No, You Shouldn’t Invest Like Yale

My latest post for Alpha Baskets looks at the recent results from the Yale Endowment and what you should and should not take away from its portfolio. It is not practical for the typical advisory client or individual investor to emulate Yale’s portfolio for a couple of big reasons; endowments have infinite time horizons and access to some of these market segments is either unavailable or the choices that are available aren’t so great. Venture Capital is an example of this. The press release does not mention private equity but I am assuming that they mean venture capital and while there are quite a few exchange traded products (funds and individual issues) that seek to track the private equity space one way or another there are far fewer that I am aware of that track venture capital. The one that I do know (mentioning names becomes tricky for compliance reasons) went down with the broad equity market during the crisis but hasn’t really participated in the bull market since (up 28% since March of 2009 vs up 194% for the SPX).  Please click through to read the entire post. A Ural motorcycle on the streets of Prescott. An old GMC pick up truck at a recent car show. A collage featuring a Tatra fire tanker from Maui....

What Did The BoJ Actually Do?

The Bank of Japan appears to have issued a confusing policy announcement on Wednesday. Bespoke Investment Group took the news as saying the BOJ would attempt to manage the yield curve to be flatter while Barron’s reported that the BOJ would attempt to manage the yield curve to be steeper. A flat yield curve generally makes lending less profitable and so is thought to impede access to capital which would seem to be the opposite of a stimulative policy. This sent the dollar lower against the yen which would also seem to be the opposite of what the BOJ would like to see. However, later in the week Goldman Sachs noted that it believes the latest BOJ announcement paves the way for so called helicopter money if/when needed which it says would eventually lead to that weaker yen that the central bank is hoping for. The Nikkei 225 managed to gain 1.91%, the JGB slid further into negative territory at -0.4% and the yen was stronger against the dollar.   The FOMC of course did not raise rates on Wednesday which was in line with expectations. The press conference after the announcement came close to spoon feeding a December hike but Chair Yellen shockingly (if shockingly can ever be used to describe one of these pressers) made two references to the committee’s not wanting to ignite a recession by making a policy error. Buried in the details were expectations to slowly get rates past two percent in the next couple of years but as Bloomberg’s coverage pointed out, there are no expectation for GDP growth to get past 2%...

Allocation Efficiency

My latest post for Alpha Baskets looks at asset allocation through the lens of risk parity. From the post; Year to date through Friday the Salient Risk Parity Index was up 15% even after rolling over somewhat last week (the point of the Bloomberg segment). Its return has gotten a boost from the bond market of course and so all of that bond exposure could be problematic if rates rise, depending on how Salient reassesses the risk when/if rates do actually rise. Every so often there will be headlines about risk parity managers getting caught wrong footed and getting pasted as a result. Please click through to read the entire post. More pictures from last weekend’s car show. Buick Roadmaster Neat hot rod. A different orange hot...

The FOMC Meets To Determine The Fate Of The Galaxy

The weekly Market Update is posted at Alpha Baskets and includes the following; The FOMC is scheduled to meet this week and while the fate of the galaxy may not actually be in play, market participants are of course very focused on whether or not there will be a rate hike this week or in December (it seems no one gives credence to a November hike) and if there is a hike whether it would be a one and done or the start of a tightening cycle. Dennis Gartman argues that the FOMC began to tighten a year and a half ago when it ended it quantitative easing. The most recent reports were weak in the form of retail sales and manufacturing data on Thursday and University of Michigan Consumer Sentiment on Friday. Please click through to read the entire post. There was another car show in Prescott over the weekend that I got to check out after fire training. Surprisingly it was mostly different cars than the one last month. Hudson Hornet Willys Coupe 1932 Hot...

Eight Brutal Truths About Retirement

Note: With the problems Word Press had this week I am publishing this post in its entirety here. Normal blog process will resume with the next post. Today’s post comes about from two articles read over the weekend; Barron’s Guide To A Healthier, Wealthier and Wiser Retirement and 20 Brutal Truths About Life No One Wants To Admit from Inc.com. The Barron’s piece was a roundtable with a little too much insurance talk/salesmanship for my liking but still some good points were raised including how important it is for not only spouses to communicate about financial/retirement matters but this conversation needs to occur between generations too. The Brutal Truths article was a list of things like 3) Your Material Wealth Won’t Make You A Better or Happier Person, 5) Donating Money Does Less Than Donating Time and 20) Time Is Your Most Valuable Asset. While the article could have probably conveyed the ideas of having the right priorities, volunteerism and live in the moment in fewer than 20 truths, these are still important ideas. You have no control over market returns Over the last 15 years the S&P 500 has averaged about 3% per year. Over the last ten years it has averaged closer to 7% per year and the longer term numbers are a little more favorable. You have some period of time that is relevant to you and there is no way to know how long that time frame will be or what the average return will be over that time. It is beyond your control. There is nothing to be gained by worrying about things beyond...