Blending Country Funds

Recently I disclosed selling out of Australia (which I expect to be temporary) over concerns about the housing market coming to fruition. We obviously can’t know with certainty if there will be any meaningful fallout to the Aussie banks if things get ugly but the visibility is there so it just made sense to simply avoid the space for now so that neither clients nor I need to worry about. Also disclosed in that post was that I had been using the WisdomTree Pacific Ex Japan ETF (DNH) for a lot of small accounts as a proxy for foreign where one or two ETFs is appropriate for the entire foreign exposure. I mentioned that I replaced DNH with a combo of iShares Canada (EWC) and Global X Nordic 30 (GXF). Part of the story here is that the broad foreign funds, like EFA, are heaviest in countries that are probably no better off than the US. It would not make sense for anyone agreeing with this line of thinking to buy EFA, instead it would make sense to create foreign exposure some other way. In trying to approach this by blending together countries with different fundamental attributes and funds that have different sector make-ups under the hood. If the countries are too similar or if the funds are too similar then there is less diversification bang for the buck. Obviously in picking two countries in this manner you have to be favorably disposed to the countries. Not to get too pancake and a smoke but here are a couple of examples of what this could look like. Norway and...

Blending Country Funds

Recently I disclosed selling out of Australia (which I expect to be temporary) over concerns about the housing market coming to fruition. We obviously can’t know with certainty if there will be any meaningful fallout to the Aussie banks if things get ugly but the visibility is there so it just made sense to simply avoid the space for now so that neither clients nor I need to worry about. Also disclosed in that post was that I had been using the WisdomTree Pacific Ex Japan ETF (DNH) for a lot of small accounts as a proxy for foreign where one or two ETFs is appropriate for the entire foreign exposure. I mentioned that I replaced DNH with a combo of iShares Canada (EWC) and Global X Nordic 30 (GXF). Part of the story here is that the broad foreign funds, like EFA, are heaviest in countries that are probably no better off than the US. It would not make sense for anyone agreeing with this line of thinking to buy EFA, instead it would make sense to create foreign exposure some other way. In trying to approach this by blending together countries with different fundamental attributes and funds that have different sector make-ups under the hood. If the countries are too similar or if the funds are too similar then there is less diversification bang for the buck. Obviously in picking two countries in this manner you have to be favorably disposed to the countries. Not to get too pancake and a smoke but here are a couple of examples of what this could look like. Norway and...

Global X Andean Fund

Global X launched its Andean ETF with ticker symbol AND. It is 49% Chile, 29% Colombia and 22% Peru. This is an important and attractive part of world, in my opinion. I’ll have more on this later. Apparently there are no Bolivian toll road stocks in the fund. Short post, I have to head to Phoenix for the...

Global X Andean Fund

Global X launched its Andean ETF with ticker symbol AND. It is 49% Chile, 29% Colombia and 22% Peru. This is an important and attractive part of world, in my opinion. I’ll have more on this later. Apparently there are no Bolivian toll road stocks in the fund. Short post, I have to head to Phoenix for the...

Narrow Leadership

Yesterday on CNBC David Faber and Gary Kaminsky did a bit about how five stocks have accounted for 27% of the S&P 500’s performance this year. As I am in a Tivo-less environment I could not pause to get all five but two of them were Apple (AAPL) and Berkshire Hathaway. Kaminsky made a comment that per S&P the leadership had never been that narrow before. Beyond the point of narrow leadership like this being a negative harbinger, which was not discussed, Kaminsky made a comment that if you don’t own the five stocks you are lagging the S&P 500. The comment is peculiarly narrow in focus. While there are probably money managers who can only operate in the SPX universe, that does not apply to a lot of people and certainly not you. There is a lot of value in terms of performance, both nominally and on a risk adjusted basis, that can be added with country selection and avoidance and in certain years domestic sector avoidance (tech in 2000 and financials in 2007). Kaminsky’s comment seems to be very much a bottoms up point of view which I think is a more difficult way to go. In this context I’ve been writing about several investment destinations over the years that offer a different economic makeup than the US, are on firmer economic footing than the US and are likely to play an increasingly important role in the world economic order than they currently do. One example is Chile which, as measured by the iShares Chile ETF (ECH), is up 32% YTD versus 6.33% for the S&P 500....

Narrow Leadership

Yesterday on CNBC David Faber and Gary Kaminsky did a bit about how five stocks have accounted for 27% of the S&P 500’s performance this year. As I am in a Tivo-less environment I could not pause to get all five but two of them were Apple (AAPL) and Berkshire Hathaway. Kaminsky made a comment that per S&P the leadership had never been that narrow before. Beyond the point of narrow leadership like this being a negative harbinger, which was not discussed, Kaminsky made a comment that if you don’t own the five stocks you are lagging the S&P 500. The comment is peculiarly narrow in focus. While there are probably money managers who can only operate in the SPX universe, that does not apply to a lot of people and certainly not you. There is a lot of value in terms of performance, both nominally and on a risk adjusted basis, that can be added with country selection and avoidance and in certain years domestic sector avoidance (tech in 2000 and financials in 2007). Kaminsky’s comment seems to be very much a bottoms up point of view which I think is a more difficult way to go. In this context I’ve been writing about several investment destinations over the years that offer a different economic makeup than the US, are on firmer economic footing than the US and are likely to play an increasingly important role in the world economic order than they currently do. One example is Chile which, as measured by the iShares Chile ETF (ECH), is up 32% YTD versus 6.33% for the S&P 500....