Trade Executed

We executed a (mostly) across the board trade for large accounts on Thursday buying ASX Limited (ASXFF) which is the stock exchange in Australia. The trade obviously increases our exposure to financial stocks and takes us back to Australia after having been out for about seven months. First from the top down I have been concerned that Australia is at risk for some sort of housing problem although with a far less severe magnitude as occurred in the US and so I sold our holding in ANZ Bank (ANZBY) for large accounts and at the same time sold our Aussie ETFs for their large exposure to the banks. ANZBY is down 13% since that sale and the ETFs are down a little more which is nice but I would not call the sale a major transaction. Going forward I think housing can still be a drag and so I think the banks will underperform but my take overall is that things in Australia look good–drawing this conclusion means you have to believe that China will not stop buying resources and I think Yanzhou’s intended purchase of Gloucester Coal supports that belief. I would also note that the SPX is right at its 200 DMA (give or take) but we have more cash raised than I think is ideal by virtue of selling American Tower. I wanted to buy something with relatively low volatility and higher yield (more on that in a moment) and actually if we have more purchases to make I think most of them, but not all, would be lower vol and higher yield like ASX. In...

Trade Executed

We executed a (mostly) across the board trade for large accounts on Thursday buying ASX Limited (ASXFF) which is the stock exchange in Australia. The trade obviously increases our exposure to financial stocks and takes us back to Australia after having been out for about seven months. First from the top down I have been concerned that Australia is at risk for some sort of housing problem although with a far less severe magnitude as occurred in the US and so I sold our holding in ANZ Bank (ANZBY) for large accounts and at the same time sold our Aussie ETFs for their large exposure to the banks. ANZBY is down 13% since that sale and the ETFs are down a little more which is nice but I would not call the sale a major transaction. Going forward I think housing can still be a drag and so I think the banks will underperform but my take overall is that things in Australia look good–drawing this conclusion means you have to believe that China will not stop buying resources and I think Yanzhou’s intended purchase of Gloucester Coal supports that belief. I would also note that the SPX is right at its 200 DMA (give or take) but we have more cash raised than I think is ideal by virtue of selling American Tower. I wanted to buy something with relatively low volatility and higher yield (more on that in a moment) and actually if we have more purchases to make I think most of them, but not all, would be lower vol and higher yield like ASX. In...

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...

Sunday Morning Coffee

We said goodbye to a very old friend in the portfolio this week (going back to 2003-old in a couple of instances) as we existed Australia on the equity side of the portfolio. We sold Australia & New Zealand Bank (ANZBY) for large accounts and we sold ETFs for small accounts because they are very heavy in financials. There have been signs of trouble in the Aussie housing market for a while in terms of various ratios of affordability and second home ownership being out of whack and while I doubt the fallout will be as bad as in the US I would rather not stick around to find out. As I said these have been issues for a while but have not really hurt the stocks and may not hurt them in the future but the situation has deteriorated a little (IMO) as time has gone on and the numbers seem to be a little worse perhaps as evidenced by the recent debt downgrades of the four big banks. All four banks got hit hard in 2008 but less so than the US financial sector. Amusingly ANZ has been the best long term performer of the group and if that was not simply luck on my part then I would attribute this ANZ having more of a global footprint (really a regional footprint in Asia) which is why I chose it over the NAB and Westpac (I never considered Commonwealth). As I noted in a client email about this we are not rooting for bad things here but quite simply the risk characteristic appears to me to have...

Sunday Morning Coffee

We said goodbye to a very old friend in the portfolio this week (going back to 2003-old in a couple of instances) as we existed Australia on the equity side of the portfolio. We sold Australia & New Zealand Bank (ANZBY) for large accounts and we sold ETFs for small accounts because they are very heavy in financials. There have been signs of trouble in the Aussie housing market for a while in terms of various ratios of affordability and second home ownership being out of whack and while I doubt the fallout will be as bad as in the US I would rather not stick around to find out. As I said these have been issues for a while but have not really hurt the stocks and may not hurt them in the future but the situation has deteriorated a little (IMO) as time has gone on and the numbers seem to be a little worse perhaps as evidenced by the recent debt downgrades of the four big banks. All four banks got hit hard in 2008 but less so than the US financial sector. Amusingly ANZ has been the best long term performer of the group and if that was not simply luck on my part then I would attribute this ANZ having more of a global footprint (really a regional footprint in Asia) which is why I chose it over the NAB and Westpac (I never considered Commonwealth). As I noted in a client email about this we are not rooting for bad things here but quite simply the risk characteristic appears to me to have...