Hougan's Reflation Trade Portfolio: Playing with Fire

By Jim Wiandt

Question for Matt Hougan—since when did IndexUniverse.com start making bets?

Laying out a portfolio that adds up to 100% and filling it with mostly alternatives that should probably add up to 5 or 10% maximum of someone's portfolio seems like dangerous advice. And certain bloggers I know already have experience with doling out suspect advice.

But before I get to that, one question: Is Maine a state or some sort of Arctic hinterland? I mean, really, Matt, I am sorry that a moose knocked over the one TV truck in Maine and short-circuited your CNBC appearance yesterday, but it comes with the territory.

On the rest, for someone who has repeatedly professed to "not understanding" gold, the fact that you make it 20% of your "reinflation portfolio" is somewhat disconcerting to me. And the rest of this is appealing and thoughtful ... but that does not mean it's not highly speculative and mainly where thoughtful investors should not be.

I think it's time to step back here and put things into perspective. You and I love to examine and speculate about the global macroeconomy. But a lifetime of timing failures have repeatedly drummed into my head that tactical trading is not how you make money ... it's how you get bloody hands from falling knives ... or waste a market run while you're sitting in cash.

So can we get back to basics. It's a phenomenal opportunity right now to make sure that you've lined up your financial goals and your risk tolerance to your level of risk. That, Matt, is the main thing ... and let's try not to forget it. Here's reminder of what those basics (more or less in this order) are: 1) know how much money you need; 2) save enough to meet your needs given reasonable return assumptions; 3) asset allocate properly according to the level of risk you need; 4) choose your investments; 5) keep an eye on your allocation for rebalancing; and 6) keep a (dispassionate) eye on the market.

This is, after all, "indexuniverse.com," and to me the world of indexes is about allocating to the available universe to match risk with investment need, not to trade.

Original post

Comments

[Analyste de...:]

I realize you two have a back-&-forth, but shame on you, Jim: the Straw Man argument is so transparent.

According to Matt, "CNBC asked me to pull together a list of seven or eight ETFs that stand to benefit from reflationary trends." Nothing implies that portfolio is designed for retirement savers, retail Joe-Six-Pack investors, or everyone looking for an investment model. Nothing indicates universal suitability or risk-tolerance, not at all: it's SIMPLY a "reflation trade portfolio."

True, there's no caveat or warning for 80 year old investors, but like many articles on SA and elsewhere, there's only so much space on the page. The strategy is clearly an academic exercise, not advice directed towards retirement savers.

In the future, please avoid this kind of Straw Man retort, it's a dull, cheap & trashy kind of reply.

May 23 05:09 PM

[Jake2:]

Zero content. Reader, pass by.

May 24 02:26 AM

[Living4Divi...:]

Typically, I find IndexUniverse to have value

This article says absolutely NOTHING.

Jun 09 06:18 AM