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Gary Gordon

 
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  • Questions For U.S. Stock ETF Bulls [View article]
    Corporations spent 20% less on share buybacks in Q2 than they spent on share buybacks in Q1... sorry about the confusion
    Aug 23, 2014. 02:43 PM | Likes Like |Link to Comment
  • Questions For U.S. Stock ETF Bulls [View article]
    User,

    In 2014, I have maintained an allocation to stock funds like VYM, USMV and AAXJ. Those are risk assets on the right side of the barbell. On the "risk-free" left side, I've used EDV and LTPZ for Treasuries and TIPS. Meanwhile, I've reduced exposure to anything in the middle.

    Here's a description of barbell investing:
    http://bit.ly/1ttShZ0

    Gary
    Aug 22, 2014. 08:20 PM | Likes Like |Link to Comment
  • Is The Depreciation Across The Commodity ETF Space Surprising? [View article]
    There is not much to respond to, Robert... I agree with most of your statements above. With 25 years in the biz, I have been seeing many of the same trends and talking about them throughout 2014.

    For example, you wrote about divergences. "Although the Nasdaq and SPX have rallied back, small cap stocks (NYSEARCA:IWM) continue to substantially lag."

    Agree. See many of my articles on divergences such as February's "3 ETF Indicators..."
    http://bit.ly/1nb9cdR

    You wrote: "The curve continues to flatten."

    See my articles all year long on Treasury bond strength on the long end of the curve a la "Against The Herd..."
    http://bit.ly/1iLuvUm

    You wrote: "Poor retail, banking and housing stock sector performance."

    See my articles throughout the year like this one on the three sectors.
    http://bit.ly/1nb9cdY

    The only question, from my perspective, is how one should "be defensive." My approach throughout the year has been to shift towards a "barbell" approach. And, of course, I do not buy-n-hold an asset class when it establishes a downtrend and/or hits a predetermined stop.

    Best,

    Gary
    Aug 20, 2014. 04:29 PM | Likes Like |Link to Comment
  • Has Stock Bias Adversely Affected Your ETF Asset Allocation? [View article]
    D,

    You do realize that one of the big stories prior to last year's monster stock move was the fact that bonds had outperformed stocks over 30 years, right? Even with this year, it's probably pretty darn close. Now consider risk-adjusted returns, and which was the better 30-year holding?

    Granted, most 30-year rolling returns throughout history are going to favor stocks. Heck... possibly 98% of them. Yet we all take more risk with stocks, it is not an apples to apples comparison. Nor is inflation hitting bonds alone, it hits stocks as well. In fact, the S&P 500 has not recovered its inflation-adjusted high from 14 1/2 years ago (3/2000). With less risk, the inflation-adjusted bond return in the same time frame is quite meaningful to risk-averse retired folk.

    By no means should you get me wrong here. Every asset type -- real estate, REITs, collectibles, commodities, stocks, bonds, preferreds, MLPs, domestic or foreign -- has advantages as well as drawbacks. And if you've been reading me here since 2005, then you already know that I am not a buy-n-holder. When something breaks down, I lighten up. When an asset class is working, I stick with it.

    I am still long large cap U.S. stocks, but I have let go of most small cap stocks. I am long emerging market stocks as well. I have been long a variety of longer maturity income assets for clients throughout 2014. But once again, whether it is large U.S., small U.S., large foreign, small foreign, emergers, REITs, MLPs, convertibles, preferreds, or fixed income of different maturity lengths, when it is time to protect clients from changing dynamics, I modify the allocation.

    G
    Aug 15, 2014. 05:49 PM | 1 Like Like |Link to Comment
  • These 5 ETF Charts Are Killing 'Risk-On' Exhilaration [View article]
    Hungry

    >>Japanese 10 year yields at 0.5 and Germany's at 1.03% tell me all
    >>I need to know about the long term direction of ours... They can fall
    >>for 35 and STAY there for 25 more.

    I tend to agree, and said as much at the start of this year. Review "Against the Herd: Lower Rates, Not Higher Rates In 2014."
    http://seekingalpha.co...

    However, I am not a buy-n-holder. When long-maturity bond ETFs hit my stop limit orders as well as broke through respective trendlines in May-June of 2013, I raised cash. A bottom formed six months later in December of 2013, allowing my to acquire Vanguard Extended Duration (NYSEARCA:EDV) and PIMCO Zero Coupon 25+ (NYSEARCA:ZROZ).

    There are scores of interest rate sensitive assets, and not all of them belong in a portfolio based on our mutually shared belief. For example, if falling rates are occurring alongside economic resilience, I would be inclined to lean into REITs and higher yielding corporate bonds, and cyclicals. If falling rates are a function of global economic weakness, as I suspect they are now, then I shift defensive with longer-dated munis and longer-dated treasuries. The latter offsets my stock exposure, largely comprised of low volatility domestic and Asia excl Japan.

    I still like MLP infrastructure. And a smidge of utilities. Where else can you count on 5% growth and 5% dividends? Granted, many are overpriced, but I protect with stop orders/trendlines with all asset classes.

    Hope that helps,

    Gary
    Aug 13, 2014. 06:37 PM | Likes Like |Link to Comment
  • 5 Days Of Fearful Trading Provide ETF Insights [View article]
    J,

    Is Europe growing? Not really. Valuations are higher for Europe than Asia ex Japan. Is U.S. growing? Check your premises if you think the answer is "Yes." Annualized growth for 2014 is nearly guaranteed to be less than 2013 which was less than 2012. That's called deceleration. And yet, by scores of different measures, U.S. stocks are nearly as expensive as at any bull market top in history.

    The point is that stocks do not necessarily require economic growth for success, particularly when easy money policies (QE, ZIRP) distort what the perception of risk is... particularly for future cash flow. Meanwhile, three years for Chinese equities with no capital appreciation? Heck yes, valuations and money flow rotation and technical uptrends and "qualitative easing" make Asia more attractive than alternatives.

    Does that mean you should not diversfiy? No. Does that mean a bear market would not clobber equities of all stripes. No. It means that -- all thnigs being what they are -- the best place for new dollars (other than waiting out a stock correction or bear in ex-stock hedges or cash), is Asia.

    Not that China's economic output will correlate to stock performance, but why have so many hard landing fanatics decided that 7.5% is worse than 2% Fed-fueled, sub-par growth stateside? Logically, it is a bit laughable. Then again, fear and greed can manifest themselves in a variety of different ways.

    G
    Aug 12, 2014. 04:16 PM | Likes Like |Link to Comment
  • Mauboussin's 5 Principles Of Capital Allocation [View article]
    I am not fond of the worship of certain value "rock stars," including Bill Miller and Michael J. Mauboussin. Offered the opportunity by Forbes to pick one single stock for an upcoming year in the early 2000s, he chose Enron at a price point of 11.99. The irrecoverable losses for Enron shareholders is well-documented. Clearly, MM failed to identify what the market was already pricing in -- that something was rotten at the energy giant.

    Bill Miller made the same falling-knife mistakes with the banks and insurers in the 2008-2009 crisis. Is it not obvious that one really bad error can destroy entire portfolios? Even if one has a value orientation a la Benjamin Graham and Warren Buffett, does it not make sense to incorporate a form of insurance against being reallllllllllllllllly wrong? From my vantage point, no matter what your investing orientation, you can ensure greater success by applying insurance principles to that orientation. Otherwise, a single mistake can destroy a 15-year track record. Just ask Mr. Miller.
    Aug 11, 2014. 01:11 PM | 1 Like Like |Link to Comment
  • 5 Days Of Fearful Trading Provide ETF Insights [View article]
    David,

    Same screening tool... you are using end-of-day Friday... the 5-day returns in the article are last Friday through the Thursday close.

    I write commentary well in advance at my ETFexpert.com web log. That said, even SA's republishing time came before the close of Friday's market.

    Keep in mind, the intent of the article is to discuss/assess how investors have responded to various data/events, as well provide potential insight into how investors MAY respond in the future.

    Best,

    Gary
    Aug 8, 2014. 04:14 PM | Likes Like |Link to Comment
  • Tactical Asset Allocation And The Understanding Of Longer-Term ETF Trends [View article]
    Green,

    Regardless of the asset, you have to have an approach for minimizing the bulk of bearish outcomes. There are a number of ways to do that -- from trailing stop/stop-limit orders, trendline breaches, hedges and inversely correlated assets, non-correlated assets, put options and so forth.

    The question on whether to sell VBR also entails how much exposure in your portfolio you have in small caps. Do you also own other small-cap funds/mutual funds/individual equities? Does your portfolio have a 5% allocation to small-cap, or does it have a 15% allocation? Obviously, the less weight, the more you can hold your ground.

    In a general sense, though, you might want to employ a stop that you are comfortable with... and/or the 200-day. For most clients, I have limited exposure to small- and mid- at this time (5% is the high end, 0% in more conservative accounts.)

    Hope that helps.

    G
    Jul 31, 2014. 11:51 AM | Likes Like |Link to Comment
  • Home Sales Data Incinerate Confidence In Economically Sensitive Stock ETFs [View article]
    Simple,

    The sarcasm is making me smile. In the big picture, you are hitting the nail squarely on the head.

    Regarding my article, though, economically sensitive stock ETFs like the homebuilders and the banks did not recover. The "green" continues to belong to "late-stagers" like Utilities (NYSEARCA:XLU) and Materials (NYSEARCA:XLB).

    Best,

    Gary
    Jul 28, 2014. 04:10 PM | Likes Like |Link to Comment
  • Sector ETFs In 2014 And 2007: The Inconvenient Comparison Feels Like A Bone In The Throat [View article]
    kydder,


    If they did hold the exact same stocks in the exact same amounts, then I would choose the investment with the lower expense ratio. However, there are a wide variety of differences between TDIV and XLK. Depending on the investing environment, I might prefer one over another.

    TDIV is weighted by a dividend value methodology. XLK is weighted by market cap. TDIV has a 2.7% SEC yield (expense ratio included), XLK has a div yield of roughly 1.7%. TDIV's trailing 12-month P/E is 15.8 whereas XLK is 12.5% more expensive with its P/E at 17.8. TDIV can be thought of as cash flow producing "old tech" whereas XLK is "all-tech." In just under two years, TDIV has garnered approx 45%. In the same time period, XLK has offered 37%... 800 basis points (8 percentage points) in two years is quite nice.

    In a late stage bull market, I prefer TDIV. In an early stage bull market, I would likely be inclined to go with VGT or XLK.

    Best,

    Gary
    Jul 22, 2014. 06:29 PM | 2 Likes Like |Link to Comment
  • Is A Little 'Bubble Paranoia' Good For Your ETF Portfolio? [View article]
    User,

    Please reread the commentary. The analysis by Smithers & Company that I have discussed (a la Tobin's Q) expressed a sentiment that stocks are the third most overvalued in their history, other than 1929 and 1999. That is why I talked about Mr. Market possibly winning a bronze medal... 3rd place.

    Regarding long-term rates falling, which you begrudgingly acknowledge I anticipated, I have been quite content to benefit from ownership of funds like Vanguard Extended Duration (NYSEARCA:EDV), Pimco 15+ Year TIPS (NYSEARCA:LTPZ) as well as a number of MLPs that have benefited as well. Not only are my clients and readers appreciative, they don't seem to mind that I chose to avoid the risks associated with REITs. There's enough overvaluation to go around, particularly in REITs, that hedging against stocks with long-term Treasuries is/was a better risk-reward play.

    In sum, the barbell approach that I have discussed in dozens of articles throughout the year has accomplished my client goals with less risk. No need to add middle-of-the-barbell assets -- handle of the barbell assets -- to portfolios. Hence, I am not recommending REITs. What you call missing the boat is what I call sensible risk-adjusted reward.

    Gary
    Jul 18, 2014. 08:41 PM | Likes Like |Link to Comment
  • Value Versus Momentum: What Should You Buy For Your ETF Portfolio? [View article]
    Larry,


    "Risk-free" is in quotation marks for a reason. Of course there is risk with sovereign debt... all we have to do is recollect what happened with Spain, Italy, Greece and Portugal in 2011.

    On the other hand, there's a reason that each and every textbook talks about the "risk free rate of return" as a function of U.S. Treasury obligations. For one thing, we can print dollars to pay our debt (until the day when we can't). And when the world gets spooked, it still runs to U.S. Treasuries.

    If long-term rates rise dramatically, then longer term U.S. Treasuries would be crucified. I don't believe this will be the case. The demand for "perceived safety" in U.S. debt is greater than what exists out there in the market... the Fed has all but permanently changed the landscape. They will not be able to reduce the size of their balance sheet, and the remaining supply of longer-term treasuries will be required by pension funds, retirees, institutional investors, foreign governments and so forth. Add to that, when stocks get hammered, the demand for long-term treasuries is enormous.

    In sum, the way that I am investing in the current environment is via the proverbial barbell. Right-side is chock-full of stock ETFs, but lower volatility U.S. stock ETFs and fundamentally attractive foreign stock ETFs. The left-side includes long-dated investment grade, mostly Treasuries, but munis and corps too.

    Gary
    Jul 15, 2014. 04:41 PM | Likes Like |Link to Comment
  • Value Versus Momentum: What Should You Buy For Your ETF Portfolio? [View article]
    Herbert,

    USMV is by no means a safe haven... of course it will fall when U.S. stocks correct. USMV should be less volatile and experience less drawdown. That provides a bit of sleep-better-at-night value.

    The only "safer havens" at this moment in time, are long-dated U.S. Treasuries... which should make up the left-hand side of the barbell... the "risk-free" side. One should lessen the exposure to the middle of the risk spectrum (i.e. "the handle"). On the "risk" side over at the right of the barbell, lower volatility U.S. stocks as well as emergers via AAXJ and deep value a la GVAL.

    Best,

    Gary
    Jul 15, 2014. 10:39 AM | Likes Like |Link to Comment
  • Are Stock ETF Investors Placing Too Much Faith In The Fed? [View article]
    Macro,

    Shorter-term... the inevitable and long overdue correction of a full 10% or more. Yet I readily admit, there's no way to predict the timing of this with any degree of certainty.

    Simply, 4-5 complacency measures as well as a variety of probability models dictate what is likely to occur at some point this year. Forget about the reason -- it could be oil, geopolitical, technical, seasonal, election cycle.

    Longer-term, a central bank will make a significant-enough policy mistake to bring about a bearish outcome in stocks. Yet that does not imply that the occurrence is imminent, nor does it imply that the misstep will result in market Armageddon. It is equally possible that globally coordinated action of some sort would restore enough confidence to avoid a total collapse of the global financial system.

    That may not be a satisfying answer. However, it represents a recognition that one must invest for the best while planning for the worst. As long as you apply insurance principles -- hedges, stops-limits, non-correlated assets, put options, trend analysis -- to your investing endeavors, you can avoid suffering a big loss. And that's all that really matters. Take a big gain, small gain or small loss to avoid a tsunami and you will be just fine.

    GG
    Jun 27, 2014. 06:35 PM | 1 Like Like |Link to Comment
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