Thinking Loooooooong Term

Last weekend I had a post up that tried to poke holes in the Five Stocks to Hold Forever types of articles. In that post I mentioned in passing that while we don’t have to pick five of anything to hold forever, it would make more sense to think about this in terms of countries instead of individual stocks. An editor at Seeking Alpha asked me to write something up following through on the five country idea which I was not thrilled about doing but then a reader asked the same thing. In thinking about this a little I thought that what this really should be about was five (or any number important to you) top down segments which could include countries but also themes and sectors. One theme would be things related to food and water. Yes this is a Malthusian argument but it seems very obvious that there is now not enough food and water in many places and a lot of money will be spent trying to solve this problem as the world population continues to grow. Some do not believe in this and so they would have no interest in the theme. There are plenty of ETFs and individual stocks for this theme taking on all sorts of attributes in terms of countries, volatility and yield. Another theme but also is about country selection is the Brazilification of other countries. You can probably guess that I mean countries that are likely to become more prosperous and see a middle class emerge/proliferate as they sell resources to other countries. We own Brazil which is relatively mature...

Thinking Loooooooong Term

Last weekend I had a post up that tried to poke holes in the Five Stocks to Hold Forever types of articles. In that post I mentioned in passing that while we don’t have to pick five of anything to hold forever, it would make more sense to think about this in terms of countries instead of individual stocks. An editor at Seeking Alpha asked me to write something up following through on the five country idea which I was not thrilled about doing but then a reader asked the same thing. In thinking about this a little I thought that what this really should be about was five (or any number important to you) top down segments which could include countries but also themes and sectors. One theme would be things related to food and water. Yes this is a Malthusian argument but it seems very obvious that there is now not enough food and water in many places and a lot of money will be spent trying to solve this problem as the world population continues to grow. Some do not believe in this and so they would have no interest in the theme. There are plenty of ETFs and individual stocks for this theme taking on all sorts of attributes in terms of countries, volatility and yield. Another theme but also is about country selection is the Brazilification of other countries. You can probably guess that I mean countries that are likely to become more prosperous and see a middle class emerge/proliferate as they sell resources to other countries. We own Brazil which is relatively mature...

The Australian Permanent Portfolio?

The Daily Reckoning had a post up about the Permanent Portfolio (the Harry Browne concept, not he US mutual fund) from an Australian perspective. As a quick reminder the Permanent Portfolio allocates 25% each to cash, equities, long bonds and gold. The idea of building the Portfolio from the perspective of another country is pretty interesting and is possible with a couple of countries using ETFs including Australia. The cash portion is simple with the Rydex Currency Shares Australian Dollar Trust (FXA). It captures the movements of the currency and has a yield that is generally inline with rates set by the Reserve Bank of Australia. With the equity allocation they usually have a broad large cap fund in mind. There are at least a couple of those to choose from with the iShares MSCI Australia Index Fund (EWA) and the WisdomTree Australia Dividend Fund (AUSE). There is no reason though that the equity portion can’t take in more than just a single broad based fund. There is small cap exposure via the Index IQ Australia Small Cap ETF (KROO) and you might find a materials ETF out there that might be enough of a proxy for Australia. Of course there are also individual stocks from just about every sector to choose from as well. For the fixed income portion there is the long standing and client holding Aberdeen Asia Pacific Income Fund (FAX) which is usually heaviest by far in Australian debt and the WisdomTree New Zealand Dollar Fund (BNZ) is due to convert on Monday to the WisdomTree Dreyfus Australia & New Zealand Debt Fund. As for...

The Australian Permanent Portfolio?

The Daily Reckoning had a post up about the Permanent Portfolio (the Harry Browne concept, not he US mutual fund) from an Australian perspective. As a quick reminder the Permanent Portfolio allocates 25% each to cash, equities, long bonds and gold. The idea of building the Portfolio from the perspective of another country is pretty interesting and is possible with a couple of countries using ETFs including Australia. The cash portion is simple with the Rydex Currency Shares Australian Dollar Trust (FXA). It captures the movements of the currency and has a yield that is generally inline with rates set by the Reserve Bank of Australia. With the equity allocation they usually have a broad large cap fund in mind. There are at least a couple of those to choose from with the iShares MSCI Australia Index Fund (EWA) and the WisdomTree Australia Dividend Fund (AUSE). There is no reason though that the equity portion can’t take in more than just a single broad based fund. There is small cap exposure via the Index IQ Australia Small Cap ETF (KROO) and you might find a materials ETF out there that might be enough of a proxy for Australia. Of course there are also individual stocks from just about every sector to choose from as well. For the fixed income portion there is the long standing and client holding Aberdeen Asia Pacific Income Fund (FAX) which is usually heaviest by far in Australian debt and the WisdomTree New Zealand Dollar Fund (BNZ) is due to convert on Monday to the WisdomTree Dreyfus Australia & New Zealand Debt Fund. As for...

Seriously, How Is This Even Possible?

Over the years I’ve poked fun and tried to dissect the unraveling of Bill Miller’s (from Legg Mason) once sterling reputation. The other day there was this post at Market Beat that dug into the history of his position in Eastman Kodak (EK). I did not know he owned the name until Monday–my interest here is more about what not to do from a big picture behavioral standpoint so I don’t keep very close tabs. I probably saw EK listed there but skipped right over it looking at the financial names. EK is a large holding in the Legg Mason Opportunity Fund (LMNOX) which is the “other” fund. The Market Beat post has this fund down 37% YTD which is an astounding number in a down 8% world. I looked at the holdings on Morningstar (understand they can be dated and changes may have been made since the last disclosure) and the holdings are truly astounding. Aside from EK which was down 55% YTD there is Genworth Financial (GNW) down 61% YTD, MGIC Investment Corp (MTG) down 81%, Monster Worldwide (MWW) down 67%, Boyd Gaming (BYD) down 51% and several others down not quite 50% this year. Astounding. While I do not know concretely what is going on here there are a couple of things that seem plausible to me. I’ve always picked on him for always having such a heavy exposure to financial stocks. The latest from Morningstar has him at 32% in the sector. He essentially went down with the ship on several names a few years ago but the thing that is most baffling is that...