Twofer Tuesday

IndexUniverse had an article up yesterday about the rebalancing at Russell Investments that occurs every June and was just implemented for 2009. IU seemed most interested in the increasing presence of Chinese stocks. The five largest stocks in the Russell Global Index (I’m not familiar with this one) in order are; Petrochina (PTR)ExxonMobil (XOM)Industrial & Commercial Bank of China (IDCBY)China Mobile (CHL) a client holdingWalmart (WMT) We are all much more aware of China as an investment destination than we were seven years ago. I seem to remember that the first Chinese stock on the NYSE was Sinopec Shanghai Petrochemical (SHI), but I may have that wrong, and then it seemed like most people knew about Petrochina early in this decade when Warren Buffet first piped up about having a position. Fast forward a few years and US based investors can now access Chinese solar stocks, water stocks, technology companies and even shampoo companies. We clearly had a mania in Chinese stocks for a while there, then the market imploded and now things are whipping up again but the Shanghai market is still down more than half from its high, the Hang Seng down about 40% from its high and the Hang Seng H Shares, or enterprise index, is down 45% from its high. I’ve disclosed my involvement with China many times before. I sold my only position in May 2007 (the other Sinopec with ticker SNP) and bought back in with China Mobile in the summer of 2008. I was a little early on both getting out and getting back in. If IPOs like BaWang can do well,...

Twofer Tuesday

IndexUniverse had an article up yesterday about the rebalancing at Russell Investments that occurs every June and was just implemented for 2009. IU seemed most interested in the increasing presence of Chinese stocks. The five largest stocks in the Russell Global Index (I’m not familiar with this one) in order are; Petrochina (PTR)ExxonMobil (XOM)Industrial & Commercial Bank of China (IDCBY)China Mobile (CHL) a client holdingWalmart (WMT) We are all much more aware of China as an investment destination than we were seven years ago. I seem to remember that the first Chinese stock on the NYSE was Sinopec Shanghai Petrochemical (SHI), but I may have that wrong, and then it seemed like most people knew about Petrochina early in this decade when Warren Buffet first piped up about having a position. Fast forward a few years and US based investors can now access Chinese solar stocks, water stocks, technology companies and even shampoo companies. We clearly had a mania in Chinese stocks for a while there, then the market imploded and now things are whipping up again but the Shanghai market is still down more than half from its high, the Hang Seng down about 40% from its high and the Hang Seng H Shares, or enterprise index, is down 45% from its high. I’ve disclosed my involvement with China many times before. I sold my only position in May 2007 (the other Sinopec with ticker SNP) and bought back in with China Mobile in the summer of 2008. I was a little early on both getting out and getting back in. If IPOs like BaWang can do well,...

There Will Be Work

We have a fenced in pen off of our deck for the dogs to have a little bit of room to explore and play. A couple of weeks ago our two smallest dogs got out after something (maybe a squirrel?) dug a small hole in from the outside of the pen. The two dogs were only gone for a few minutes but it was very scary for a little bit. We had lined most of the pen with rocks of varying sizes but it was not perfect. So Sunday morning Joellyn and I embarked on a masonry project where we made up some concrete, moved rocks and then reset the rocks in the concrete while trying to work the little bit of chicken wire that runs along the bottom of the fence into the concrete. What does this have to do with investing you may ask? On Sunday a reader left a comment in response to my writing about owning foreign equities asking “doesn’t it depend on what foreign equities you own?” Well yes it does. The work in the pen required heavy lifting of many bags of concrete and adding more heavy rocks to the fencing. The idea of gravitating toward more foreign exposure more narrowly than just owning iShares MSCI EAFE Index Fund (EFA) requires a different type of heavy lifting. As a quick note EFA blends away a lot of attributes of the smaller, healthier countries, provides a lot of exposure to Japan and big Western Europe and tends to correlate much closer to the US market than many single country funds. The concrete needed to...

There Will Be Work

We have a fenced in pen off of our deck for the dogs to have a little bit of room to explore and play. A couple of weeks ago our two smallest dogs got out after something (maybe a squirrel?) dug a small hole in from the outside of the pen. The two dogs were only gone for a few minutes but it was very scary for a little bit. We had lined most of the pen with rocks of varying sizes but it was not perfect. So Sunday morning Joellyn and I embarked on a masonry project where we made up some concrete, moved rocks and then reset the rocks in the concrete while trying to work the little bit of chicken wire that runs along the bottom of the fence into the concrete. What does this have to do with investing you may ask? On Sunday a reader left a comment in response to my writing about owning foreign equities asking “doesn’t it depend on what foreign equities you own?” Well yes it does. The work in the pen required heavy lifting of many bags of concrete and adding more heavy rocks to the fencing. The idea of gravitating toward more foreign exposure more narrowly than just owning iShares MSCI EAFE Index Fund (EFA) requires a different type of heavy lifting. As a quick note EFA blends away a lot of attributes of the smaller, healthier countries, provides a lot of exposure to Japan and big Western Europe and tends to correlate much closer to the US market than many single country funds. The concrete needed to...

Sunday Morning Coffee

Barron’s was a keeper this weekend. Of most interest was an article about the latest trials and tribulations of the university endowments and an interview with the guy running CALPERS these days. First up is the CALPERS interview. There was a money quote and the fund’s allocation. Global Equities 49%Fixed Income 20%Private Equity 14%Real Estate 10%Inflation Linked Including Commodities 5%Cash 2% CALPERS had to increase the target for private equity because the value of everything else fell so much it raised the weighting to private equity. This is the same concept I talk about with using SDS. If the market falls a lot SDS will grow to a larger weight in the portfolio thus hedging more. As I understand the article, had they not done this they would have been forced to sell some of their PE exposure. The fund is trying to make it’s “assumed rate of return of 7.75%.” The brings up an important point. Many people think in terms of the stock market averaging some percent every year. Maybe the number is 10% or 8% or something else but something. Unfortunately reality is much lumpier than 9% per year. Whatever the real number is it includes all the 1997s, 2008s and everything in between. Pensions and endowments cannot be very flexible with what they payout for their obligations but you can be–maybe. Obviously living below your means helps here. When the market has the occasional really bad year (not talking a 10% decline) you have a better chance of cutting back on certain expenditures than a pension fund does. The money quote; To try to capture...