BREAKING
NEWS
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The reality is that for the past decade, we've all been vastly better off in actively managed mutual funds. There is simply no contesting the reality that index funds have lagged profoundly for the last ten years. Having said that, it's also true that index funds will rise again, when the bull market genuinely returns and investors flock to the indices again. For now, this is a consensus move which doesn't have a lot of genuine validity behind it. We'll stay mostly in actively managed funds.
When
Bad is Good (8/30/2010)
I just got off the phone with Ivy Asset Allocation.
They think the November elections are going to create big change, but they are uncertain what that change will be. Currently they have only 5% cash, which is less than they had two months ago. They also have NO allocation to bonds because they feel that interest rates are going up.
12% is in gold bullion. And because of market shorts via the futures market they are only 25% net long with 53% of their stock holdings in international venues.
What this means is that they are defensive in general but biased AWAY from fixed income TOWARDS the stock markets.
With a beta statistic of .86 and an R2 of only 56, this fund remains attractive.
Yields like this suggest that investors think there will be almost no growth and no inflation during the next 7 years.
Yet we know that the consensus at extreme valuations is ALWAYS wrong.
It's a bond bubble.
Fairholme
Fund
(7/13/2010)
Fairholme Fund is one of our stellar funds which is normally included as part of our diversified portfolios. Therefore I am delighted to see that this manager's excellence is being recognized at last.
Global
Economy
(7/12/2010)
The week begins with two articles concerning the global economy. These pretty much mirror what we've been saying all along:
The
Three Biggest Lies (?) About the Economy
(7/1/2010)
I've been mulling over this article for the past few days, so it's really not breaking news. But it's current because of today's jobs report, which underreported job loss profoundly. It's mostly just for general interest and won't change our portfolio allocations at all. What this article discusses is already built into our plans. In my opinion the author gets it about 70% right.
At best, this will be a slow, uneven recovery. You can see that here, in today's statistics about expectations. Despite this, we will eventually get through our rough patch. Meanwhile, we want to stay diversified and flexible, and committed to the long term. This is the kind of news which is better off ignored when it comes to making investment decisions. The problem is that most people don't ignore it.
New
Home Sales Plunge to Record Low in May
(6/23/2010)
Is anyone surprised by this? It appears to me that any government, regardless of party, deals with economic challenges via artificial stimulus. The props which lifted up the market for new homes evaporated in April. A very normal decline in the previously subsidized market occurred in May. No surprises here.
As the following clip indicates, we don't know what will happen. We really don't. At this point, it appears that we are experiencing a mild, uneven recovery, but the oil spill in the Gulf of Mexico and the Euro's crisis may both act as economic dampers. Down at the grassroots, the global economy HATES uncertainty. Businesses and consumers all over the world spend money and thus grow the economy when they feel that it's safe to do so. Uncontrolled events such as the oil spill and unpredictable societal events such as government interventions cause businesses and consumers to defer spending. At the moment, chaos is creating a sense of fear, and fear keeps wallets closed. In my opinion, staying very diversified is a valid choice, even if we lag a small bit in the short run.
If you read my last newsletter, I discussed the possibility of the breakup of the Euro into the "Euro light". Now we are getting confirmation from economists. It's important to remember: we don't really know how this will happen, or even if it will happen. Also any currency reversions will probably not affect the valuation of the affected stocks in terms of dollars. So we aren't running away entirely.
Yesterday we read Paul Farrell's column that the financial world is coming to an end. Now there's this very positive news. I suppose the best thing to do is to focus on our long term plan and stay the course.
Mark Hulbert writes a newsletter about financial advice, and his is usually accurate. So this is GOOD NEWS. We could use some right now.
Strategic
Defaults
(5/18/2010)
We're looking at this closely. It could become a major complication for mortgage quality in the secondary markets later this year.
Momentum
Building in Economy
(5/11/2010)
Here's an important article about what isn't really known about China: They have a debt bubble too! We rebalanced our Asian holdings last quarter. These have been great providers for us over the years, and probably will be great again. Meanwhile, we've lightened up. We haven't eliminated the position, however, because we don't really know what will happen, or when.
Local
Real Estate (5/6/2010)
|
Region Name
|
|
Type
|
Current
|
Current Loss %
|
|
California
|
All Homes
|
$327,900
|
- 63.40%
|
|
|
Monterey
|
All Homes
|
$520,400
|
- 44.12%
|
|
|
Salinas
|
All Homes
|
$305,900
|
- 71.28%
|
|
|
Santa Cruz Metro
|
All Homes
|
$504,000
|
- 61.46%
|
U.S.
Stocks Suffer in Market Decline
(4/27/2010)
Stay
the Course
(4/27/2010)
The
Making of a Greek Tragedy
(4/26/2010)
Here's why we diversify. The coming weeks will show us how this unfolds.
A
Star Fund Manager Gets Cautious
(4/16/2010)
We agree with David Forester. That doesn't make him right: actually he may be quite wrong. But there's enough uncertainty out there to justify what he's doing.
Quality
vs. Junk
(4/9/2010)
GDP
Surges on Inventory Slowdown
(1/29/2010)
Read article This is an inevitable part of the recession recovery cycle. The next question is: Is this sustainable? We genuinely don't know.
Bullishness
at Dangerously High Levels
(1/6/2010)
Read article This is telling us that rebalancing is a great idea, regardless of any tax consequences. It's also telling us that we want to stay very diversified.
Do
You Suffer From Bag-Lady Syndrome? (6/6/2006)