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Eric Parnell, CFA  

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  • Stocks Are So Overrated [View article]
    Hello Brazo264,

    Thanks for your comment and for raising a very good point. But your point here assumes that an investor is working to time the market, which I certainly do not agree with. Unfortunately for most investors, however, they are more inclined to buy at the tops and sell at the bottoms than the other way around. And even if they are dollar cost averaging and throwing away the key, it has still been a fairly wild ride for investors in stocks over some of the time periods mentioned above.

    Thanks again for your comment and very good point.
    May 28, 2015. 10:56 PM | Likes Like |Link to Comment
  • Stocks Are So Overrated [View article]
    Hello s_belton12,

    Thanks for your comment and for raising some good points. But to your point about asset allocation and diversification, I flatly disagree. When seeking to build a diversified portfolio, one should not be emphasizing negatively correlated assets. After all, if two holdings are strongly negatively correlated, when one asset goes up the other goes down and you end up neutralizing your returns. Instead, the far more ideal asset class categories from a portfolio diversification standpoint are those that are uncorrelated in that when one asset goes up, the other asset is completely uninfluenced. While negatively correlated assets do have their place on the margin, a focus on uncorrelated asset classes is how true portfolio diversification is achieved. And to this point, one of the beauties of cash is that it is effectively uncorrelated with stocks, hence the diversification benefit. As for precious metals such as gold, the correlation with stocks over the last decade has been +0.07, or virtually uncorrelated and once again the diversification benefit.

    And to your final point, I offer the converse not because I disagree with your points, but just for the sake of argument. When was the last time someone built a house with share certificates of Pets.com? Or when was the last time I served breakfast with share certificates of Bethlehem Steel (which were actually gifted to me many years ago not long before the company went bankrupt - nice collectors item, but not jump starting my day)? Or when was the last time a crafty M&A actually generated the synergies promised to shareholders other than making some senior management rich anyway? And when was the last time I was able to make a sandwich with a financially engineered balance sheet and a marketing plan? As for gold, a good number of retirees have been glad to own it since January 1, 2000 with Gold having risen in value by +310% to date over this time period versus just +91% for the S&P 500 Index - after all, these retirees can create synthetic income by selling a portion of their gold and still have a whole lot left over.

    But with all of this being said, you make a number of excellent points here and I appreciate your taking the time to comment. Thanks again.
    May 28, 2015. 10:52 PM | 2 Likes Like |Link to Comment
  • Stocks Are So Overrated [View article]
    Hello RNArizona - Thank you for your comments on my recent articles and your very kind words. Thanks again.
    May 28, 2015. 10:36 PM | Likes Like |Link to Comment
  • Stocks Are So Overrated [View article]
    Hello tmow - Thanks for your comment. I appreciate it!
    May 28, 2015. 10:35 PM | Likes Like |Link to Comment
  • Stocks Are So Overrated [View article]
    Hello Gary,

    Thanks for your comment. This is a point that was raised earlier in the comment section. While your point is well taken about the use of a logarithmic scale, I intentionally used a standard scale given the fact that the design of the article was to think about markets from the perspective of the typical investor. Given that many investors do not typically recognize the difference between a 200 move in the S&P 500 from 1500 to 1700 versus a 200 move from 2000 to 2200, it is reasonable to assume that they are not thinking about the value of their accounts on a logarithmic scale but instead as a standard dollar amount.

    But your point is well taken and I appreciate your raising it. Thanks again.
    May 28, 2015. 10:34 PM | Likes Like |Link to Comment
  • Stocks Are So Overrated [View article]
    Hello just-an-opinion,

    Thanks for your comment and you make a lot of great points here. One in particular is a point that too often gets overlooked and is something that I need to raise in a future article. A key mantra for many investors is that one must stay fully invested during severe market downturns to avoid missing the subsequent bounce (assuming the bounce eventually comes - thanks to the Fed in 2009, it came quickly - not so sure next time). The only problem is that a good number of investors often find themselves in the unexpected need of accessing this money (lost their job, forced to move, etc.) and are forced to liquidate their positions at the worst possible time and end up missing the bounce. This is problematic in an entirely different way.

    Excellent points. Thanks again.
    May 28, 2015. 10:30 PM | Likes Like |Link to Comment
  • Stocks Are So Overrated [View article]
    Thanks DGM01 - I appreciate it!
    May 28, 2015. 10:26 PM | Likes Like |Link to Comment
  • Stocks Are So Overrated [View article]
    Hello xpan,

    Thanks for your comment and for raising some good points. I'm not sure that 25% returns on real estate is necessarily a no brainer, but I do agree that private real estate most definitely has its role in the broader personal asset portfolio construct. I also wouldn't go so far as to say anyone is definitively "right" or "wrong" on any of the points being discussed, but instead a contrast of varying opinions on a variety of topics worth debating.

    Thanks again for your comments.
    May 28, 2015. 10:24 PM | 1 Like Like |Link to Comment
  • Stocks Are So Overrated [View article]
    Hello TheUnknownInvestor,

    Thanks for your comment and your great points including highlighting the many references throughout history. Thanks again!
    May 28, 2015. 01:45 PM | 2 Likes Like |Link to Comment
  • Stocks Are So Overrated [View article]
    Hello RAKJ,

    Thanks so much for your comments both here as well as on some of my other recent articles. I appreciate it! And I too look forward to the comments that follow on this article, as it is in the comment section where the greatest insights are expressed and shared in my opinion.

    Thanks again!
    May 28, 2015. 01:43 PM | 2 Likes Like |Link to Comment
  • Stocks Are So Overrated [View article]
    Hello market flaneur,

    Thanks for your comment and excellent points. The only point that I would add is that from a portfolio construction standpoint, the inclusion of a very small allocation to something that may be volatile in isolation can serve the purpose of meaningfully lowering the risk profile of the overall portfolio if its price performance is uncorrelated to negatively correlated with the other assets in the portfolio. In this way, the strategic use of higher risk securities can actually lower an overall risk profile. But to your point, such instruments must be used tactically and with great care.

    Thanks again.
    May 28, 2015. 01:42 PM | 1 Like Like |Link to Comment
  • Stocks Are So Overrated [View article]
    Hello u01bsb0,

    Thanks for your comment and for building on the point raised by Sam in his comment above. You are right that zooming into specific time periods would show a greater disparity in the lines. But when seeking to view the markets from the perspective of a typical investor, the difference between roughly $18,000 in stocks versus $1,100 in bonds in 1986 feels very different in absolute dollar terms than $290,000 in stocks and $7,000 in bonds today. But your point is well taken and I appreciate your raising it.

    Thanks again!
    May 28, 2015. 01:39 PM | 2 Likes Like |Link to Comment
  • Stocks Are So Overrated [View article]
    Hi Sam,

    Thanks for your comment and your point is well taken. You'll notice that in most of my articles I chart price on a logarithmic scale, but I purposely used a standard scale for this article given the fact that part of its purpose is to consider the perspective of the typical investor, as most people I have encountered do not track the dollar value of their wealth on a logarithmic scale. But your point is every well taken and I agree with what you are trying to express by making this point.

    Thanks again and I look forward to your future articles on SA. I particularly enjoyed your recent post on Volkswagen. Great work.

    http://seekingalpha.co...
    May 28, 2015. 01:33 PM | 7 Likes Like |Link to Comment
  • Stocks Are So Overrated [View article]
    Hello dieuwer,

    Thanks for your comment and for raising a very good point on gold. It is to this very point that you've made here that I gave it a nod at the end of my article. And given that stocks and gold have moved back and forth with each other over long-term periods of time, I suspect gold will have its day back in the sun before it's all said and done.

    Thanks again and great point.
    May 28, 2015. 01:29 PM | 5 Likes Like |Link to Comment
  • Stocks Are So Overrated [View article]
    Hello fripp1,

    Thanks for your comment and I agree - high quality companies at attractive valuations with low price volatility that are big free cash flow generators and pay consistently growing dividends are the best. The attractive valuations part has been increasingly elusive over the last several years, but market cycles will provide good entry points again in the future I'm sure.

    Thanks again!
    May 28, 2015. 01:27 PM | 9 Likes Like |Link to Comment
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