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Gary Gordon

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  • Sector ETFs In 2014 And 2007: The Inconvenient Comparison Feels Like A Bone In The Throat [View article]

    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.


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

    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.

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

    "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.

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

    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.


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

    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.

    Jun 27, 2014. 06:35 PM | 1 Like Like |Link to Comment
  • Are Stock ETF Investors Placing Too Much Faith In The Fed? [View article]

    "...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.

    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."

    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."


    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.


    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

    Time Magazine
    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."

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

    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:


    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]

    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.


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

    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.

    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!

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

    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.


    Apr 22, 2014. 12:41 PM | Likes Like |Link to Comment