Meir Statman Says Time Diversification Is Hokum

My latest post for Alpha Baskets looks at an article by Meir Statman and includes the following; Statman’s opening argument begins “consider an investor who invests $1,000 in a portfolio with a 50–50 chance to gain 20% or lose 10% each year.” To me the argument is lost right here in the open as there are an almost infinite number of different outcomes not two outcomes. Statman lays out the math which is obviously correct but it is an isolated, academic framing of the issue to the point of being overly academic. Please click through to read the entire post. Over the course of the last week I have had to do a ton of fire chiefing as our area has been under evacuation and threat from the Goodwin Fire which started on June 24th and for a time was essentially un-fightable. I will have more soon but for now some of the more interesting smoke pictures I took and used to keep our department’s Facebook page current. And a Type 3...

Central Bank Hedge Funds?

This week’s Market Update is posted at Alpha Baskets and includes the following; It is widely known that the Bank of Japan has been a large buyer of Japanese equities, mostly through ETFs. In recent months it has become known that the Swiss National Bank has been very active buying equities as part of its attempt to put downward pressure on the franc (it prints francs and buys equities). Please click through to read the entire update. There is a wildland fire that is threatening Walker so I’ve had to do a lot of Fire Chiefing over the weekend in terms of communicating and scouting out the fire. The first picture was from a couple of hours after it started and you can see the smoke coming from behind the ridge. The truck we took to scout in on Saturday night. Sunday at dinner time the fire activity had picked...

The Crash That Will Bring Down the Entire Galaxy

Ben Carlson had a little fun poking fun at the regular calls from Jimmy Rogers predicting the worst crash in our lifetime and other sensational headlines like the one for this post that is hopefully amusing. Ben found a headline like this attributable to Rogers going back every year to 2011. He says these extreme predictions offer no value. John Hussman has an interesting approach to this sort of thing. While Hussman’s concerns have come nowhere close to manifesting in equity prices there is still value to be had. He frames it in terms of whether market conditions are relatively risky at the moment or not. An easy way to think about this is there is a lot less risk of a crash or bear market immediately after a crash or bear market. Markets are less likely to double after they have just doubled. Agree or disagree with Hussman, it is a simple way to view the world. Where I diverge with Hussman is concluding “oh, the market is overvalued and sentiment is too bullish so I must get out now” which is how I take Hussman’s approach and I think his fund’s results bear that out. Over the course of an investing lifetime it is not crazy that you might get a market top or bottom exactly right and Rogers of course has made some great calls but Carlson’s point for the average investor (or advisor) not allowing being right on a couple of big calls to lead to over estimating the ability to make those calls (Dunning Kruger). As someone who has read Hussman for ages, I...

The Hike Everyone Was Expecting

The weekly market update was posted and includes the following; The FOMC met last week and of course hiked rates to a new range of 1.00%-1.25%. The move was widely expected, built into Fed Funds futures pricing but seems to be widely derided as well. Barron’s made the argument that the policy group is underestimating the downward pressure on prices from creative destruction seen in things as mundane as unlimited data plans getting cheaper and cheaper. Please click through and read the entire update. I was in San Diego last week to speak at the Pershing Insite Conference on asset allocation and managed to take in a Padres game. The Padres are one of my favorites (after the Red Sox of course) and I love the stadium. On the way to San Diego I stopped at a couple of fire houses  for some pictures including Congress, AZ. And Imperial County, CA in Palo...

Retirement Reading Roundup

My latest post for Alpha Baskets is up and includes the following. Maybe less related but still a good read is from the Charlotte Observer, weighing in on how far $1500 will get you retiring in Ecuador. This is a fun topic to write about. It is interesting to many people on some level even if not a serious consideration for many. My thought on how this might work has evolved. As opposed to planning to leave forever, I could see this being a temporary thing for young retirees who maybe have not accumulated as much as they would have liked, going for five or maybe ten years. Please click through to read the entire...