Analyste de Boston

Nouriel Roubini, One on One: More Doom and Gloom

Roubini got the "big picture" right, years before the Crisis appeared on the front pages. His televised advice in 2008 was Treasuries & Cash, but his own 401k was invested in ... Equities! (During a Bear Mkt? Wow, epic fail.) He's like a doctor who correctly diagnoses a rare ailment that other specialists missed, yet goes on to prescribe the wrong medicine to the patient.

I pay attention to his macro read, but discount his investing advice altogether. It may also be true that his ego & status is now obstructing the coherence of his calls. Too bad.

The Gold Debate: Here's Why You Should Be Wary

Gold practically advertises itself: it's GOLD, after all. That said, the desperation and ignorance of Americans is leading them to be fleeced both coming and going!

Consider :
1) Cash4Gold is buying from foolish sellers at just 1/3rd > 1/2 the fair value - DON'T SELL! tinyurl.com/5lkb9v

2) The US Mint is selling gold coins at a whopping 38% premium
over spot - DON'T BUY! tinyurl.com/mjgvgl

I'm also wary when things are advertised on late-night teevee; that's a call to clueless suckers, obviously. But that won't change 5,000+ years of human history either. Gold is still (and will ALWAYS remain) a hedge and defense against deep financial crisis & possible collapse of any fiat currency.

You don't "invest" in gold long term - it's ONLY useful as a store of wealth, earning nothing. Gold is primarily for conservative, older investors, and rich people who want to safeguard part of their wealth. Example: if you think the USD$ has a 20% likelihood of collapse within 10 years, allocate 20% of your portfolio to bullion, accessible & in your possession. (Buy from a trusted dealer at LOW PREMIUM, and beware of the shysters & counterfeit coins.) It's that simple.

For almost everyone else, Gold is a distraction. Don't "speculate" on the yellow metal! Seek alpha elsewhere ...

Gone Nowhere in 8 Years

Yes, dividends reinvested AND inflation-adjusted return. Subtract any trading & portfolio costs and consider survivorship bias (if you were holding the component stocks) - what have you really lost?

For the DIA, the 10 Yr TOTAL Return is 5.91% (0.58% annualized), that's probably been the cheapest index choice.

It's CONSIDERABLE WORSE for investors in S&P500 index mutual funds: 10 Yr TOTAL Return for the Vanguard 500 Index Inv (VFINX) is -8.5% (-0.88% ann.) ; Fidelity Spartan 500 Index Inv (FSMKX) is -8.54%; etc. Higher fees = greater negative return.

Meanwhile, 2000-2008 inflation was 25.1% (2.26% ann.)

From today forward, JUST TO BREAK EVEN the average US market index investment needs a +40% TR on an inflation-adjusted basis. (Taxes not considered!) OVER INFLATION, that's +3.2% avg. ann. return for the next ten years, +6.5% for the next five years or +11% for the next 3 years. Just to break even!

Playing catch-up forces equity investors further out on the risk-return curve. Beyond the Dollar's inflation, taxes, liabilities and any economic dysfunction in the near term, this reality should make a higher allocation to Emerging Mkts and alternative investments even more appealing.

Why ETFs Are a Scam

I've never read so much nonsense on SA, in almost three years studying this site. And after 15 years in the mutual fund industry.

I would LOVE to see an eviscerating critique of ETFs - that WOULD be informative to any any contrarian and every investor - but this is pure blather.

The mutual fund industry has its gunsights on the rapidly growing ETF industry, which is stealing their assets and hurting their bottom-line. Look for many, many more articles in blogs just trashing ETFs with all sorts of slanted & manipulative premises ... and very little legitimate criticism?

THAT says alot.

Natural Gas: Powering the Dubai Overshoot

On Nov 28 07:23 PM DeepValueLover wrote:

> Dubai is a canary and the emerging sovereign bond market is the coal
> mine.

Dubai hasn't defaulted, let's be clear about that. But it's worth asking WHICH ETFs or FUNDS hold Dubai in their portfolio(s)?

No "DubaiWorld" in Powershares' Emerging Markets Sovereign Debt Portfolio (PCY) nor Templeton Emerging Markets Income Fund (TEI) nor the intl equity SPDR DJ International Real Estate (RWX):
tinyurl.com/y8o2evc
tinyurl.com/ybmwusw
tinyurl.com/yjuvvln

So who got burned?

U.S. Government's Size: The Slow-Motion Crisis

With all due respect, Chris, your "Septic Systems/Title 5" is a regulation of the Commonwealth of Massachusetts. Not a Federal statute.

I'm a libertarian, but all those Commentators fulminating against the Feds and screeching about "States' Rights" (an old racist rallying cry) must face the reality that most noxious laws are local, not national.

And when some scumbag Republican like Mitt Romney "cuts State taxes" your municipality will make up the difference by jacking up locals fees & taxes. Let's be honest here, folks: that's how it works!

The End of Asset Allocation

Now we see the blame game.

I don't think "asset allocation" is dead, and I don't even agree with part of Kay's definition. CONTRARIANISM did not inform asset allocation models which largely all went down in equal measure (see all Target 2020 Funds for example.) Why did that happen? Similar losses across the board resulted from managers' largely inflexible mandates to stay fully invested in equities, neither truly "diversified" not "contrarian" in any meaningful way. The proof is in the same-same lousy performance!

You can asset allocate prudently, but you have to have strategic maneuverability to avoid the worst market carnage. Case-in-point: what percentage of mutual fund managers were moving to cash in 2007 or short selling to defensively offset portfolio losses in 2008? No, conventional thinking (industry groupthink) did NOT permit the kinds of strategies that truly contrarian, diversified money managers would have used.

So the argument against asset allocation above is misframed, although several points are certainly valid. Ignorance of RISK, not asset allocation, is entirely at fault here. If we must identify a single major culprit, it's more likely to be same-same broken black-box algorithms: even if your firm didn't use Monte Carlo simulators, you were modeling against someone who was. The circle closed!

Agreeing with the Comments above: solid, contrarian, conservative discretionary judgment was in short supply. There are certainly times to be out of (or shorting) the market: asset allocation doesn't dictate otherwise!

The Destruction of the Dollar: It's Nearly Inevitable

It's not "nearly total." The Dollar Crash has a-ways to go yet - a hyperinflationary death spiral will be the end (circa 2015?) Isn't that always how a currency ends, having fallen THIS far?

Look where we are now. I examined US market prices & US govt statistics from 1910, 100 years ago, and it's apparent the USD$ has LOST:
1) -98% of it's purchasing power in gold
2) -95% of it's purchasing power in silver
3) -95% of it's value against the platinum metals
4) -92% of it's value against the base metals
5) -97% of it's value against energy commodities
6) -97% of it's value against a basket of the major fish harvested
7) -90% of it's value against a basket of the major ag products
8) -96% of it's purchasing power to feed a family of 4

Volcker Sounds Off

I agree. Volcker's name was bandied about in the last months of the election, to siphon a few older, better educated conservative-leaning undecided/independent voters, so-called "Reagan Democrats." I don't know the Volcker support had any impact on election results, but it was a no-lose ploy for the Obama camp.

Early hopes that it would amount to any substantive direction faded fast. We're stuck with a Greenspan protege and a Larry Summers directed mess!


On Sep 30 01:19 PM enigmaman wrote:

> Considering that Paul Volcker was touted as one of the persons Obama
> would go to for advice on how to handle the economy ...

Marc Faber's 2010 Investment Outlook

Just read the INSANE illogic on forums like this:
"I don't (and would not) subscribe to his newsletter, but a study of newsletters showed that from 1991 to 1996, the TOP 10 performing newsletter recommendations returned an annual average of 13% while the market returned 16%."

So, what you're really saying is "Marc Faber is now wrong, because OTHERS who wrote newsletters 15 years ago were wrong!" Wow, that's some kind of irrational garbage to post online. Anywhere. You're brave!

"Given the tone and the title of Farber's newsletter, I am willing to bet he did not do so well in the stock market this year. I seem to recall some very dire comments from him last spring, and I suspect he missed most of the 60%+ run up since March."

You lost the bet. Marc Faber is one of the the very few on record calling the March 6-9th bottom WHEN IT OCCURRED. He also publicly called Emerging Mkts as the big sector to play. Right again. If you investigate even further - ya, FACT check! - you'll see he's correctly identified a number of other market lows & highs. For that, he's very highly regarded by intelligent investors.... folks who aren't brainfarting gibberish opinion on websites like this.

I'm sure many of Faber's specific projections over the last 30 years have also been "wrong" (too early, too late, partially incorrect, overtaken by unforeseen events, etc.), but it's absurd to imagine infallible gurus or to expect 100% accuracy from any PhD economist either. Be reasonable!

Willfully ignoring those who are often right (but tell inconvenient truths) is not ignorance, it's sheer STUPIDITY.

Will the New DBC and DBA Be More Volatile?

The more I think about the CFTC meddling, the more irate I become. These govt regulatory bodies are just lapdogs for the MUTUAL FUND COMPANIES, harassing the popular ETFs. Why? Because commodity ETFs are taking assets from their pricey dud funds. And "their" clients are bolting - to better, cheaper ETF investments.

This is war.

The ETF companies shouldn't be forced to dilute or muddle their funds to suit the competitors' complaint (whatever the proxy's excuse.) I don't like all-&-everything ETFs, either. NARROW index funds are what sophisticated investors want!

At some point, the little guy will have to fight back: take the battle to THEIR conference calls, haranguing mf reps in 401k meetings, even picket their offices - slay the Mutual Fund dragons. The apathetic alternative? We lose ALL access to commodity, short- and leveraged ETFs. Because the Mutual Fund companies said so?! #$%@ 'em.

UBS Halts Inverse and Leveraged ETF Trading

Look at the conflation here: some of the commentators above cannot distinguish between leveraged and UN-leveraged products as they rush to condemn, condemn, condemn these strategies.

Fact is, investors who didnt have short positions got burned in the collapse of a ridiculously overvalued market, and some now conclude that the solution (to their own incompetence/stupidity... is to BAN SHORT SELLING. (Wow, talk about getting it all wrong!) This is the irrational Blame Game.

The mutual fund industry (whose equity products probably wiped out nearly 20% of the wealth of the US) is likewise blaming the ETFs, owned by relatively very few investors but siphoning off fund family assets at an alarming rate. This is the rational Blame Game - it's called Pass the Buck.

Raymond James, UBS... soon, short ETFs will be dropped at Fido and Schwab and all the other IRA platforms. Why don't we just ban ETFs altogether - investors really don't understand ALL the nuts-&-bolts of these products, right? Great excuse: cut off your nose to spite your face! "I don't understand the choice, ergo no one else should have access" - that's logic for ya!

There goes my alpha. Thanks, mutual fund punks.

Barron's Calls a Bottom

YES, how many times has Barron's been discredited calling a Bottom so far? If the paradigm's over, they've been proven clueless, or why aren't they telling the subscribers that Citi & GM are screaming buys? The Emperor wears no clothes, so what's going on?

The Market isn't driven by fundamentals anymore, the Working Group is intervening as aggressively as ever, since 2003 at least. As a libertarian and Ron Paul voter, I see NeoCons stymieing attempts to rally sentiment and tacitly calling for a Market Boycott (a la Ayn Rand, "going John Galt") succeeding, so far. Fantasist entrepreneurs like Joe-The-Plummers and guru Limbaugh certainly got the memo; this planned obstructionism continues to thwart any orchestrated shift towards optimism. The Republican campaign to sabotage the Market is winning.

Rightwing politicos will continue to drive stock prices down (dishearten the Sheeple to fortify & enlarge the Repubs' reactionary base) until the Obama Administration effectively caves in to NeoCons demands. THAT will be the Market's Bottom; until then, expect more downside and continue buying physical gold as a wipe-out hedge. BUY THE DIPS, remember that mantra? LOL!

I wouldn't rule out playing a short sharp rally (as I did on 20 Nov 2008) but I remain very Bearish longer-term. How low will it go? S&P500 at 545 or so, I'll guess. The nominal price will rise from there - hello, hyperinflation! - yet might remain a relative loser's bet for the next decade or so. So many unknowns, now. It's amusing that people blithely still chatter about "long-term investing," you may not wish to remain in the USA when a Sarah Palin comes to power in 2012.

It really is different this time, and Barron's still doesn't get it. Why would you expect anything but bollocks from the groupthink corporate media, anyway?

How Buying a Home Is Gambling

Nobody ever talks about taxes & fees. Because these are spiraling upwards and out-of-control in coming years, most "home investors" are more than abit dishonest about the downside. So yes, home-buying does look more like gambling nowadays: that refrain of denial sounds sooo familiar.

Talking about those who bought in 1972 is nutty & deceitful. Except to remind us all that for decades, inflation-adjusted home prices went nowhere in a period of low taxation. But that forgotten history has zero bearing on those buying now or the kinds of mortgages today's "investors" are getting, too. The EZ Money 1990s are over, folks: that (the foundation of insane RE prices) wasn't realistic and won't repeat.

2011-2021 will be the Decade of the Renter and Squatter.

Insincere Concerns: The Banning of Leveraged ETFs

Ron raises an excellent, simple, and obvious question: if leveraged & inverse ETF products are a "problem," why aren't leveraged & inverse MUTUAL FUND products likewise?

Answer: Because the mutual fund industry is going after the ETFs, that's why. FINRA is just the enforcement flunky for the competition.

Let FINRA know you oppose their nanny-state meddling and any attempts to steal your alpha!
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www.finra.org/Industry...