http://www.cnbc.com/id/100892137.....And so: why would I want to buy into the US Market right now? (I'm sitting on a pile of cash at the moment.) In addition, my EM bonds have been slowly clawing their way back up, still at a bit of a discount. But I'm way too top-heavy--- and have been for years--- in international stuff, both equities and bonds.... Thoughts? Seems to me that so much $$$ rushing into USA equities will drive up share prices. Or should I just pull the trigger, to get in before everything rises even further?
Comments
Some EM things have been working better than others, such as consumer names. Look at a chart of the EM consumer ETF vs the EEM index ETF over the last couple of years:
http://finance.yahoo.com/echarts?s=ECON+Interactive#symbol=econ;range=2y;compare=eem;indicator=volume;charttype=area;crosshair=on;ohlcvalues=0;logscale=off;source=undefined;
It becomes the question of what do emerging markets look like over the next 5-10 years and whether or not countries like China can successfully move towards a more consumption-centric society (obviously that will have bumps, even if they eventually are successful.) Do you want to focus on EM consumer names (although some of the names in that ETF are looking richly valued), or get into broader funds that haven't done as well/nearly as well, but will hopefully adjust over time as EM economies do?
On the flip side, if you're all EM, then you have to be willing to go through periods like this. That's why I think people should have investments spread across the globe.
Scott says it so well...people should have investments spread across the globe. Remember that you do not have to own EM stocks to participate in the growth of EM economies. Funds like MAPIX and others have a lot of their holdings that are tied to the growth in EM countries but are not necessarily based in China, Mexico, Russia, etc. Calamos CNWIX is similar to some extent. If investors want to be in the biggest growth prospects of the next decade, they should consider today's so-called frontier markets. Perhaps a small allocation to something like Wasatch's WAFMX will end up being like ODVYX was the last 10 years? Shareholders had their ups and downs but the long-term numbers were spectacular, something like 18% average gain per year.
CNBC is all about advertising dollars, same with the other business channels. I really hardly ever watch them. A friend who works as an anchor says almost everything is carefully controlled by the big shots, who give instructions that certain lines of questions and topics will not be allowed. Pretty scary that so many people listen and take what is said as gospel. It is all about headlines and sound bites and instilling the notion that people should always be doing something with their portfolios. And that is precisely the wrong message to be giving investors. Oh, well...enough of my soapbox.
I think in terms of the money on the sidelines, there's also the issue of the amount of shares outstanding in the market, which have gone down quite a bit and what that means for investors going forward. Statistics (http://www.forbes.com/sites/peterricchiuti/2013/06/21/the-shrinking-supply-of-stocks-and-what-it-means-for-investors/)
As for EM, I think one has to have a long-term view, whether it be the idea that China can turn itself into a more consumer-centric economy or that Brazil can work out its issues (hopefully for it, before the olympics.) You can look even at specific issues - FEMSA (a conglomerate that owns a massive convenience store chain, a large part of Coca-Cola Latin America and Heineken); that's done very well for the last several years, but how do they face the issue of Mexico overtaking the US in terms of obesity issues? (http://www.deseretnews.com/article/865583041/Mexico-overtakes-US-in-obesity-grapples-with-weight-and-malnutrition-problems.html?pg=all)
How do emerging markets in general deal with health issues that have started to be increasingly visible as their consumers move up in the world? Abbott (ABT) has run into a bit of an issue in China recently along with Mead Johnson, but in the long-term, Abbott and its nutritional division make for a very boring way to play the consumer in EM (as Abbott has a pretty significant EM exposure) who are - if you believe EM consumers are going to continue to move up over time - more nutritional and "value-added" products.
I do like playing EM via EM when possible, but Abbott is, I think - an example of an enjoyably dull way to get both EM exposure and US exposure to an increasing amount of baby boomers via products like Ensure, not to mention generics and other health care products. Unfortunately, the bummer is that when Abbott split off into Abbvie and Abbott earlier in the year, Abbvie offered the larger dividend. When Abbvie was spun-off, the nutrition division became the focus of Abbott.
There are other companies too that could likely fit, but the idea being that I continue to think that there are EM and EM-related themes that may work longer-term while the broader indexes may be more volatile. (Actually, now that I look, there is actually an EM healthcare fund - EEM index vs HGEM:
http://finance.yahoo.com/echarts?s=HGEM+Interactive#symbol=hgem;range=5y;compare=eem;indicator=volume;charttype=area;crosshair=on;ohlcvalues=0;logscale=off;source=undefined;
ECON(EM Consumer) and HGEM vs EEM:
http://finance.yahoo.com/echarts?s=HGEM+Interactive#symbol=hgem;range=5y;compare=eem+econ;indicator=volume;charttype=area;crosshair=on;ohlcvalues=0;logscale=off;source=undefined;
Both EM consumer and EM healthcare were certainly not highly correlated to the broader EM index during this period.
Interesting about CNBC. It must be why some of the anchors have that vaguely constipated/grumpy look whenever someone seems to go off what appears to be the desired topic.
How much more do I want to put there? I'm really asking, that's not rhetorical.
Domestic: I was very fortunate when I chose Mairs & Power MAPOX and MSCFX. In fact, the latter is up over the last 15 months by 40% for me. It, too, is just 3.01% EXACTLY of my total.
Most disappointing has been SFGIX. Shall I double-down there? I had figured this all out for myself. I had figured MAPOX is my best play. But if I read you guys accurately, you're advising that frontier and EM is where it's at. Thankfully, I can say I've already got a substantial EM and Frontier presence in my portfolio. My MAPOX stake is but 3.49% EXACTLY of my portf.
So, I know that MAPOX owns bonds, too. About 30% of the portfolio in that fund. But my domestic equity stake is but 6.5% EXACTLY of my total. I still would like to try to rebalance, so that my foreign stuff isn't such a huge bet, proportionally. Follow? Thanks for any further input, everyone. I don't want to re-hash the previous conversation about this. The responses above = new input, though. And things are always changing.
I wouldn't say that it's "where it's at" as much as I think people should have exposure to it. How much exposure to it depends on one's views and risk tolerance, with the latter being particularly important, given the volatile nature of EM. I wouldn't be heavily overweight EM, but I would continue to have a diversified exposure around the world.
Someone who is near retirement should have a very light exposure to EM and in a much more conservative manner. Someone younger should have a larger exposure, but again, depends on the person.
I guess my view is this: I think people should have a diversified portfolio with exposure around the globe. If people are all EM (or all US, or all tech or all whatever), that's fine, but just be willing to accept the periods - possibly long - where that will underperform.
If you are looking to add to the SFGIX or TRAMX, I'd add to the former and keep the latter as a smaller, supporting player.
SFGIX has not done bad this year in comparison to its category.
I realize I am in the minority, at least on this board, but that very strategy has worked for me for over 25+ years. Probably picked it up from that Darvas book about staying with the trend and when the trend changes run like a thief.
There is also growing trend of investing in ETFs as opposed to mutual funds. So the mutual fund flows is not telling the whole story.
US Stocks, 41%
Foreign Stocks, 29%
US Bonds, 15%
Non-US Bonds, 6%
Cash, 6%
Other, 3%
The above figures do not include the 79% cash or equivalents now sitting in various bank savings and MMkt accounts... this breakdown is just for all of our non-MMkt fund holdings, which currently are 17% in equity funds, 4% in Bond funds. Will definitely be easing back in as the Fed issue sorts out, and will try to maintain approximate distribution as above by increasing allocations across the board.
DLFNX 2.55%
MAPOX 8.61
MSCFX 3.02
MAPIX 36.6
MAINX 2.75
MACSX 2.65
SFGIX 2.72
TRAMX 3.01
PREMX 38.1
Severely barbelled, with MAPIX and PREMX, yes. It is what it is. I guess I've not shown it and shared it exactly this way for a while? Not at all balanced.
cash 2%
US stocks 9%
Foreign stocks 43%
Bonds 42%
Other 4%
The cash sitting in bank is part of your retirement portfolio so there is no point in checking the asset allocation of your mutual fund portfolio in isolation. With 17% equity exposure a few percentage more US vs Foreign is a wash. The difference is too small to make a meaningful impact in returns.
When you have 17% invested in equities if 40% of that is US (6.8% of overall portfolio) or 60% of that is US (10.2%) just does not matter much as a lot of US vs non-US movements is correlate. So, you would pretty much get similar returns if your equity divisions have changed.
Now, I am not saying 17% equity may or may not be appropriate for you. When you have a large enough portfolio you can afford to take less risk. And if you have way way too much you can than afford to separate enough to guarantee the rest of your life and than take whatever risk you like for the rest to raise funds for any other objective. Than the remaining portfolio is no longer a retirement portfolio. It is a portfolio for a different goal and should be invested in line with the objectives of that goal and the time horizon that goal requires.
Regards- OJ
By comparison, one of the other large aircraft carriers, the one with "Euro" painted on the bow, is a hell of a lot lower in the water, and from the looks of things the patches on that one could start falling off almost anytime. If the weather turns nasty again I'd much rather be on the one with "USA" on the bow.
While first childhoods are mostly the same, second childhoods are wildly variable. That doesn't imply that EM should be the pivot of one's holdings (especially if serious health problems are already obvious), but it doesn't need to be minimized for another decade although I might take unexpected profits off the table. (Greed is not so good when one is 75).