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Gary Gordon  

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  • ETF Flows: Nobody Believes In Europe, Everyone Believes In North America [View article]

    At the start of the year, when the 10-year yield sat at 3.01%, Bloomberg News surveyed banks and securities companies on where the 10-year Treasury yield would finish 2014. Every top economist -- 100% of them -- expected rates to rise. The average y/e forecast? 3.41%.

    Very few people went against the herd on this one. I did. I expected rates to fall, with the 10-year at 2.75% (currently at 2.35%) and a flattening of the yield curve such that longer-term rates would fall even further than the 10-year. Here is one of my articles on lower rates in 2014:

    The thesis was simple. Comparable yields with other developed world economies, global economic uncertainty, deflationary scares and safety of principal. Throughout the year, I extolled the virtues of the barbell, pairing long-dated Treasuries in funds like iShares 20+ Treasury (TLT) and Vanguard Extended Duration (EDV) with risk assets like S&P 100 (OEF), SPDR Health Care (XLV) and Minimum Volatility (USMV). The risk-adjusted results speak for themselves.

    Unless the rest of the world starts growing - unless German bunds and JGB yields start to climb because the respective foreign economies are healing - rising stateside bond yields will only encourage carry traders, pensions, safety seekers, yield hunters and money managers like myself to buy the Treasury bond dips.


    Nov 11, 2014. 02:32 PM | Likes Like |Link to Comment
  • When Will Emerging Market ETFs Join The 'Risk-On' Party? [View article]

    Perhaps I hit the nail on the head with DXJ in late 2012. (See article link below.) However, the potential for the yen carry trade to unwind is more risk than I am willing to take as we head into 2015. If you feel you can trade it, you can give it a whirl. I would not dream of holding-n-hoping with DXJ.

    On the other question, the implicit suggestion is that the dollar will continue to strengthen. It wasn't that many years ago when the Economist printed a picture of George Washington rapidly descending on a dollar bill plane on fire. I bring it up because I remember telling just about everyone that we've seen the bottom in the almighty buck.

    The dollar may or may not continue to strengthen, depending on what the Fed does in 2015. Personally, I do not believe they will raise rates, and they may even hint at "twisting" or "stimulating" in a fashion that the markets might see as slightly bearish for the greenback.

    On its face, of course, export-dependent emerging markets should benefit handsomely from dollar strength. Yet that assumes a stable global economy. One that is weakening across the board? It may be difficult to commit to emergers if global growth does not pick up soon. You might want to think about hedging your currency exposure via HEEM or DBEM - assuming you see ongoing dollar strength - if you like the emerging market valuations.


    Nov 4, 2014. 12:41 PM | Likes Like |Link to Comment
  • Expect Rate Sensitive ETFs To Extend Their Lead Due To Housing Uncertainty [View article]

    The barbell port has been the same throughout the year, for the most part. On the equity side, most of my clients have had a combination of funds like OEF, USMV, VYM, XLV, VOE. (We stopped out of 1/2 our position in AAXJ and TDIV in Oct... and reallocated that cash to more OEF and USMV on the U.S. market's return to the 200-day MA.)

    I recognize that you have been reading me throughout the year, so you are well aware of my affinity for funds like BLV, MLN, TFI, EDV, TLH on the left-hand side of the barbell. The risk-reduction strategy has worked exactly as it was designed to do since 1/1/14... and continues to do so.

    You are correct... I do not own VNQ or VPU. And they've both been winners. We have plenty of exposure to rate sensitivity, so there's no need for more of it in the barbell. The handle is supposed to be slim. I like utilities, and have a little ED, as well as exposure via USMV. But I have happily avoided VNQ.

    Ironically, there's a certain Seeking Alpha user who has acted like a stalker throughout 2014, consistently berating me for not recommending REITs. I've explained - to no avail - that my barbell approach in a late-stage bull market is more than meeting its risk-adjusted performance goals. He simply talks about VNQ's stellar performance. We don't own FB either... silly me!

    All the Best,

    Oct 29, 2014. 06:09 PM | Likes Like |Link to Comment
  • Keeping More Of Your ETF Capital Gains And Income [View article]

    A valid point, to be sure.

    In the article, I talked about several ways that the government can (and will) change laws to raise taxes on those who work, those who have tax-deferred savings and those who are wealthy. Heck, the federal government may also find new ways to get money out of munis... other than the current offset vis-a-vis Social Security income.

    That said, for those who have substantial taxable brokerage dollars, munis are not entirely diminished by SS taxation. For one thing, a person can defer taking SS until 70. And the munis will shield more income than a taxable bond, assuming a beneficial TEY.

    Assume a $2M portfolio with $800,000 in bond assets.. and $400,000 of those bond assets in tax-free munis. The $16,000 of potential tax-free income is not a "no-go" due to potential taxation of some/all SS dollars alone, and it is still likely to be more beneficial than the taxable bond alternative.

    That said, for those who have SS income coming into play at age 70, or earlier at 65, it is worth discussing the implications with a qualified CPA. Thanks for the input, Nicholas!

    Oct 28, 2014. 01:57 PM | 1 Like Like |Link to Comment
  • For Buy-And-Hold Investors, It's Really Hard To Lose Money In The Stock Market (Part I) [View article]

    Exactly how long should a buy-n-hold investor "hold?" For example, if you held the stocks in the Dow Jones Industrials from 1916 through 1981, would you have made money in those 65 years? Sadly, the answer is "No."

    At the link below, I provided a chart for the inflation-adjusted returns for the Dow from 1916 to 1981. It may be difficult to accept, yet holding-n-hoping for the 65-year period would have provided little more than heartache.

    Naysayers might say that the dates have been "cherry-picked." That argument might hold water for dismissing a recent 14-year period (2000-2014) for the S&P 500 or the NASDAQ; both are still battling to break even on an inflation-adjusted basis. Yet the above-mentioned data represent 65 years of futility. Nor is it fair to dismiss 15-year periods with two bearish collapses as short periods in the lives of the turn-of-the-century retiree.

    If 15 years can produce nothing but anxiety and angst - if 65 years can create little more than depression and greater depression - is 30 years the magic hold-n-hope period for success? I guess that depends on the index. Let's just say that you wanted to use the NYSE as your broad measure of stocks. In the 30-year period from 1966-1995, you would barely have been able to maintain your purchasing power. That is a 30-year period of no financial growth.

    I could go on, of course. I could discuss the 2nd and 3rd largest economies. The Nikkei in Japan? 26 years and counting. Shanghai in China? 7 years gone and another 160% required to break even. Like the tech bubble, many will never recover from the Nikkei or the Shanghai bubbles. And those are the nominal percentages, not the inflation-adjusted ones.

    I have not even touched on the psychology. In truth, I have yet to meet the person who psychologically, and financially, felt fine with losing HALF to THREE-QUARTERS of his/her account value. Forgive those folks if they no longer embrace buy-n-hold enthusiastically.

    For those who wish to stick with a "buy-n-hold" approach, perhaps you will do okay. Just be aware that history has not been as kind as many would have you believe. Nor is past performance an indicator of future performance.

    Is there a better plan? In my opinion, yes... applying insurance principles to the investing process.

    Lastly, it seems that many talk about simply buying more when the market goes down. Does everyone have an endless store of cash on the sideline to dollar-cost average back in, regardless of how long or how deep a market falls? Not from my experience managing client assets. A great many retirees have Rollover IRAs and brokerage accounts where they are not able to put any more money to work; rather they need the money they have to secure their financial future. Buy-n-hold cannot do that.


    Gary Gordon
    Oct 14, 2014. 06:58 PM | 3 Likes Like |Link to Comment
  • Jobs Data Great For ETFs, Grisly For The Economy [View article]
    >>Part of the declining or flattened (some claim) trend in the
    >>participation rate is sort of "normal" -- due to change in the age
    >>structure of the population, as every one knows.
    >>Has anyone seen a recent estimate of what part cannot be so explained?

    Indeed, I have... and I wrote about it in the summertime. About 25% can realistically be attributable to aging of the population (legitimate retirees). The other 75% cannot be explained away as "normal."
    Oct 4, 2014. 05:01 PM | 1 Like Like |Link to Comment
  • What The Daily 1% Price Swings Mean For ETF Investors [View article]

    Thanks for your interest. We have a new Special Report in the works... you may wish to keep an eye out for it.

    On a separate note, I/we recently created an index with FTSE. The index will be an integral part of hedging against stock downtrends... a la when a levee breaks.

    This is a unique approach to reducing stock risk, and I intend to discuss it in greater detail in the weeks ahead. As my company, Pacific Park Financial, and FTSE, get closer to the release date, we will be able to talk more about it.


    Oct 1, 2014. 06:41 PM | Likes Like |Link to Comment
  • What The Daily 1% Price Swings Mean For ETF Investors [View article]
    The strategy is always the same. I have not changed a thing about my approach to the management of downside risk... 25 years and counting. Feel free to read more about how I approach downtrends at the link below.
    Oct 1, 2014. 11:35 AM | Likes Like |Link to Comment
  • Emerging Market ETFs Are Taking Back The World [View article]

    VWO/EEM can be pretty volatile as well. That said, they are terrific for broad-based exposure.

    At the same time, there's little reason to look at the second largest economy in the world (China,) and decide that it must be mixed with Russia and Brazil. People do not seem to have the same reservations about investing in Japan or Germany or Switzerland.

    BRIC exposure via VWO/EEM is certianly worthy. Still, some folks ought to embrace the ability to invest in pan-Asia excl Japan, as I have since the first quarter of 2014 with iShares MSCI Asia excl Japan (AAXJ). Others should be able to see if a direct stake in Chinese corporations is for them.

    Review Feburary's "China ETF Bashers Cannot See The Forest For The Trees" at this link:
    Sep 4, 2014. 02:48 PM | Likes Like |Link to Comment
  • Profit Margins And 'Fairly Valued' U.S. Stock ETFs [View article]
    You summed up the challenges succinctly!
    Aug 29, 2014. 10:57 AM | Likes Like |Link to Comment
  • Record-Setting Stock ETFs: It's About The Stimulus, Not The Economy [View article]

    Global economic weakness is supporting our dollar and giving a lift to U.S. Treasuries as well. This is a pattern that has occurred throughout history, where certain safer haven assets benefit from perceived troubles. These assets include - the dollar, the Swiss franc, the yen, gold, JGBs, German bunds and U.S. Treasuries. And, of course, Americans are buying these assets as well.

    Yet I disagree that money from troubled spots abroad seek additional risk in our equity markets. Our stocks may be relatively safer, but there is an extraordinary premium a la overvaluation. And historically, there is a high correlation between equities of all stripes. So it is highly unlikely that - should emerging markets, Europe, Japan and stocks around the world flounder - U.S. stocks would flourish on a "money has no place to go" argument. That is as flawed as "rates are so low, stocks are the only game worth playing."

    Aug 26, 2014. 01:47 PM | Likes Like |Link to Comment
  • Record-Setting Stock ETFs: It's About The Stimulus, Not The Economy [View article]
    W E. Coyote,

    >>Thanks for your consistently rational approach to trend following. As
    >>a reader for many years, I've found real investible and Alpha
    >>producing advice on your posts, whereas many here just parrot the
    >>common wisdom.

    I appreciate the kind words.

    And you are correct... I am neither a perma-bull nor a perma-bear. I look to participate in a wide variety of asset classes. As long as those asset classes present uptrends, I remain invested in them. In contrast, if a holding that I own for clients hits a pre-determined stop or a holding indicates a high probability of ushering in a downtrend, I lighten up.

    Regarding deflation, that remains a real threat for Europe. Indeed, when asked at the start of the year which global issue had the most potential to disrupt the markets in 2014, I answered, "Deflation." (See the link below.) Obviously, it is difficult to gauge how effectively the ECB will be in dealing with either deflation or recessionary pressure.



    Aug 26, 2014. 01:33 PM | Likes Like |Link to Comment
  • 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]

    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:

    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..."

    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..."

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

    See my articles throughout the year like this one on the three sectors.

    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.


    Aug 20, 2014. 04:29 PM | Likes Like |Link to Comment