Hawkishly Dovish?

This week’s Market Update is posted and includes the following; On the optimism side of the ledger, the University of Michigan consumer sentiment survey registered the highest numbers since 2000 for Current Conditions. Looking a little closer at the numbers, there is a shocking disparity along political lines. Republicans registered at 122.4,versus an overall number of 97.6, while Democrats came in at 55.3. As an adviser you likely have had clients ask you if they should make changes to their portfolio because Trump won the election. You also probably had different clients ask you the same question after Obama won in 2008. We are unaware of any long term investment strategy (as opposed to short term trading) that avers reactionary portfolio changes based on political outcomes. Staying disciplined is of course key to clients’ long term financial success and only being disciplined 90% of the time won’t get it done. Please click through to read the entire update. Taken in the Mint 400 pit area before the Mint 400. From the Mint 400 inspection day in Las Vegas Pink...

No, You Don’t Own An ETF

My latest post for Alpha Baskets looks at a few interesting (and funny) items from the current Barron’s issue. From the post; There was an article about one of the publicly traded asset managers (naming names is complicated for compliance reasons). A reader shared that he owned one of this company’s energy sector ETFs in the comments section. No, he owned a closed end fund from a company with a similar name. The name mix up is one thing but not knowing the difference between a closed end fund and an ETF is problematic, potentially very much so. The CEF he owns just announced that 78% of its current “dividend” is actually a return of capital. An ROC does not have to be bad, but is something that someone who owns the fund should know and I am guessing he doesn’t. Please click through to read the entire post. Support vehicle with a topo map paint job. One of my favorite trophy trucks for the color. I get a kick out of the spare tire (s)...

The Best Week Of The Year!

The weekly Market Update is posted at Alpha Baskets and includes the following; As the ten year spent a few minutes during the week above 2.60% we want to circle back to Bill Gross’ comments from last year where he placed great importance on 2.60% as being a point where bad things would ensue for capital markets, and he still feels this way. In mid-December, the ten year also flirted 2.60%, quickly backed off and equities are up almost 5% since then. Jeff Gundlach went after Gross publicly back then, claiming that 2.60% was not a significant pivot. We won’t choose a side based on the fundamentals or personalities but if there is any yield which actually turns out to be a significant pivot, it won’t be the mere touching of that level on some random day or two that makes it significant. For now, it is too early to proclaim Gross as being wrong or right. Please click through to read the entire update. Heavily filtered black and white picture of a Toyota Trophy Truck. This buggy started out as a Jeep This one was relatively popular on my Instagram feed for some...

Separating Reality From Catastrophe

My latest post for Alpha Baskets looks at recent comments from Rob Arnott about the trouble he sees brewing with smart beta strategies. From the post; Arnott goes on to say he sees this performance chasing as a looming catastrophe for buyers. This seems very unlikely. The downside here is that a given strategy will lag the broad market for an extended period. Taking a very simplistic example between a large cap value strategy and the index, one must outperform and one must lag. There isn’t a scenario where, sticking with the word catastrophe, a value oriented smart beta goes down 40% while the S&P 500 goes up 10%. It would be easy to see that value oriented smart beta up 5% or flat in an up 10% world which isn’t catastrophic unless you have an inordinately low tolerance. Please click through to read the entire post. Mint 400 pit area Inspection day in downtown Las Vegas A trophy lite out on the...

Bull Market Turns 8 This Week!

The weekly Market Update is posted at Alpha Baskets and includes the following; Much was made during the week of Fidelity’s big drop in stock and ETF commissions from $7.95 to $4.95. This was in reaction to another firm’s cut and prompted at least one other firm to cut its commission. For years now, most online brokerage firms (amazing how the word “discount” is no longer used) have offered some large number of ETFs for trade commission-free which is great for advisory clients and do-it-yourselfers to reduce their expenses and now $4.95 makes that even easier still. To the extent most investors only make a few trades a year, perhaps the benefit is most realized when implementing a new portfolio, selling out the old and buying the new like when a client changes managers. Twenty five years ago this might have cost a couple of thousand dollars and now maybe $100. The other big benefit is it allows smaller accounts to have more precise exposures without being economically inefficient. At $15 per trade maybe a third bond fund for a $100,000 account isn’t such a great idea; different story at $4.95. Please click through to read the entire update. Over the weekend I went up to see the Mint 400 off road race near Las Vegas. There are many different classes of vehicles that race (although I know very little about them) and just about all of them make for fun pictures. Below are a few pictures for now. A trophy truck at the inspection day in downtown Las Vegas; A panoramic of several trophy trucks from the pit...