only $30 million in assets trading $75,000 dollar volume per day as the best way to capture a given sector you can buy that fund pretty easily. There is obviously risk of that fund closing but a fund that closes for lack of interest is not a total loss. It doesn’t necessarily have to be a loss at all. If the market was up 30% this year then most of the HealthShares that are being closed would also be up but probably...

Shopping Day!

So do your part and get to clicking! As people maybe have thought about the things they are thankful for in the last couple of days I had a thought about people also being very worried about their financial situations. How many people have mortgages that are too big, are over extended on credit cards and whatever else you can think of? As you can maybe tell by my thoughts about portfolio management I am very conservative (I think) with personal finance issues. We paid off our small mortgage in Prescott very quickly, have not had a credit card balance since 1992 or 3 and the mortgage on our Hilo house is not even 20% of our income. This sort of approach prevents most problems from ever happening. Similar to my portfolio is down 40% now what do I do, waking up one morning and realizing there is not enough money for the bills is a bad place to be. That is the crux for living below your means. Some people do thrive on that sort of stress, I want no part of it. Different subject. I first made mention of the dollar’s status as world reserve currency changing in some way in 2004. Now four years later the path to this is easier to see (it may not happen of course but things in the US have deteriorated mightily). Here is a snippet from the FT on Thursday about the yen possibly filling that role. I’m not sure what I think about the likelihood of yen becoming a world reserve currency just yet as I believe the vast...