Stay On Your Own Mat

Stay on your own mat is a yoga term which means that you should not worry if the person next to you can do the pose better than you can. This is consistent with being in the moment and doing what you are able to do. I thought about this as I read the comments left on a post from Randall Forsyth about the failings of the cash for clunkers program. Forsyth points out some of the unintended consequences of the actual program and then the lack of lasting economic benefit. We learned under Bush that short term stimuli do not have lasting impact. I’m not sure why this is so difficult to grasp. The reason for the title of the post comes from one reader who said he was “more than a bit resentful” that he having taken responsible actions like buying a Honda and saving money is not a beneficiary of any of the government programs that have been enacted since the crisis started. The commenter is correct about the inequity of the various attempts to fix things. It does appear that bad behavior is being “rewarded” by having access to mortgage adjustments (if this is really going on in a meaningful way) and whatever else is being attempted. This is where the idea of staying on your own mat comes into play. Chances are that if you have accumulated some savings you feel some sense of accomplishment and security which is not bad. If you have a mortgage you can easily afford and never had to worry about not being able to pay then you avoided...

Stay On Your Own Mat

Stay on your own mat is a yoga term which means that you should not worry if the person next to you can do the pose better than you can. This is consistent with being in the moment and doing what you are able to do. I thought about this as I read the comments left on a post from Randall Forsyth about the failings of the cash for clunkers program. Forsyth points out some of the unintended consequences of the actual program and then the lack of lasting economic benefit. We learned under Bush that short term stimuli do not have lasting impact. I’m not sure why this is so difficult to grasp. The reason for the title of the post comes from one reader who said he was “more than a bit resentful” that he having taken responsible actions like buying a Honda and saving money is not a beneficiary of any of the government programs that have been enacted since the crisis started. The commenter is correct about the inequity of the various attempts to fix things. It does appear that bad behavior is being “rewarded” by having access to mortgage adjustments (if this is really going on in a meaningful way) and whatever else is being attempted. This is where the idea of staying on your own mat comes into play. Chances are that if you have accumulated some savings you feel some sense of accomplishment and security which is not bad. If you have a mortgage you can easily afford and never had to worry about not being able to pay then you avoided...

If Japan Is Going To Blow Up

The theme that (I believe) started in Barron’s over the weekend about Japan eventually blowing up has picked up a little attention as several people have written about it. You can look at Sunday’s post for a couple of highlights as to why and the link to Barron’s. If this happens it will cause a lot of havoc for investors who rely on the iShares MSCI EAFE Index Fund (EFA). EFA allocates 23% to Japan. If Japan truly blows up as some are calling for then it stands to reason that any equity fund heavy in Japan, like EFA, will get hit very hard. I’ve never liked Japan as an investment destination and obviously avoiding it has been right far more often than it has been wrong. I’ve written a lot of posts about the merits of country selection and while not everyone will want to do this country avoidance could become very important. I am not aware of any broad based fund that avoids Japan but the country can be avoided by anyone not willing to pick countries. As a substitute for EFA a combo of WisdomTree Asia Ex-Japan High Yield Equity Fund (DNH) and Vanguard European Stock ETF (VGK) gives broad coverage and bypasses Japan. Some clients own DNH, no one owns VGK. Clients do not have heavy exposure to big Western Europe as I think they have some big problems too just not as bad as Japan. But the context here is people who do not want to pick countries but might really want to avoid Japan. On a lighter note Red Sox legend Johnny Pesky...

If Japan Is Going To Blow Up

The theme that (I believe) started in Barron’s over the weekend about Japan eventually blowing up has picked up a little attention as several people have written about it. You can look at Sunday’s post for a couple of highlights as to why and the link to Barron’s. If this happens it will cause a lot of havoc for investors who rely on the iShares MSCI EAFE Index Fund (EFA). EFA allocates 23% to Japan. If Japan truly blows up as some are calling for then it stands to reason that any equity fund heavy in Japan, like EFA, will get hit very hard. I’ve never liked Japan as an investment destination and obviously avoiding it has been right far more often than it has been wrong. I’ve written a lot of posts about the merits of country selection and while not everyone will want to do this country avoidance could become very important. I am not aware of any broad based fund that avoids Japan but the country can be avoided by anyone not willing to pick countries. As a substitute for EFA a combo of WisdomTree Asia Ex-Japan High Yield Equity Fund (DNH) and Vanguard European Stock ETF (VGK) gives broad coverage and bypasses Japan. Some clients own DNH, no one owns VGK. Clients do not have heavy exposure to big Western Europe as I think they have some big problems too just not as bad as Japan. But the context here is people who do not want to pick countries but might really want to avoid Japan. On a lighter note Red Sox legend Johnny Pesky...

Fund Folly

I stumbled across an old article in the the Wall Street Journal profiling an advisor including her model portfolio pictured below. The advisor’s target allocation is 40% domestic equities, 35% bonds (10% of the 35% is foreign), 15% foreign stocks and 10% Alternatives which includes managed futures. Anyone may or may not agree with the allocation but like any allocation this will be fine most of the time but it may make sense to raise cash at different points in the future. The way the advisor implements the model is problematic. As you can see all of the holdings are actively managed mutual funds. The funds chosen are probably “good” funds. Advisors don’t usually pick the worst performers in the group. “The small cap fund I chose for you has lagged its benchmark index and 80% of all small caps for the last ten years,” doesn’t happen too often. Boilerplate always warns about past performance but what else can you do? Any buyers of actively managed funds out there go with the active fund that is 15 basis points cheaper or do the take the better track record? Additionally there is no way to do any sort of forward looking analysis. What will the manager of your active mutual fund want to own one year from now? As the question is unanswerable forward looking analysis is undoable. The potential consequence is that the portfolio owns a bunch of funds where the managers all draw similar conclusions and so invest their funds similarly. This is fine if they are right or a potential deathblow if they are catastrophically incorrect like...