Burning leaves So, this image is a pretty decent fire, without much smoke at this time. For those who have burned leaf piles; you know there are many factors of the physical sciences world that affect the burn; and for that matter, the start; and the continued burn, which may be without flames eventually, but with enough heat energy to continue to change the physical condition of the remaining leaves; albeit perhaps, with much smoke. The burn stops eventually, when the leaves are no longer leaves.
Evening,
Today was a real rip-tear for equity markets and one may suspect a further transistion to Asia again. I'll be watching Japan; although no money is parked there for this house.
The smoldering equity markets; or at least the big trading houses who really itch for some movement to make a trade and hopefully money, were likely happy today; if they were indeed on the good side of the trade.
Not doubting that some of the rally was in relief to some issues being removed from the work tables in D.C.-land. Also, that those holding short positions were forced to unload those positions.
The question(s).
1. how much of the gains will be shaved back;
2. and after how many days of an equity rally?
Or do some feel there will be a straight line rally for the month of January and beyond?
I'll guess a 50% equity retreat within 5 trading days. Gotta a guess?
Ah, heck....have some fun and take a guess. No prizes will be awarded.
Regards,
Catch
Comments
Yeah, I'd go with that.
On the other hand, I'm wondering if some of the mice who were living in your leaf pile are now out there nibbling at the edges of our bondfund stuff... don't like what happened to ADFIX or ACITX today at all, at all...
I was a little astonished to read that someone like CNBC frequent guest Dennis Gartman, who's so vanilla (which makes him perfect to be on CNBC constantly) and doesn't usually make more extreme statements said this yesterday: "Owning stocks at this point is rather like owning stocks in Zimbabwe several years ago – but remember as the Zimbabwean dollar plunged, the stock market soared. We may have the same sort of thing,"he said."
I don't think we're going to go full Zimbabwe (and I doubt Gartman does either), but - over at least the short and medium term, there's going to be volatility but I think the market heads higher as the current easy monetary policies around the world (I mean, look at Japan - I think Japan has a lot of negatives unfortunately - demographics, etc, but if they are going to "reflate at all costs", their market is going higher and I continue to own a little Japan really only due to that theme, not on a fundamental basis) continue and equities (not across the board, but some sectors especially) will stay ahead of inflation as currency debasement continues.
I'll also highlight something that Marc Faber said not that long ago and that - with the way things are - I agree with: "Look at the history, for example, of Germany, for the last 100 years. They had World War I. They had the hyper-inflation in World War II. The bond-holders got wiped out three times. If you owned Siemens, and you still own Siemens today, it was not a fantastic investment, but at least you still have something. You were not wiped out. I think that in equities you will be better off because you have an ownership in a company, than by being the lenders to companies, and the lenders, especially, to governments."
I understand the risk and volatility involved is not appealing, but I think there are lower volatility ways for conservative/retired investors to have some equity exposure, such as the low volatility S & P ETF (SPLV), which also provides a monthly dividend. Not a recommendation, but you can own a Walgreens (WAG) that is generally boring and will serve an increasing population getting to retirement age (and which yields 3% or so.) Or the core Abbott Labs (ABT), which just spun-off the R & D portion. I'm not saying invest in Abbott, but that's a good example of an enjoyably dull stock that would be a good choice for a more conservative and/or retirement age investor. P & G and Unilever would be other ideas.
Boring stuff that provides core needs and are stable businesses that have been around for ages and one reinvests the dividends.
Marketfield (MFLDX) remains a successful long-short offering, as well. It's going to lose money in a 2008 style situation, but has displayed skill at dialing up and down risk.
...and not saying that everyone should be 100% equities, either. But I think even those in retirement age should have *some* exposure, and how much is up to them.
"Also, that those holding short positions were forced to unload those positions."
And you're going to continue to get rolling short covering because you get instances where a rumor comes out and the market is lifted 200 points or the fiscal cliff "deal", which I don't think is really all that good for many people, but the market was thrilled something was done and the market zips higher. If people want to short to hedge a bit and maybe are successful in doing so, great, but I wouldn't short heavily into continued easy monetary policy and any hedging should be short-term in nature. Overall though, some of the last few days is short covering, but there will be more instances of it as the can will continue to be kicked whenever problems come up and rumors suddenly take markets higher (only to be denied right after the close.)
"Today was a real rip-tear for equity markets and one may suspect a further transistion to Asia again."
I'll continue to move more investment to EM.
"Or do some feel there will be a straight line rally for the month of January and beyond?"
Nothing investment-wise moves in a straight line, certainly. There will be volatility and down periods. However, you have this mentality that debt doesn't matter and massive spending as far as the eye can see is fine. If you believe that politicians - once on that path - will get off of it (Sen. Schumer to Bernanke: "Get to work, Mr. Chairman" - http://www.zerohedge.com/news/chuck-schumer-ctrl-p-get-work-mr-chairman-benefit-my-donors), I'll respectfully disagree. In this environment, I want to have a significant allocation to real assets and companies that provide core needs (and companies that provide a value to consumers and/or businesses - even something like Costco.)
Additionally, I continue to think that people have to be diversified globally.
At the new year, wifey and I always tap one of our funds which is not tax-sheltered for a hefty chunk of money to send back to the struggling relatives in Asia. We use MACSX. I checked, and given our cost-basis and the share-price after yesterday's market-close, we made a bit more than 17% on what's been sitting in there and growing. Not hard to take.
No portfolio fires here, merely looking for thoughts about entry points going forward.
However, thank you for presenting two areas that all investors must understand past any and all fundamental or technical aspects of investing; being one's emotional capabilities to deal with investing.
While you related one aspect, jealousy; a second cousin of envy, can be equally destructive to one's investments. If this house was subject to these investing aspects, we would have no need to be here; as we would not likely have a portfolio remaining, of any monetary consequence.
If either or both of these wander too far into one's decisions involving investments; the outcomes may be most negative.
Jealousy is an emotion and typically refers to the negative thoughts and feelings of insecurity, fear, and anxiety over an anticipated loss of something that the person values, particularly in reference to a human connection. Jealousy often consists of a combination of presenting emotions such as anger, resentment, inadequacy, helplessness and disgust. In the original broad meaning used in this article, jealousy is distinct from envy, though the two terms have popularly become synonymous in the English language, with both now taking on the narrower definition originally used for envy alone.
Envy is best defined as a resentful emotion that "occurs when a person lacks another's (perceived) superior quality, achievement or possession and wishes that the other lacked it."
Thank you again for bringing forth this important aspect of investing. Hopefully, others reading this will benefit from this knowledge.
Regards,
Catch
I think trying to make sense of short term market moves is difficult. But I'll admit to the same proclivity. Just a snippet on the news about long term cap gains going to 20% - hope I got that right. If correct, not as bad as some expected. That might explain why the NASDAQ sold off before the "deal" and than yesterday recaptured some of the loss. These securities tend to offer higher cap appreciation (vrs income yielding equities) so probably dance more to the tax tune.
Nothing smoldering around here except the glow In the fireplace this morning. Regards
Whelp, I think most everything you noted is true. Without a doubt, the equity market is being inflated by all the QE$ - here and abroad. The CBs are dropping money from helicopters and there's not really any other place for it to go. No doubt this is NOT going to end well but while Uncle Ben is keeping the punch bowl full - Party On.
Just keep things in perspective. Each of the CBs is racing to debase their currency before the others, so that their funny money can buy goods and services from abroad at a slightly higher marginal exchange rate and so they can monetize as much of their debt as possible. Price inflation is being held in check due to extremely low velocity due to the liquidity trap. This is occurring in an environment where is there negative wage pressure due to high unemployment and a soft economy. And let's not forget that globalism and the internet prevent any company from having any pricing power. Granted, the Feds are dinking the numbers a bit via their CPI formulae but real inflation at this time is what, around 5%? Alas and alack, I fear it won't remain this low for long.
How to CYA? Quality stocks paying a dividend are great way to start. They allow you to stay in the equity arena to capture any equity inflation while paying you for your trouble. Geez, it doen't get much better than that.
For bonds, stay away from anything longer term, particularly treasuries and agencies. Sovereign debt is extremely dicey. Sure the US Treasury is the 'holy of holies', but don't fool yourself, that's only because it's the least smelly fish in the barrel. I like having some TIPs and particularly like intermediate term corporate bonds.
And, while I know I've beaten this drum to death, diversify, not only your portfolio, but your wealth. The elder Baron R. stated that to protect yourself financially, you need to have 1/3 of your wealth in securities, 1/3 in real estate and 1/3 in rare art (define rare art as you wish, but it ain't Beanie Babies).
and so it goes,
peace,
rono
Rono made a good suggestion with your local utility co as a stock idea. Maybe a dash of an MLP fund to offer real asset exposure and higher yield (although with high volatility)
While nothing is entirely "set it and forget it", create a bond and largely boring stock portfolio that requires relatively minimal maintenance and still provides income while offering equity exposure. Reinvest divs over time. You don't have to sell all the bonds or take huge equity risks. There's plenty of J & J - type stocks that may have volatile moments but have been steady and enjoyably dull for decades.
Maybe a portfolio that offered a combination of bond funds, equity funds and a few J & J-style single names? The %'s would be up to you to decide.
You noted: No, not fixated with the leaves; just an interesting view of a concept that there is always something/sectors to monitor to attempt to find what stage of a burn is in place. If we (our house) were really getting pushed by short term blips, we would have been in and out of too many funds during the last few years; and would have abandonded some funds that held there own, relative to risk and reward.
The week of July 25, 2012 still seems to hold some form of transistional phase, beginning with the valuing of the $US. I will have to revisit that write and look at some charts again, too. Also, beginning in Sept/Oct 2012 started to show some flattening in some bond funds. We surely won't live with bond funds having less than a 2% yield with pricing remaining flat or downward. That doesn't help anything, eh? We were away from the markets (traveling) for most of the last two weeks of December; and so let our portfolio rest in place, as is. But, we have had considerations of some holdings changes for the past several weeks. We are reviewing this now.
We can't whine about our risk adjusted return for 2012. Not so sure at this point, where a greater than 5% return may be obtained for 2013.
More later......got to travel the highways.
Take care, up there.....
Catch
Our direct TIPs holdings and PLDDX are our cash holdings funds, as we don't have any money market type holdings.
Much of the headline news that hops in and out of the minds on a daily basis moves among the story of the day; and we have to wade through all of this to attempt to make investment decisions, eh? Europe is out of the news, for the most part, at this time; but many things have not changed there. We're currently attempting to determine some equity areas into which to venture for this new year. Bond yields in the 10 year Treasury sector have increased about 22% in the past few weeks and this always puts an edge on perceptions of a pending change of towards "something". Is the change in anticipation of growth, or at least more growth than has taken place in the past year. I don't think so. The question is; who is selling and why? I have not really answered any question. Just thinking outloud. If some equity for this house; where will it be?
Below is a reply to hank in this thread.
The week of July 25, 2012 still seems to hold some form of transistional phase, beginning with the valuing of the $US. I will have to revisit that write and look at some charts again, too. Also, beginning in Sept/Oct 2012 started to show some flattening in some bond funds. We surely won't live with bond funds having less than a 2% yield with pricing remaining flat or downward. That doesn't help anything, eh? We were away from the markets (traveling) for most of the last two weeks of December; and so let our portfolio rest in place, as is. But, we have had considerations of some holdings changes for the past several weeks. We are reviewing this now.
We can't whine about our risk adjusted return for 2012. Not so sure at this point, where a greater than 5% return may be obtained for 2013.
More later......got to travel the highways.
Catch
You noted: "don't like what happened to ADFIX or ACITX today at all, at all... "
TIPs funds have had a face slap this week. But, your entry point to the holdings was a ways backward and still allow for some wiggle room, eh?
Not unlike yourself, we don't like to give back any earnings either.
I do believe, in a very short term period (less than one month); that government bond sectors are perhaps setting a new range. Pension funds and others may indeed re-enter the buying area again.
Must travel now.
Take care,
Catch
Catch: You've kept no secret of your returns. But, I'd love to hear you quantify (1) the yardsticks you use to measure the risk of various assets you own and (2) the tools you so employ to obtain these measurements. I'd expect that to be a daunting task - as there seems little agreement here or in the financial media regarding varying degrees of "risk" re: cash, bond, commodity, real estate, and equity sectors.
I'd think both the yardsticks used to quantify risk as well as the specific techniques and instruments employed to measure it vary greatly in the real world. John Hussman calls HSGFX "risk adjusted" - but it turned out a negative 12% last year. I'm sure in his mind that was the price that needed to be paid in the interest of reducing risk for his investors. I also suspect David Tice or Jim Rogers. uses a different risk metric than say - the folks at Dodge & Cox or T. Rowe Price. So ... let's hear yours. The returns you've portrayed. What makes you believe they were praiseworthy on the risk-reward spectrum? In other words, how do you know they were achieved with relatively little risk?
The more math inclined on this board could answer this much better than I but....
You have to look at volatility when talking about risk adjusted returns. Catch underperformed the S&P (dividends included) by what, something like 3%.
But being all in bonds, he didn't have to endure as much volatility during the year and hence on a risk return basis I would say he outperformed the S&P. Take a look at board fave PONDX. Simply amazing that its 2012 return of nearly 22% was achieved with virtually no volatility - less than a 1% drawdown at any time during the year. Compare that with the equity funds that made around 22% and you will see they were subject to drawdowns of 10% and more along the way. PONDX on a risk/reward basis trounced them.
One reason I have been so enamored of junk bonds over the years is because on a risk adjusted return basis, they handily beat the S&P over the long haul. Last I recall, over the past 30 years the returns of the S&P vs junk bonds were nearly identical. Yet you had about one half the volatility in junk compared to the S&P.
Jim Rogers sees run-away inflation as the big risk. To him the real "risk adjusted" return is in commodities - though not evident on a week-by-week basis. Tice would put the risk as deflation, and sees long bonds and gold as the best risk adjustment. Ted likes health care, and you can't disagree that we're all getting older and more in need of increasingly expensive care. Could, I suppose, argue that true risk avoidance lay in investments in health care and mortuary science as they're certainly in constant demand. ..... I don't pretend to know the answer - but I don't publish a investment column every week either. FWIW