The Not Permanent Portfolio

A few days ago I disclosed buying the Global X Nordic 30 ETF as part of swapping out of Australia (for “small” accounts we sold Aussie ETFs and bought GXF and iShares Canada, for “large” accounts the Australian exposure has not yet been replaced). For these small accounts we used Australia as a proxy for foreign developed because aside from liking Australia we want no part of Japan or Big Western Europe and the broadest index funds are heavy in those countries. As I mentioned Australia was a very long term hold (we’ll be back in one way or another for large accounts soon) but I felt a change was needed (click through for the rationale) but still wanted to avoid Japan and Big Western Europe. Depending on the client, they’d had EWA since 2004. That is a long time; seven years is almost permanent. Scandinavia has been a region that I have been favorably disposed to and heavy in the portfolio for quite a while and as I would prefer to keep turnover low and 30-40 positions in a small account remains prohibitive, I hope to be able to keep GXF for a very long time as well, maybe almost permanent. If something sours or more correctly if I believe that something has soured I won’t hesitate to sell it but hopefully that does not happen. This got me thinking about an alternative to the permanent portfolio as I am not a huge fan of holding on to something come hell or highwater. I could not feel good about putting 25% of anyone’s money into long term treasuries...

Rough Week

This has been a rough week for all sorts of reasons for all sorts of people. This tornado business happening in the midwest seems particularly vengeful. A little closer to (the market) home was the passing of Mark Haines Tuesday night. September 11, 2001 was obviously a remember where you were moment and Mark was a big part of my September 11 as he was for many people working in the business or following the markets. I’ve told this story before but on that morning I was on the phone with a client (I was a trader back then) selling some stock into the premarket (this stock had been halted for a while and this was the first morning it was going to trade). Mark reported the first plane hitting, I interrupted the client to hear what had happened. No one knew yet what was actually going on but for some reason (I don’t know the reason) I said to the client we need to get more aggressive. We sold as much as we could and then got off the phone before what should have been the open. For the rest of the morning we sat around watching CNBC trying to understand the moment. At one point yesterday Simon let out that he’d been “quite ill.” I was never a huge fan of his and I wrote many times that he acted like he did not understand the ETF market but like many people he has been a fixture in my career just about every morning for a long time. He certainly could be entertaining and no doubt he...

Rough Week

This has been a rough week for all sorts of reasons for all sorts of people. This tornado business happening in the midwest seems particularly vengeful. A little closer to (the market) home was the passing of Mark Haines Tuesday night. September 11, 2001 was obviously a remember where you were moment and Mark was a big part of my September 11 as he was for many people working in the business or following the markets. I’ve told this story before but on that morning I was on the phone with a client (I was a trader back then) selling some stock into the premarket (this stock had been halted for a while and this was the first morning it was going to trade). Mark reported the first plane hitting, I interrupted the client to hear what had happened. No one knew yet what was actually going on but for some reason (I don’t know the reason) I said to the client we need to get more aggressive. We sold as much as we could and then got off the phone before what should have been the open. For the rest of the morning we sat around watching CNBC trying to understand the moment. At one point yesterday Simon let out that he’d been “quite ill.” I was never a huge fan of his and I wrote many times that he acted like he did not understand the ETF market but like many people he has been a fixture in my career just about every morning for a long time. He certainly could be entertaining and no doubt he...

Chanos Is Not Bearish Enough?

Barry Ritholtz posted the video from Jim Chanos’ appearance on Bloomberg TV. The big deal might be that after sending his research team to China he said he may not be bearish enough on China. Ruling out that the comment was not more about seeing only what they wanted to see it should be obvious that China is, at the very least, a complicated investment destination. In the interview he only talked about two segments of China; real estate and reverse mergers (this Longtop is the latest one of these to blow up I guess). We know there are a lot of questions about how many apartments have been built, how many are empty and how many will remain empty. I don’t know if bubble is the right word and frankly I don’t care. It is easy to envision that the apartment capacity is far ahead of the rural to urban migration, exceeds the need of the people who own two or three of them, that there could be a problem at some point with over leverage (not on the properties as the down payments are huge, but in terms of carrying two or three mortgages), that the banks will mismanage their loan portfolios or that the developers will over leverage themselves. This case is simply too easy to make. That does not mean the market must collapse just that it doesn’t take too much heavy lifting for an adverse scenario to develop. As for the reverse mergers, in a way these aren’t even investing in China. It is China of course but these companies find shell companies here...

Chanos Is Not Bearish Enough?

Barry Ritholtz posted the video from Jim Chanos’ appearance on Bloomberg TV. The big deal might be that after sending his research team to China he said he may not be bearish enough on China. Ruling out that the comment was not more about seeing only what they wanted to see it should be obvious that China is, at the very least, a complicated investment destination. In the interview he only talked about two segments of China; real estate and reverse mergers (this Longtop is the latest one of these to blow up I guess). We know there are a lot of questions about how many apartments have been built, how many are empty and how many will remain empty. I don’t know if bubble is the right word and frankly I don’t care. It is easy to envision that the apartment capacity is far ahead of the rural to urban migration, exceeds the need of the people who own two or three of them, that there could be a problem at some point with over leverage (not on the properties as the down payments are huge, but in terms of carrying two or three mortgages), that the banks will mismanage their loan portfolios or that the developers will over leverage themselves. This case is simply too easy to make. That does not mean the market must collapse just that it doesn’t take too much heavy lifting for an adverse scenario to develop. As for the reverse mergers, in a way these aren’t even investing in China. It is China of course but these companies find shell companies here...