Comment Thread

There was an odd comment thread on on yesterday’s rather innocuous post about another blogger’s theories about portfolio construction. Seemingly out of nowhere came some anti-financial market, anti-advisor and anti-blogger sentiment. Some of the comments; It seems all you “advisors” have this basic assumption that a “financial portfolio” is needed? The “stock market” is a fools game created to steal your money. Top down may have worked this time, but has it always? Most of these blogs remind me of a daily racing form you get at the horse track… It is gambling! Wow that is some dourness and I probably resemble some of those remarks (blogger and advisor). First off, after months and months of stock market declines it makes sense to expect that many people will be emotionally weary. Comments like the ones above belie that weariness. The folks leaving those comments might be inclined to tell me to hit the bricks but but for anyone not inclined to compare stock market content to a racing form they might benefit from recognizing the emotion exhibited by other people which in turn might prevent them from letting their own emotions get the best of them. I was having a conversation with someone on Wednesday and I said the biggest threats to a successful financial plan are poor decisions and poor performance (it only takes one of those to derail a financial plan). People have more control over their decisions than their portfolio results. One source of poor decisions is letting emotion dictate portfolio action as opposed to logic. This is not to say that by remaining logical you...

Interesting Blog Post

Over the weekend someone left a link to a blog post from someone named Tom Drake that you can look at here. I don’t know much about him but he lives in Arizona and likes baseball so you gotta like that. The post in question is interesting to me because I think he is drawing some similar conclusions about the future of investing (there are some differences too, as I read the post) but Tom has been learning about markets since the 1960s whereas I only go back to 1984 (worked in the business full time for a year before going to college). He articulates a case for a completely different type of portfolio construction focusing on varied things with a more active approach than what most folks probably do. He ponders allocating more to commodities because he says it is a commodity era not an equity and bond era (presumably there is context to this line of thought in past posts). He says to forget stocks and standard bonds but use dividend paying stocks as a substitute for bonds and he likes CEFs and royalty trusts. I’ve been on board with the idea of portfolio construction evolving for ages so I agree with Tom on this point. My ideas about how to get there are different (have written about this many times before) than Tom’s which does not necessarily make either one of us right or wrong but it is good to see other people writing about this and if it turns out that many of the old norms of investing will no longer stand up you need...

Interesting Blog Post

Over the weekend someone left a link to a blog post from someone named Tom Drake that you can look at here. I don’t know much about him but he lives in Arizona and likes baseball so you gotta like that. The post in question is interesting to me because I think he is drawing some similar conclusions about the future of investing (there are some differences too, as I read the post) but Tom has been learning about markets since the 1960s whereas I only go back to 1984 (worked in the business full time for a year before going to college). He articulates a case for a completely different type of portfolio construction focusing on varied things with a more active approach than what most folks probably do. He ponders allocating more to commodities because he says it is a commodity era not an equity and bond era (presumably there is context to this line of thought in past posts). He says to forget stocks and standard bonds but use dividend paying stocks as a substitute for bonds and he likes CEFs and royalty trusts. I’ve been on board with the idea of portfolio construction evolving for ages so I agree with Tom on this point. My ideas about how to get there are different (have written about this many times before) than Tom’s which does not necessarily make either one of us right or wrong but it is good to see other people writing about this and if it turns out that many of the old norms of investing will no longer stand up you need...

Hist O Ree

The picture is of WC Hawley and Reed Smoot. Yeah, that Smoot and Hawley. The Smoot and Hawley whose legislation called for an increase on tariffs that was signed into law in 1930. You have probably heard that the stimulus plan is going to have strong incentives for steel and other materials used in all of the infrastructure projects that are supposed to happen to come from US companies. Oh, boy. I’m not going to worry about this until it actually happens, if it happens. If it does happen then, depending on the details, it stands to be something of a game changer and would be a reason to get a little more defensive fairly quickly and maybe more so shortly thereafter. As I write this now I’m not sure if that means selling stock, buying the double short ETF or doing both but probably I’d do both. Again, depending on the details In terms of managing money, whether you do it for other people or just yourself, the right and wrong of this doesn’t matter. Where the portfolio is concerned your job is not to solve the world’s problems it is to let the assets grow when that is appropriate and protect them when that is appropriate. This applies to things you perceive as being threats to equity prices. I perceive this sort of protectionism as being a threat to equity prices. I would not make a bunch of trades all at once because I could be wrong but I would take some action very quickly. I suppose that my thought of a very large bear market rally...

Hist O Ree

The picture is of WC Hawley and Reed Smoot. Yeah, that Smoot and Hawley. The Smoot and Hawley whose legislation called for an increase on tariffs that was signed into law in 1930. You have probably heard that the stimulus plan is going to have strong incentives for steel and other materials used in all of the infrastructure projects that are supposed to happen to come from US companies. Oh, boy. I’m not going to worry about this until it actually happens, if it happens. If it does happen then, depending on the details, it stands to be something of a game changer and would be a reason to get a little more defensive fairly quickly and maybe more so shortly thereafter. As I write this now I’m not sure if that means selling stock, buying the double short ETF or doing both but probably I’d do both. Again, depending on the details In terms of managing money, whether you do it for other people or just yourself, the right and wrong of this doesn’t matter. Where the portfolio is concerned your job is not to solve the world’s problems it is to let the assets grow when that is appropriate and protect them when that is appropriate. This applies to things you perceive as being threats to equity prices. I perceive this sort of protectionism as being a threat to equity prices. I would not make a bunch of trades all at once because I could be wrong but I would take some action very quickly. I suppose that my thought of a very large bear market rally...