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Gary Gordon

 
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  • Are Stock ETF Investors Placing Too Much Faith In The Fed? [View article]
    MC,

    "...we all have to admit we are very poor at predicting when these things will occur, including the Federal Reserve."

    The operative word is 'when.'

    Japan has been stuck in the same muck with an inability to raise short-term rates above 0.5% for 15 years. Its debt-to-GDP is so alarming and so unsustainable, one might have expected the country's financial system as well as its economy to implode years ago. Instead, it muddles through, and the yen remains a safe haven.

    Still, I would say that it is not particularly challenging to identify stupidity. People used terms like "New Economy" and created new models to explain why ridiculous dot-com valuations somehow made sense in the late 90s. They did not. Paying 40% more for the privilege of owning a home than to rent it in 2006 was stupid as well. You did not need to be an economist to understand that the real estate boom that fueled the economy circa 1998-2006 would severely bust the economy down the road.

    "When" is always a challenge to identify. I do not claim to be prescient; rather, I use investment tools (e.g., stops, trends, hedges, non-correlated assets, put options) to insure against natural and unnatural disasters.

    >>that you believe a jolt is coming (eventually) due to investors'
    >>overconfidence in central banks, when one of them makes the
    >>inevitable significant mistake? Your investment changes appear
    >>consistent with that.

    Client portfolio changes are modest. I simply adjusted holdings along the risk spectrum, preferring a barbell approach when U.S. stocks appear likely to pull back. Yet I have no idea about a more significant jolt... like the eurozone crisis in 2011. Thankfully, I have a plan for dealing with severe risk-off environments -- and the tools for executing the plan.

    GG
    Jun 27, 2014. 06:11 PM | Likes Like |Link to Comment
  • When The S&P 500 Breaks A Record, Reduce Your ETF Portfolio Risk [View article]
    BB wrote:

    "You have, at your disposal many tools to protect you from that eventual market drop. USE THEM. Stops, Trailing stops averages and so on."

    This is precisely how I have managed money for clients for 25 years. I apply insurance principles to the investment arena, employing stop-limit loss orders, put options, hedges and trendlines. All of the risk management tools have merit; all of them have flaws.

    I talked weekly about applying insurance principles to investment on national talk radio in the 90s. I also discussed it at length on the printed page, as well as in thousands of online articles. Last week, I mentioned the many tools in "Uber and Tech ETFs: Stupid Is As Stupid Does."
    http://seekingalpha.co...

    For those who may be interested in learning more about how I manage risk and protect client principal, here is the link to Pacific Park Financial, Inc. Simply take a tour through the links on "How I Protect Money."
    http://bit.ly/11RtnHW

    Best,

    G
    Jun 20, 2014. 12:32 PM | Likes Like |Link to Comment
  • Sidestepping The S&P 500 ETF Trap [View article]
    I have been discussing exchange traded INDEX funds (ETFs) for nearly 20 years -- as the CFP on a national talk radio show in the 90s, on the printed page and in thousands of online articles. I often forget that are those who will be reading my thoughts for the first time. So let me clarify a few points here.

    First, I am active indexer. Roughly 85%-90% of the investments in my personal accounts as well as my client accounts are ETFs. Investing in the S&P 500 via SPY, IVV or VOO is a terrific way to get exposure to U.S. large caps.

    That said, I do not support the idea that the S&P 500 is the only equity exposure one should have. Small-caps, foreign stocks and emerging market stocks via exchange-traded INDEX funds provide diversification in the 21st century.

    Similarly, I do not subscribe to the notion that one should buy-n-hold-n-hope. Whether one elects to hedge, employ stop-limit orders, use trendlines, buy put options -- whatever the approach -- one needs to apply insurance principles to one's investment endeavors.

    Finally, one does not not need a financial advisor. I believe strongly that you can do this investing thing yourself. (You may or may not have the time, desire, or emotional make-up... but that's another matter altogether). What one does need is a plan to protect his/her assets. Having faith that a market always recovers is neither a plan, nor does it reflect an understanding of history or math.

    Do it yourself? Absolutely. Just pay attention to where the emergency exits are.
    Jun 17, 2014. 11:45 AM | 1 Like Like |Link to Comment
  • Eventual 'QE' For The Eurozone? Consider European Index ETFs [View article]
    Clodrick, Tunaman,

    Clodrick said it perfectly. Read any of my articles over the last six years, and you will see... I do not view QE favorably, nor do I regard it as an investment hypothesis.

    On the flip side, when you have fundamental value (e.g., Trailing P/E 13), technical strength (Price above 50-day/200-day), relative strength and relative value when compared with U.S. securities, extraordinary central bank stimulus, participation is sensible. As Clodrick suggested, simply have a plan for stepping aside. Stop-limit loss orders, put options, hedges, trendlines -- pick your insurance policy.

    Best,

    Gary
    Jun 6, 2014. 04:21 PM | Likes Like |Link to Comment
  • Are Record Levels Of Consumer Credit Dangerous To Your ETF Portfolio? [View article]
    Yes, the consumer may be over-leveraged. I suppose it depends upon one's perspective.

    Household debt may be 9% below the all-time peak of $12.68 trillion from Q3 2008. Does that imply that debt levels that are 9% below insane levels of household indebtedness do not represent undesirably high levels of indebtedness/leverage now?

    Not unlike stocks themselves, we are likely looking at U.S. equity overvaluation. Yet P/Es today are less than P/E ratios in 2000. This hardly implies that 2014 stocks are fairly valued.

    Other links on leverage concerns:

    St. Louis Fed
    http://bit.ly/1hz0jy0

    Time Magazine
    http://ti.me/1hz0jy1
    Jun 4, 2014. 11:17 AM | 1 Like Like |Link to Comment
  • Buy 'Value ETFs' Here, Buy 'Growth ETFs' Over There [View article]
    "US consumers are spending much more on food and energy, and are being taxed at a higher rate. Many consumers don't want to buy anything discretionary unless it is a bargain."

    Precisely.
    May 30, 2014. 11:00 AM | 1 Like Like |Link to Comment
  • International Stock And Bond ETFs Deserve More Of Your Allocation [View article]
    Number19,

    Price declines due to the collapse of the financial system in 2008-2009 do not mirror previous bear market outcomes, and those price declines may not be a good indicator of future bears either. It follows that international equities and emerging market equities may or may not fall harder, depending on the nature of the sell-off that eventually occurs.

    Right off the bat, there are a number of very distinct differences between "then" and "now." In the previous bull market for stocks, investors had been paying a 10%-20% premium for the global growth story. The demand for emerging market stock ownership had been so great, in fact, they earned 3x as much as U.S. stocks on the upside. That kind of frenzy had a lot to do with the remarkable fall from grace, as well as the safe haven currency trade back to the dollar.

    Since the euro-zone crisis in 2011 and the emerging market bearishness (2011-2014), foreign equities now trade anywhere from a 10%-40% P/E discount. That's completely different from the previous decade. In other words, "global value" may provide a bit more cushion in the next downside slide, compared to the way the deterioration of the global growth theme eviscerated foreign equities in 2008-2009.

    Based upon valuations alone, it is possible that the U.S. could be the stock market with the most trouble. Or not. Other possibilities include severe under-performance. Recall that U.S. stocks climbed 30% last year and emerging markets logged -6%. It is certainly conceivable that emerging markets or foreign equities could "decouple" as they potentially reclaim desirability and the U.S. could stagnate.

    In sum, there is no perfect formula. Myself? I deal with the trends that currently exist. Most importantly, I do not fear ownership of any asset because I do not buy-n-hold. Regardless of whether I hold an asset 16 years, 6 years, 3 years, 1 year, 6 months or 6 weeks, I control the outcome; specifically, each asset will offer a big gain, small gain, or small loss... but never a big loss.

    For more on how I manage assets, and why fear does not need to derail the process, here is a link to how I manage downside risk:
    http://bit.ly/1jdCtrg

    Best,

    G
    May 13, 2014. 04:42 PM | Likes Like |Link to Comment
  • What You Don't Know About Relative Strength Shifts In ETFs Can Hurt You [View article]
    Gourils,

    Genuinely, there is nothing to reconcile. U.S. stocks -- both large and small -- have been fading in relative strength. This does not mean every company or every sub-category. Energy stocks and MLPs are gaining in momentum, regardless of valuations. The same is true for REITs via VNQ.

    Nevertheless, on the whole, the vast majority of high P/E U.S. equity investments have been falling out of favor as of late. That is a fairly straightforward and benign observation on the asset class. (Keep in mind, REITS via VNQ are often regarded as a separate asset class, potentially helping diversify the risks of stocks and bonds in portfolios.)

    Similarly, foreign equities and emerging market equities with lower P/Es have witnessed an increase in relative strength. Is that true for Japan EWJ? No. Are there other exceptions? I am sure there are. Yet, on the whole, the asset classes speak for themselves.

    Best,

    G
    May 2, 2014. 12:54 AM | Likes Like |Link to Comment
  • Homebuilder And Home Construction ETFs Falter At The Real Estate Altar [View article]
    Skilluminati,

    With new home sales plunging 14.5% in the latest report (to accompany weakness in existing homes sales declines), backtracking economists are acknowledging that "the weather" is not the culprit.
    Clearly, the longer-term rise in mortgage rates and double-digit percentage increases in prices have stretched demand/affordability. What's even more telling about slumping demand is the fact that the weather actually improved in March and mortgage rates dropped.

    Theoretically, yes... we may see more inventory. Theoretically, yes... that could stabilize prices. Yet current prices combined with current mortgage rates are already an issue, and many anticipate those mortgage rates moving higher. Heck, I am one of the few voices that said rates would move lower in 2014, not higher... and even that has not kept homebuilder stocks out of trouble.
    http://bit.ly/1iLuvUm

    In essence, if mortgage rates climb as some anticipate, affordability will be stretched even further. And the only real hope for the homebuilders would be the willingness of banks to loosen the reins on lending practices. Let's hope that they loosen a bit, yet show the kind of restraint that did not exist last decade!

    G
    Apr 23, 2014. 11:49 AM | Likes Like |Link to Comment
  • Weaker Euro Presents ETF Admirers With Multiple Opportunities [View article]
    User,

    Solid comment... appreciated.

    It is quite ironic that the hawkish Jens Weidmann actually said, "QE is not out of the question." You may recall that he once expressed doubt about the constitutionality and legality of QE. More recently, Weidmann/Bundesbank acknowledge that it is not unthinkable. That is a huge change in "bank-speak."

    Granted, the ECB will likely try many other policy measures to weaken its euro first. Launching a QE asset purchasing program may be the proverbial last resort. Nevertheless, the desire of the ECB as well as the powers-that-be in Germany is for the euro to depreciate. Where there's a will there is a way... and that is a key take-away from the article.

    Again, the article's intention is to talk about the high probability of a weaker euro going forward. With the euro's probable depreciation, I offered a number of ways that ETF/ETN investors and traders might take advantage.

    Best,

    G
    Apr 22, 2014. 12:41 PM | Likes Like |Link to Comment
  • ETFs For Those Seeking Greater Tax Freedom [View article]
    NYer1

    Thank you... you are correct about my mistake for the taxable equivalent yield for the 35% tax bracket. I had been hastily looking at numbers... and yes, for TFI with a 2.4% yield, the taxable equivalent is 4.0% annual, irrespective of cap app. It is not 6.9%, and I will remedy that in the article.

    Best,

    G
    Apr 15, 2014. 12:39 PM | Likes Like |Link to Comment
  • Great Rotation? ETFs Encounter A Different Kind Of Shift In 2014 [View article]
    Paul,

    This year, last year, and throughout 2013, you will find commentary where I extol the virtues of "pharma." Indeed, for the past several years, I have over-weighted the sub-sector.

    Below are several articles from 2013 alone:

    10/10/13 http://bit.ly/PSWxT3
    7/09/2013 http://bit.ly/PSWxT4
    2/25/2013 http://bit.ly/PSWA1t

    One of the primary reasons for the over-weighting of pharma/healthcare has been the less volatile drawdown. However, PJP has since become more volatile. The fund hit pre-determined stop-limits, experienced wider-than-normal daily trading ranges, and breached key trendlines in March and April.

    In essence, I do not buy-n-hold for my clients... not ever! If I need to take a large gain, a small gain or a small loss on an asset class or an individual asset to eliminate the possibility of a big loss, that's what I do to reduce risk.

    I still hold Tech Dividend (TDIV) and Healthcare (XLV) at this moment in time, though I have sold Pharma (PJP) in most, if not at all, client accounts. To learn more about how I manage ETF assets, you can read more at the Pacific Park Financial, Inc. web site:
    http://bit.ly/11RtnHW
    Apr 9, 2014. 06:31 PM | Likes Like |Link to Comment
  • Portfolio Greatness: Bill Miller's Advice On How To Make Money In This Market [View article]
    It is intriguing to see what Bill is up to these days. Yet is there "value" in Bill Miller's picks up-and-above sensible indexing?

    From June of 2007 to March of 2009, Bill Miller’s Legg Mason Value (LMVTX) plummeted 73%. Bear market math shows that while S&P 500 index funds fell roughly 55% in the same time period, requiring 122% to get back to even, the 73% decimation of LMVTX required 270% to recover. Naturally, the fund has changed managers/names so that the historical track record no longer applies.

    Bill Miller had an unprecedented run prior to 2007. That truth cannot be denied. Yet Bill's deep discount approach ignored insuring against disaster and, ultimately, ended in disaster. Unfortunately for Legg Mason Value believers, the fund underperformed its Large-Cap Value Lipper Average over 1, 3, 5, 10 and 15 years.
    Mar 28, 2014. 04:28 PM | 3 Likes Like |Link to Comment
  • 3 Reasons Top Earners Should Favor High-Yield Muni ETFs [View article]
    Kapusta Kid,

    I am not sure how you come to an across-the-board conclusion on what top earners invest in. I am a top earner. I represent retirees and those who are still working, and the latter are most definitely top earners. And with $125M in AUM coupled with a quarter century in financial services, I do not restrict myself to individual issues; rather, I readily purchase held-to-maturity bond ETFs and highly liquid bond ETFs on behalf of my clients.

    A diversified vehicle that is easily converted to cash is highly desirable to top earners. Trying to purchase 50 individual issues to achieve diversification is rarely as successful as indexing, not to mention the poor liquidity of some of those individual muni bonds.

    Individual, hybrid (ETF), fund -- each has advantages and disadvantages. You may want to check your assumptions.

    Regarding your desire to become a top earner, wishing won't make it so. Motivation, skill and hard work will.

    Gary
    Mar 26, 2014. 01:01 PM | 2 Likes Like |Link to Comment
  • U.S. Stock ETFs Completely Decouple From U.S. Economic Concerns [View article]
    >>Ok you like to put your clients in XLY, XRT, XLB, ITA, USMV,
    >>and SCZ? I think I got it right this time.

    No, you have it wrong again. I have some of my clients and some of our assets allocated to Health Care (XLV), Aerospace/Defense (http://bit.ly/Pah45D), Minimum Volatility (http://bit.ly/Pah45G) and Small Cap EAFE (http://bit.ly/Pah3i8). I do NOT own Consumer Discretionary (http://bit.ly/1hUv5ym) or Retail (http://bit.ly/1hguPrc) or Materials (http://bit.ly/IoVUJs).

    >>You have your clients is beta style investments with low yields.

    You have read one article... I have written 1000s. You have mistakenly determined that four positions constitute the entirety of every portfolio in 100s of managed portfolios. We have tailored portfolios that typically host 14-16 positions that target both "alpha" and "beta" for optimal diversification (non-correlation) where possible. Equally important, we do not buy-n-hold every asset. Yield matters, except when it doesn't... like when yield chasers experienced 2013's taper tantrum.

    In fairness, it is silly to presume that you can determine the value that a particular adviser provides to his/her clients. For one thing, you do not appear to have an appreciation for insuring against big losses. Again, there are those who understand the value of losing less when markets are getting killed, including, but not limited to, the financial well-being and the emotional peace of mind. For another, our clients have the ability to speak with us about everything that touches their money, from retirement to estate to taxation to business formation.

    I believe strongly that investors with time/desire/emotional fortitude/and financial know-how should invest for themselves. They have low cost indexes and liquidity via ETFs to achieve goals on their own. I have taught financial concepts around the world and believe many can DIY successfully.

    Yet not everyone understands how to reduce risk with mechanical, unemotional tools. Not everyone has the time or desire to insure their financial success by protecting against the big loss. I represent many exceptional minds -- CEOs, executives, doctors, educators -- who may not have the wherewithal to dedicate themselves to their finances.

    Apparently, you believe success comes down to picking winners on the upside. Respectfully, I disagree. The upside pretty much takes care of itself. Risk-adjusted, no mutual fund manager has ever beaten the S&P 500 for 15 years and tens of thousands have tried. There was Bill Miller... though you may want to read about what happens to one's dollars if he/she loses 70%+ in a single year.

    Those who have chosen our registered investment adviser know that we will achieve plenty of the upside, but that, primarily, our value is the ability to protect folks against devastation. We seek to insure investment success. Investment success is about avoiding the big loss... it is insurance... it is staying out of the water hazard. Clients and non-clients alike have benefited from my quarter century of work in this capacity.

    Gary
    Mar 7, 2014. 05:50 PM | 1 Like Like |Link to Comment
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