It’s Too Late To Shut The Barn Door

I had that thought as I read this article in the Wall Street Journal about investment advisers starting to look at alternatives to buy and hold. According to the article more advisers are exploring tactical moves (ie defensive action) and introducing “new” asset classes into their clients’ portfolios. Long time readers will know I have been writing about this stuff since 2004 (which is as long as I have been writing). Creating a zigzag effect by whatever means possible with whatever tools available, IMO, gives the best chance for successfully navigating a bear market. I imagine a few things inspired me in this line of thought including the first few things I ever read about the Harvard and Yale endowments. While I obviously believe in this line of thought the time to explore this was several years ago not after the second 50% decline for stocks in this decade. One of the reasons I gravitate to the 200 DMA for defensive action is that it triggers early in the bear market. Not at the top mind you but early. Once heeded most of the work is done. No big decisions need to be made just decisions about tweaks and the tweaks are far less important than taking action of some sort when the original breach occurs. While I generally like the ideas spelled out in the article I think the timing is horrible. Anyone who dropped all 50% is probably better off hanging in there as difficult as that might be. The fastest path to portfolio recovery from cutting in half will not come from selling a bunch of...

It’s Too Late To Shut The Barn Door

I had that thought as I read this article in the Wall Street Journal about investment advisers starting to look at alternatives to buy and hold. According to the article more advisers are exploring tactical moves (ie defensive action) and introducing “new” asset classes into their clients’ portfolios. Long time readers will know I have been writing about this stuff since 2004 (which is as long as I have been writing). Creating a zigzag effect by whatever means possible with whatever tools available, IMO, gives the best chance for successfully navigating a bear market. I imagine a few things inspired me in this line of thought including the first few things I ever read about the Harvard and Yale endowments. While I obviously believe in this line of thought the time to explore this was several years ago not after the second 50% decline for stocks in this decade. One of the reasons I gravitate to the 200 DMA for defensive action is that it triggers early in the bear market. Not at the top mind you but early. Once heeded most of the work is done. No big decisions need to be made just decisions about tweaks and the tweaks are far less important than taking action of some sort when the original breach occurs. While I generally like the ideas spelled out in the article I think the timing is horrible. Anyone who dropped all 50% is probably better off hanging in there as difficult as that might be. The fastest path to portfolio recovery from cutting in half will not come from selling a bunch of...

Tuesday Tidbits

You probably saw the segment on CNBC yesterday about the BerkShares, a local currency being used in the Berkshires in Western Massachusetts. Despite a lot of chatter about this on the internet (found after I watched the segment) I had never heard of this. BTW that is Herman Melville on the $20 bill. This idea is both concerning and intriguing. I can’t really articulate much in the way of real concern other than I get a sort of Jericho versus New Bern vibe off of the whole thing which I’m sure is unfounded. I find it intriguing in the same way I find the idea of moving to New Zealand or Uruguay intriguing. I have no plans to move anywhere there is just something intellectually interesting about the idea. Frankly in watching the CNBC segment and looking around the site, I’m not very clear on what the purpose is. People using the BerkShares benefit from a 5% discount when they convert “federal dollars” in for the new currency (maybe they make up for it on volume?). This begs the question of whether we will see more local currencies created. Will we be able to short the rust belt against Oregon? Will there be ETFs to let us do this? Speaking of ETFs, IndexUniverse reported that iShares has filed for foreign sector ETFs. WisdomTree was the first in the space with dividend weighted foreign sector ETFs followed by capweighted funds from SPDR and now the iShares filing, also for capweighted. This strikes me as a threat for WisdomTree (not an aggressive move on the part of iShares just something that...

Tuesday Tidbits

You probably saw the segment on CNBC yesterday about the BerkShares, a local currency being used in the Berkshires in Western Massachusetts. Despite a lot of chatter about this on the internet (found after I watched the segment) I had never heard of this. BTW that is Herman Melville on the $20 bill. This idea is both concerning and intriguing. I can’t really articulate much in the way of real concern other than I get a sort of Jericho versus New Bern vibe off of the whole thing which I’m sure is unfounded. I find it intriguing in the same way I find the idea of moving to New Zealand or Uruguay intriguing. I have no plans to move anywhere there is just something intellectually interesting about the idea. Frankly in watching the CNBC segment and looking around the site, I’m not very clear on what the purpose is. People using the BerkShares benefit from a 5% discount when they convert “federal dollars” in for the new currency (maybe they make up for it on volume?). This begs the question of whether we will see more local currencies created. Will we be able to short the rust belt against Oregon? Will there be ETFs to let us do this? Speaking of ETFs, IndexUniverse reported that iShares has filed for foreign sector ETFs. WisdomTree was the first in the space with dividend weighted foreign sector ETFs followed by capweighted funds from SPDR and now the iShares filing, also for capweighted. This strikes me as a threat for WisdomTree (not an aggressive move on the part of iShares just something that...

We Are Not Iceland, We Are Not Iceland

I had that thought I as took a peek at this from Barry Ritholtz attributed to Mike Larson. Mike has some numbers on the extent to which the Fed has levered up its balance sheet and the composition of the holdings. In the last two year the Fed has apparently gone from 27-1 leverage to 48-1 leverage and the quality of the holdings, not surprisingly, has deteriorated. The consequences of this as listed by Mike and certainly not new to you include whether the US’ AAA rating is in jeopardy, how long will foreign buyers of US debt drink the kool-aid and can dollar continue to hang in there as well as it has. These issues are not new but they are also far from resolved. I tend to think that the worst case scenario (and the best case for that matter) does not happen, I mean the worst, but there can be negative outcomes, we are working through one now. Part of the argument for this turning out to be not so bad is that the Fed/Treasury/anyone else involved will know when to reverse the various extreme measures taken. Maybe this cabal will know when to start unwinding things but that is a tall order for anyone especially the government agencies involved. These issues, albeit of a far less severe magnitude, have been around for years now and the best way to handle this, IMO, has been the same for years now which is have more foreign exposure for all asset classes and avoid loading up on high priced treasuries. While we are at it I would say...