Seeking Alpha
View as an RSS Feed

Gary Gordon  

View Gary Gordon's Comments BY TICKER:
Latest comments  |  Highest rated
  • Selling Winners In Your Portfolio Is Never Easy [View article]
    Fourteen months ago, I placed my convictions and my reputation as a money manager on the line. Truth was, you could not find a single long bond advocate east or west of the Mississippi, unless that person happened to be a bond fund manager. And, well, then there was one individual... me.

    At first, the gallery took shots at my investment selection of EDV and similar proxies because it was easy to parrot how rates had to go higher. Yet the comment writers and media speakers completely missed the direction of interest rates. As the year progressed, the gallery took shots at me because it was easy to say the move would be temporary. Again, they were wrong; some were even mean-spirited in the presentation of their position.

    How easy it is it for someone to comment anonymously? How easy is it for those without hundreds of clients or tens of thousands of readers to attack via a keyboard? Too easy. Nevertheless, my long bond conviction that countered mainstream gospel came out on top.

    Sometimes, it is not my conviction taking fire. It may be my discipline. I choose to apply insurance to the investing process. Stop-limit loss orders, trendlines, multi-asset stock hedging - none of these methods of reducing risk meet with approval six-plus years removed from the financial crisis.

    However, it was these very approaches that helped my clients sleep better at night during 2008-2009 and during 2000-2002. Clients maintained more of their dollars. And they recovered from the downturn far more quickly than had they been stuck in a hold-n-hope world.

    In sum, my discipline does not permit me to fall in love with my convictions. Rather, my convictions allow for a buy decision, whereas my discipline ultimately insures favorable outcomes (i.e., big gain, small gain, small loss). Indeed, 45% gains on EDV are fine for now... I can always revisit extended duration treasuries at another time.
    Mar 9, 2015. 04:54 PM | 6 Likes Like |Link to Comment
  • 50% Recession Possibility Calls For A 'Higher-Than-Usual' Allocation To Non-Stock ETFs [View article]
    Exactly. It has been working for six-plus years, and it will probably continue to do the trick. Until one day, it just doesn't work anymore.
    Mar 30, 2015. 06:45 PM | 4 Likes Like |Link to Comment
  • Touring The Asset Classes Via Vanguard ETFs [View article]

    It's not that you haven't made some terrific points... it's the way that you make them. Every comment does not need to be filled with vitriol.

    When you write 1000s of articles, you are going to make mistakes. Your pointing them out can be a good thing... for everybody. Still, if you are always looking to prove others wrong, you may miss the ideas/thoughts/opinions that one has shared.

    For instance, Agribusiness (MOO) compounding at roughly 4.6% since inception with 20% more beta risk than the S&P 500... that might be described as "struggling." Most stock assets may have "struggled" in that time period. It is just a word that had been used in a sentence in an article that expressed an opinion about Infrastructure ETFs being overrated.

    Regardless of how you feel about me or my opinions, I wish you well in your investment pursuits.

    Jul 5, 2013. 05:12 PM | 4 Likes Like |Link to Comment
  • That Wasn't a Bear Market, This Is a Bear Market! [View article]
    Your thesis reads well in theory. However, the "average Joe" DID NOT merely "buy a smattering of mutual funds, individual stocks, sector ETFs." That's not a true accounting of historical events.

    In the previous bear market, you had irrational greed for technology stocks and the so-called New Economy, resembling the irrational greed for real estate in the low interest rate environ that followed. People were heavily over-allocated to large-cap tech in the Nasdaq. Losses were 76% for the Nasdaq.

    The market based wealth of most average Joe investors is/was based inside the 401k. The overwhelming majority of 401ks didn't even have small-cap funds inside them. That puts a further dent in the idea that you can use an equal-weight analysis.

    Third, buy-n-hold investing was firmly entrenched in the minds of virtually all investors in 2000. The average Joe rode all of it down, mostly consisting of "get-rich-quick, tech fever" losses. This time, rational fear and irrational fear caused many more folks to sell earlier, rightly or wrongly, so many more people reduced the extent of their losses. Not so in the last bear.

    As a radio personality, writer and money manager, I witnessed losses in the previous bear that far exceeded 50% in most cases. In fact, many were looking at 75% losses thanks to the tech heavy allocation of the "average Joe." In this bear, there were more efforts to mitgate thoses losses, since people weren't willing to suffer as badly as they had in the 2000-2002 period.

    Obviously, from an emotional perspective, this bear is far, far worse. The last bear did not seem as bad due to home price appreciation. This bear feels worse because of a more severe recession and the epic real estate decline.

    Nevertheless, if numbers are going to be used as though people were invested in a smattering, equal-weighted fashion, both then and now, that's inaccurate. It is also a bigger asssumption to asusme that everyone bought and held and hoped the way that they did in 2000-2002... many gave in earlier.

    Mar 19, 2009. 12:42 PM | 4 Likes Like |Link to Comment
  • Are Transportation Stocks Hinting At A New Recession? [View article]
    "Time alone does not end a bull market."

    It is accurate to say that time itself does not cause a bear in stock assets. Yet probability based on historical length and strength of all 35 bull markets since 1900 is as worthy as other indicators, including fundamental, contrarian, economic and technical price indicators. Price movement, for instance, is little more than the plotting of price over time... and only the uninformed fail to recognize the impact of a benchmark's price falling below and staying below a 200-day moving average.

    One can certainly say that time is irrelevant or that things are different this time (interest rates are super low and so forth). We heard the "it's different" argument with the New Economy in the late '90s, as well as "time does not end bull markets" in the late 90s. Yet those that paid attention to the bull market's duration and epic price gains in the late 90s -- alongside insane valuations -- were able ride the wave and safely get off of it thanks to historical probability.

    One might insist that only a recession causes a bear. Yet we heard NBER declare the 10/07 recession one full year after the bear had already mauled portfolios (10/08). So how has the statement that recessions cause bears been helpful to participants?

    Another might explain that bears respond to extreme overvaluation. Okay, but when exactly? Are we not presently staring at the highest median stock P/Es and highest median stock P/S ratios in recorded history? We are.

    It follows that time may not end bull markets, but time is a lot more powerful in discerning probable outcomes than you may be willing to acknowledge. 35 bull markets since 1900? It is certainly reasonable to consider average length, strength, and deviations from both. And when one witnesses an exceptionally long bullish period coupled with an exceptionally large percentage gain that deviates markedly from historical norms, it is instructive to be mindful of the 35 events that came before.
    Mar 26, 2015. 05:02 PM | 3 Likes 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
  • 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
  • Against The Herd: Lower Rates Rather Than Higher Rates In 2014 [View article]
    "The author is correct if he anticipates a cresting of rates until it causes enough economic slowdown that people flee towards relative safety of US Treasuries again."

    That is what I anticipate in 2014... yes.

    I am only talking about where rates will be in 2014, not 2024, nor am I addressing (in this article), the longer-term damage that the Fed may be inflicting on the viability of U.S. debt or the dollar. Much like the PIGS of the Eurozone, the U.S. will certainly have a period of reckoning. However, 2014 will not be the time when our 10-year rates resemble rates of the P.I.G.S.

    This article addressed the high probability that the Fed will not willingly let the economy or market-based securities work through any issues or struggles that occur; rather, there is a high likelihood that they will turn right back to more "cow bell" stimulus at least once in 2014. And there are reasons galore for believing so, including, but not limited to, the year-over-year 50% decline in mortgage applications. Expect Helicopter Janet to wind up piloting to the rescue when enough pressure mounts.

    For those who believe that the jig is already up, they should recall that Japan has been playing the QE game for 14 years. The effects of questionable and controversial policies may not be fully understood for many more years to come.
    Jan 17, 2014. 12:47 PM | 3 Likes Like |Link to Comment
  • Why The Rich ETFs Keep Getting Richer [View article]

    >>...blame private interests but I am amazed at how the unions,
    >>government pensions always get a pass, as they are huge part
    >>of why our states and cities are broke and why our total debt is

    Indeed! The public sector employee/director/higher level leader is in better shape than his/her private sector counterpart. In particular, some of that "better financial shape" is derived from no-risk redistribution of wealth.

    I manage the assets for wealthy people from all walks of life. I am not speaking ill of firefighters, teachers or those employed by a government entity. Nevertheless, the financial realities are astonishing. Public sector pensioners are, on average, twice as wealthy as the equivalent employee in the private sector, particularly when wealth is defined by one's future income stream.

    >>The poor have the left working hard to help them,
    >>the rich have the right (mostly- many liberal left
    >>are getting rich at fed policies) working for them but
    >>if you are middle class, you have no one working for you.

    The left genuinely have the interest of the poor in the forefront of their thinking, but it usually ends up being the tyranny of good intentions. Rather than expanding the size of the pie, which is wealth-generating, efforts tend to be aimed at providing an "equal" and "fair" slice from a pie that does not expand in the economic oven. In fact, redistributing the wealth eventually leads to less production by the producers of that wealth, effectively making the pie smaller.

    Yet the left are not merely thinking about the poor. They are also thinking about public service workers... those who do not have a profit motive. It is difficult for me to believe that leaders on the left are unaware of the fact that the public sector has been getting wealthier at the expense of the private sector employee. It appears as though many on the left favor "public service" over private work.

    The right-of-center conservative looks out for the wealthy, of course. And their solutions tend to reside in the notion that when the rich get richer, the rest of society benefits. Well, that doesn't always work either. The Federal Reserve has made the wealthiest even wealthier on the same idea of top-down wealth creation... which is why I wrote the article on income disparity.

    Theoretically, of course, the central bank of the United States is neither on the left or the right. Regardless of who currently supports the Fed's policies, the facts are undeniable... Fed policies are based on wealth being created in a top-down manner. And yet, the rich are getting richer with QE and zero-interest-rate, with only a small amount of that wealth-creating economic expansion benefiting the rest of society.


    Nov 14, 2013. 04:58 PM | 3 Likes Like |Link to Comment
  • Why The Rich ETFs Keep Getting Richer [View article]

    I did not write that most of the poor do not want to work. I wrote,

    "The assumption here is that everyone wants to work equally hard for a better life. Where is the evidence that each and every one of us pursues the best grades in our respective educational environments, or willingly logs 60-hour work weeks to climb a financial ladder? We're different."

    I find it difficult to believe that you genuinely think that all people, rich or poor, work equally hard. Some people work harder than others... at school, in their relationships, in the careers. That's just a simple reality of the unique nature of being human.

    On the other hand, you have made a generalization that Americans are "not collectivist." That's incorrect. Some lean toward collectivism, some lean toward capitalism, and some do not give a rat's arse one way or another. Again, we are different.

    Clearly, we do not agree on the primary cause of income disparity. You believe it is the "capitalist foxes" whereas I believe it is 13 years of low interest rate policy and dollar devaluation by the Federal Reserve.

    It follows that, since we do not concur on the primary cause of income disparity, why would we agree on a solution to solve income disparity. At least we can both agree that income disparity is a problem, and for that, there's a place to begin a healthy debate on how to solve it.

    Nov 14, 2013. 11:25 AM | 3 Likes Like |Link to Comment
  • Defending Emerging Market ETFs [View article]
    >>We cover ETFs from all issuers, regardless of whether they
    >>advertise on our site or any other, and we stick to facts when
    >>doing so.

    It's possible that you are not required to disclose your financial relationship with Emerging Global... perhaps because your company, ETF Database, is not a Registered Investment Adviser. Yet I believe it is critical for influential writers/analysts to disclose such relationships. I know that I would.

    When you omit the facts about stated cost, hidden costs, tradeability, low volume and index longevity... when you omit key facts about your sponsor Emerging Global's product(s)... when you identify "dirty little secrets" of non-sponsors like Vanguard and Barclays/BlackRock... it seems to me that you're sticking to selective facts that serve an advertiser/sponsor arrangement.

    And you know what? I'm okay with biased opinions... regardless of their origin. Every one of us presents biased opinions. However, I'm NOT okay with the reality that you don't disclose to your readers the relationship that you have with your sponsors or advertisers.

    >>Gary: Generally love your stuff

    I am pleased to hear it
    Feb 18, 2010. 04:22 PM | 3 Likes Like |Link to Comment
  • China ETFs: Is Goldilocks in the House? [View article]
    >>did you really know anything about china? where do you live?

    Actually, yes... I know quite a bit about China. I speak a fair amount of Mandarin, worked and traveled in SE Asia for 5 years and married a mainland Chinese woman.

    You're entitled to your opinion, of course. But perhaps you should learn more about my background before casting stones. Incidentally, there are plenty of top analysts and professionals living and working in China today who share my opinion.
    Feb 18, 2010. 12:51 PM | 3 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
  • 3 Critical ETF Trends That Require Monitoring [View article]

    The way that I see it, IWM can lag, but it cannot tank (as it did in July and September) without having an adverse effect on broader U.S. equities. Conversely, energy reallllllllllllllllllly needs to stabilize... or you may see the type of panicky conditions that occurred during the eurozone crisis.

    Foreign stocks and emergers have shown that they can lag, even "decouple" from U.S. benchmarks. But that only occurred during QE3 and the Draghi 'do-what it takes" period since the euro-zone crisis. Usually, what happens elsewhere matters quite a bit over here.

    My sense is that if the global economy continues to weaken, the dollar continues to strengthen, and foreign assets buckle, U.S. stocks would correct again. Then a Bullard-like hint or an actual "QE4's on the table" proposal would be introduced to backstop further deterioration.

    But a bear? Well, a bear market would more likely coincide with an unpopular policy move by the Fed (e.g., raising rates in spite of significant global uncertainty in the short term, never being bold enough to raise them in the longer term a la Japan, etc.). In other words, this has been a Fed-fueled asset inflating market since 2008. Whether Fed policies are beneficial to the U.S. economy is a whole different conversation.


    Nov 13, 2014. 01:35 PM | 2 Likes Like |Link to Comment
  • 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