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Gary Gordon  

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  • Is Waning Enthusiasm For U.S. Dollar-Denominated Assets Temporary? [View article]
    U44,

    For clients who had been fully invested, the extended duration assets hit their stop limit in early March. I described the round-trip in "Selling Winners In Your Portfolio Is Never Easy."
    http://bit.ly/1by2mQh

    In the latest round of selling pressure, yes... TLT stopped out for clients who had been fully invested. Depending on the client risk tolerance, and depending on the existing cash level to put to work, however, there are those who may be in a position to buy the proverbial dip.

    In most cases, however, the "risk-free" left side of the barbell shifted to IEF. Less upside in a "flight to quality," but the 10-year is less volatile than longer durations.

    Keep in mind, the essence of the barbell in a late stage bull market remains the same. Conceptually, one pairs risk-free treasuries with "risk-on" stock assets, and you forgo middle-of-the-road assets (e.g., high yield bonds, convertibles, preferreds, etc.). That's not to say that an allocation to the middle cannot work; rather, one heavily favors the left and the right.

    Gary
    May 6, 2015. 11:35 AM | Likes Like |Link to Comment
  • The Debt-Driven Expansion Requires Tweaks To Your Portfolio [View article]
    Lladnar,

    Some of your words express wit, intelligence as well as competence. Other ideas come across as ill-considered. In particular, you lose a bit of credibility when you pigeon-hole an author into a punditry box.

    Granted, I am not afraid to give my perspectives. It certainly opens the door to valid criticism and disagreement. Yet, are you any less of a pundit for expressing your idea that the Fed could write off all of the debt of the U.S. government and the bigger world would barely notice?

    (Note: I would refer you to "When Genius Failed" by Roger Lowenstein. Therein, you should discover why a country's credit, the liquidity of its sovereign debt and leverage in a financial system matter, as defaults like the one you have conjured up result in severe recessions. The bigger world as well as the smaller world suffer greatly during economic hardship. Meanwhile, the dog you envision barking at your neighbor's home? He might be missing his best friend who may have been called up for a national guard or Army assignment.)

    The main difference between my expressing my views and you expressing your views is that tens of thousands of readers care what I think. That doesn't make me better or smarter or wiser. It means that I have developed a readership over time, and that many of those readers appreciate the ways in which I successfully protected them from the bulk of the 2008-2009 portfolio declines.

    It is true, when you write 1700 articles over the course of a decade, you are bound to make some really poor word choices. Yet when it comes to the world of investment? Well, by applying insurance principles to the investing process, I've minimized the mathematical dollar devastation associated with bear markets. I will pay the premium of a small loss, if that's what is necessary to avoid a hurricane hitting the portfolio.

    As the CFP on a national talk radio program in the 90s, my 1998 and 2000 guidance to tens of thousands of listeners was to ratchet down risk via long-term treasuries. Those moves helped so many folks avoid the bulk of the 2000-2002 bear. As the owner and president of a Registered Investment Adviser with the SEC, I effectively lessened the downside associated with the 10/2007-3/2009 financial collapse.

    Personally, I love the hard work and dedication required to effectively manage downside risk. In fact, I live for it. And I am not sure why you yourself feel that you should simply take equity/property risk and hope for the best. After all, there are easy methods for protecting against a severe downside slide.

    Then again, when a person does not consider the unprecedented monetization of the public debt as reckless, let alone potentially dangerous to one's financial well-being in the future, then perhaps one is left holding-n-hoping. Me? I have a fiduciary obligation to protect client portfolios.

    Gary
    Apr 28, 2015. 07:15 PM | 2 Likes Like |Link to Comment
  • An Energy ETF Resurgence Defies The Naysayers [View article]
    Precisely!
    Apr 23, 2015. 05:02 PM | 1 Like Like |Link to Comment
  • An Energy ETF Resurgence Defies The Naysayers [View article]
    >>Comparative performance also supports this.

    Performance does not support concerns about liquidity and expenses. On the contrary... RYE significantly outperforms XLE/VDE in bullish energy sector uptrends (e.g., early 2012 through July 2014), while RYE loses more ground in energy sector smackdowns (e.g., 2008-09).

    In fact, virtually ALL of the Guggenheim Equal Weight sector funds outperform the State Street and Vanguard equivalents in uptrends, in spite of higher expenses. And the reason is relatively straightforward. Equal weighting has the effect of turning those S&P 500 large caps into performing more like a market-cap weighted mid-cap fund. (Small-caps and mid-caps tend to outperform large-caps in bull markets, and they tend to lose more in bear markets.)

    On the flip side, liquidity is a valid concern for investors; in particular, anyone who actively manages money must be cognizant of the issue. Limited liquidity during bearish sell-offs make it difficult to exit a position at a reasonable price point. Indeed, that may be reason enough for some folks to stick with highly liquid market-cap weighted SPDR Select Sector or Vanguard sector funds.
    Apr 23, 2015. 11:02 AM | Likes Like |Link to Comment
  • Understanding Why Rates Must Go Lower Leads To Better Risk-Adjusted Results [View article]
    Honestly, you may be right. I still think it will be closer to 1.5% on December 31. That said, it would not surprise me if we get below 1.25%, and then a bit of snap-back.
    Apr 13, 2015. 06:01 PM | Likes Like |Link to Comment
  • Understanding Why Rates Must Go Lower Leads To Better Risk-Adjusted Results [View article]
    >>"you are a speculator"

    Okay, if you say so. I guess I've been speculating successfully for 25 years, 12-plus years as the president of a Registered Investment Adviser with the SEC. My clients seem to appreciate the fact that I raised the allocation to treasuries in 2000-2002, 2008-2009, 2011, while lowering my allocation to stocks. In 2009, for example, the action reduced the bear's bite substantially, allowing most folks to recover principal in one or one-and-a-half years, as opposed to four-and-a-half riskier years. (And we can all thank the Fed for shortening the recent recovery span at that!)

    They also appreciate that I lowered my allocation to treasuries in 2013, when the "taper tantrum" played itself out. I simply choose to control investment outcomes -- securing a big gain, small gain or small loss. I apply insurance principles to the investment process so that a big loss does not decimate what my clients have worked so hard for.

    I am far from perfect. I make bad decisions - we all do. The difference is, I understand how to mitigate those bad decisions by applying insurance principles to the investing process. I will sell for a small loss or pay to hedge in a riskier environment rather than "hold-n-hope." And treasuries at this time in a bull cycle... among their virtues you can add stock hedge to the list.

    >>""Stocks currently trade at the highest valuations in history across >>virtually every respectable measure ""
    >>Do they?

    Yes. Unquestionably, yes. A person can always find a measure that magically justifies the silliness of the "now," yet the "now" is similar to 2000 and 2007, no matter how much longer the bull market decides to run. And I will participate for as long as that run remains intact, but I will sell and hedge to avoid the one outcome that my clients worry about the most... the big loss.
    Apr 13, 2015. 05:31 PM | 2 Likes Like |Link to Comment
  • Understanding Why Rates Must Go Lower Leads To Better Risk-Adjusted Results [View article]
    Strong point on the Japanese culture... and the ownership of those bonds. I lived and worked in Asia for roughly 4 1/2 years, and the cultural aspect of personal finance is one that I find fascinating!
    Apr 13, 2015. 04:39 PM | Likes Like |Link to Comment
  • Understanding Why Rates Must Go Lower Leads To Better Risk-Adjusted Results [View article]
    Treasury bonds too risky and speculative? In spite of the remarkable relative value with other sovereigns, in spite of the necessity for governments and households to service the interest payments and avoid default, I wonder then... is it speculative to buy stocks today? They currently trade at the highest valuations in history across virtually every respectable measure (e.g., Tobin's Q, market cap to GDP, PE, PS, CAPE, cash flow, etc.)? The downside risk of 50% is not too risky, such that 100% gain in principal would be needed to break even?

    If avoiding the bulk of bears in market-based securities -- stocks, bonds, currencies, commodities -- makes one a "speculator," then I accept your designation. Keep in mind, though, I hold an asset for hundreds of clients as long as the asset is still contributing to risk-adjusted total return. I do not "hold-n-hope" for 10 years or 30 years because others erroneously believe that an "investor" must do so.
    Apr 13, 2015. 04:36 PM | 1 Like Like |Link to Comment
  • Understanding Why Rates Must Go Lower Leads To Better Risk-Adjusted Results [View article]
    Loud,

    I would not still be long many of the same ETFs since the euro-zone crisis scared the investing world in 2011-- XLV, VGT, OEF, VOE - if I did not agree. I would not endorse USMV, or more recently, HEWG and HACK, if I did not agree.

    That said, the premise is only accurate until Mr. Market no longer supports the premise. There will be a day when all correlations move toward 1.0, and at that time, PEs of 20 will be viewed as, "what on earth were people thinking?"

    Stocks are not near record highs due to ultra-low rates alone. There have been foreign stocks with higher yields than the country's 10-year sovereign debt interest payment since 2011... and that did not do a thing for those stocks for 4 years. Why not? Fears of slowing economic growth coupled with a relatively weak dollar. In 2015? Currency devaluation of the euro and the yen and the won with QE as well... and it's "game on!"

    Only a function of low rates? The last two decades.... the Fed may be the biggest factor indeed. Yet there are other humongous factors such as stock buybacks and algos/high frequency trading that have increased the influence of technical price movement.

    In essence, fundamentals seem to matter when everything is falling to pieces. Rates will be low then, we will have QE4 or QE5 then, and it still won't stop the bear mauling. PE 20 when we are greedy, PE 10 when we're petrified.

    Gary
    Apr 13, 2015. 04:13 PM | 1 Like Like |Link to Comment
  • Government And Corporate Indebtedness Provide Investment Opportunity [View article]
    4% overnight lending rate target by the Fed... and you will never see them get above 1%-2% (if that... ever!). The only way that rates will ever be normal is when they blow right past normal... when somewhere out in the distant future... the world regards U.S. treasuries the way the world regards the sovereign debt of Greece.
    Apr 13, 2015. 01:08 PM | Likes Like |Link to Comment
  • Government And Corporate Indebtedness Provide Investment Opportunity [View article]
    D, Cap,

    I agree with both of you... and did not intend to tout IPKW. The reason for bringing IPKW up in discussion is that interest in the exchange-traded tracker may evolve alongside interest in international investing. It is an ETF to keep an eye on.

    Keep in mind, when Invesco first introduced PKW, there wasn't a whole lot of interest in PKW either. Similarly, when I first began talking about currency-hedged international funds, there were very few in existence with any volume. Now most of them have $500M or $1B under management.

    Gary
    Apr 11, 2015. 03:30 PM | Likes Like |Link to Comment
  • Paper Wealth In Your Accounts Is Great, But Only If You Know How To Protect It [View article]
    Eddie,

    I like it! You recognize that losing some money - emotionally, financially - is better than losing a disastrous amount. Equally important, you employ an approach for participation that keeps your emotions in check.

    Gary
    Apr 9, 2015. 01:47 PM | Likes Like |Link to Comment
  • Paper Wealth In Your Accounts Is Great, But Only If You Know How To Protect It [View article]
    Frank,


    Selling on the greed side is a good thing. It is more typically associated with the phrase, "sell high."

    Do you trust your ability to buy on the fear side? If not, you may fail at the task of "buying low."

    Panic buying in China has become a sport. And it wasn't that long ago when Shanghai shares lost 80% of their value. Neither panic buying or panic selling tend to lead to advantageous outcomes.

    Having an unemotional plan for execution is what is necessary. And it may not matter how one protects his/her self, as long as it is done. I prefer stop-limit loss orders, stop-gains, trendline breaches, tactical asset allocation and mutli-asset hedging. Others prefer shorting, put options or simply raising cash.

    Just be sure that your "sell high" approach is not done on a whim or gut instinct. You will be right at times, but that would lead to a false sense of security. There are people who sold back in 2012, believing that the rally was over. And there are people who would not buy in 2009, 2010 or 2011 due to one concern or another.

    Bottom line? Have a sensible plan for risk assets, whether you are a buyer or seller.

    Gary
    Apr 9, 2015. 12:21 PM | Likes Like |Link to Comment
  • Paper Wealth In Your Accounts Is Great, But Only If You Know How To Protect It [View article]
    Frank,


    Selling on the greed side is a good thing. It is more typically associated with the phrase, "sell high."

    Do you trust your ability to buy on the fear side? If not, you may fail at the task of "buying low."

    Panic buying in China has become a sport. And it wasn't that long ago when Shanghai shares lost 80% of their value. Neither panic buying or panic selling tend to lead to advantageous outcomes.

    Having an unemotional plan for execution is what is necessary. And it may not matter how one protects his/her self, as long as it is done. I prefer stop-limit loss orders, stop-gains, trendline breaches, tactical asset allocation and mutli-asset hedging. Others prefer shorting, put options or simply raising cash.

    Just be sure that your "sell high" approach is not done on a whim or gut instinct. You will be right at times, but that would lead to a false sense of security. There are people who sold back in 2012, believing that the rally was over. And there are people who would not buy in 2009, 2010 or 2011 due to one concern or another.

    Bottom line? Have a sensible plan for risk assets, whether you are a buyer or seller.

    Gary
    Apr 9, 2015. 12:21 PM | Likes Like |Link to Comment
  • Paper Wealth In Your Accounts Is Great, But Only If You Know How To Protect It [View article]
    Just a typo.
    Apr 8, 2015. 05:04 PM | 1 Like Like |Link to Comment
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