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Gregory Skidmore

 
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  • Avoid The 'Hunt For Yield,' But Remember Treasury ETFs Are Priceless [View article]
    I was referring to short term muni bonds. What is your duration?
    May 13, 2013. 09:33 PM | Likes Like |Link to Comment
  • Avoid The 'Hunt For Yield,' But Remember Treasury ETFs Are Priceless [View article]
    Muni's have their place for sure, as do Federal Agency Securities. My concern with Muni's is that they don't provide the same protection as Treasuries and in recent history I haven't felt the risks taken supports their low yields. Federal Agency Securities provide better protection in times of distress, but I've favored pure US Treasuries.
    May 13, 2013. 01:56 PM | Likes Like |Link to Comment
  • Avoid The 'Hunt For Yield,' But Remember Treasury ETFs Are Priceless [View article]
    You are correct that buying puts and bear market funds do generally protect against a declining stock market. However, I've found treasuries do it at a lower cost.
    May 13, 2013. 12:17 AM | Likes Like |Link to Comment
  • Avoid The 'Hunt For Yield,' But Remember Treasury ETFs Are Priceless [View article]
    I will do my best to add some context and provide additional reasoning behind why I incorporate Treasuries even when they are yielding so little.

    I manage money for a wide range of investors. Some are conservative and some are aggressive. The portfolios I manage are generally balanced portfolios. Clients who are in retirement are usually taking distributions from their portfolios.

    The last time interest rates were this low were in the 1940s (http://ow.ly/kXphT) and as rates slowly rose until they peaked in the early 80's stocks outperformed their historical average and government bonds underperformed their historical average. So during this period of rising interest rates stocks made up for the underperformance in government bonds. However, during this same period there were many corrections in the equity markets and holding government securities in a portfolio during this period reduced the volatility of a portfolio and provided important liquidity.

    Some people will disagree with my belief that Treasuries should continue demonstrate the tendency to rise in price when stocks fall in price. However, historically Treasuries have tended to move up in price when stocks move down in price. So they have provided insurance against falling markets. In other words they have provided an important source of liquidity to investors when they need it most. During a market correction an investor would have the option to sell Treasuries to meet their liabilities instead of selling its theoretically under priced stocks. The kinds of investors faced with this type of need would be anyone drawing income: retirees, pension funds and endowments.

    I believe interest rates will slowly rise over the next 30 to 40 years as they did between the 1940s and 1980s. I expect that stocks will outperform their historical average and government bonds will underperform their historical average. Even though I feel this way, the problem with holding stocks is that they can lose up to 80% of their value in a crash as they did in crash of 1929 or commonly 50% as they did in 2008-09. Therefore holding dividend stocks in place of Treasuries requires an investor to assume a much higher probability of a capital loss. History has shown that investors who may need to access their capital to meet immediate or near term liabilities would be better served to hold a portion of their assets in treasuries.

    In regards to the statement concerning Treasuries and that “they’ll be intrinsically valueless”... People may find the following helpful: Ken French, Professor of Finance at the Tuck School of Business at Dartmouth College, explains how investors can manage inflation uncertainty using Treasury Bills and Treasury Inflation Protected Securities in a video at the following link. (http://ow.ly/kXqZf)

    In terms of investors mentioned (Buffett, Soros, Yacktman, Icahn), I would assume they all hold short term Treasuries as a form of liquidity and to meet the needs of short term liabilities such as fund redemptions or distributions. As a side note David Swenson, CIO of the Yale Endowment, recommends 30% in Treasuries (15% in TIPS and 15% in regular).
    May 13, 2013. 12:15 AM | Likes Like |Link to Comment
  • Avoid The 'Hunt For Yield,' But Remember Treasury ETFs Are Priceless [View article]
    Is your question referencing ETFs or Mutual Funds? Also do you prefer buying actual bonds?
    May 11, 2013. 10:42 PM | Likes Like |Link to Comment
  • Avoid The 'Hunt For Yield,' But Remember Treasury ETFs Are Priceless [View article]
    I like and agree with your suggestion of switching a portion of fixed income to high quality/defensive equities. Half way through the article I mention some of the WisdomTree Funds I've used.
    May 11, 2013. 10:40 PM | Likes Like |Link to Comment
  • Avoid The 'Hunt For Yield,' But Remember Treasury ETFs Are Priceless [View article]
    I do allocate to MLPs and BDCs as well as REITs using ETFs. Depends on the risk of the portfolio. Unless a market is extremely liquid like the treasury market, I don't like buying bonds in an ETF because an ETF carries secondary market trading risks and during times of distress they can trade far away from NAV. When I allocate to bond mutual funds I tend to use Vanguard or DFA Funds which typically have expense ratios as low as ETFs.
    May 11, 2013. 10:34 PM | Likes Like |Link to Comment
  • Avoid The 'Hunt For Yield,' But Remember Treasury ETFs Are Priceless [View article]
    Thanks for your question. I like FFRHX and think it is a great fund. I use EABLX for a small allocation of 2.5% in my model accounts. I have not changed my floating rate allocation since I added it a year or so ago. EABLX carries a little more credit risk and has a higher yield. You can see that in how it got beat up a little more in 2008 and 2009.

    If the economy starts to slow I will probably switch to FFRHX or something similar.
    May 10, 2013. 01:26 PM | 1 Like Like |Link to Comment
  • Freeport McMoRan: Let The Shareholders Vote [View article]
    Unfortunately this kind of stuff goes on too often. However, it was fun to watch David stand up and start yelling when this was announced.
    Dec 11, 2012. 04:08 PM | Likes Like |Link to Comment
  • Nokia And The Wow Factor [View article]
    To follow up on Herve's comment, there have been many companies that have produced dominant products/services throughout history. Some maintain that status longer than others and some have been monopolies but not all. The one's that come to mind are: Dutch East India Company, Wedgwood, United Aircraft and Transport Corporation, US Steel, Standard Oil, RCA, Ford, AT&T, Kodak, Sony, Nintendo, Microsoft, Netscape, and Apple. History tells us that biggest threats to Apple are the government, competitors or a drastic change in technology.

    I believe it is important to watch Nokia because they are well position to benefit from any challenges that Apple might face. (Disclosure, Herve and I work together. I do not own Nokia in any of my portfolios.)
    Sep 20, 2012. 09:09 AM | 1 Like Like |Link to Comment
  • Alternatives and Strategies to Handle the Bond Bubble [View article]
    This article is meant to point out that the average retail investors is taking on duration and credit risk to get yield without fully understanding the risks that go along with chasing yield. This group has always used bonds for safety of principal and income. Bonds have served these conservative investors well since the 1970's and as Steven Bavaria points out in his comments above this is not the 1970's.

    The next 30 years of bond returns will look very different from the last 30 years of returns. Investors who try and chase the returns they have previously receive from bonds by adding credit and duration risk may be burned badly. This is the wrong time for these types of investors to be adding that kind of risk. The last time interest rates were this low was some time in the 1940's and for the next 30 years the annualized returns of bonds was approximately 2%.

    For investors looking to protect principal within the fixed income markets I believe a globally diversified portfolio of short term, high quality fixed income is appropriate. Investors should accept that the period of time when short to medium term investment grade bonds could produce high single digit returns is gone.
    Sep 11, 2010. 04:22 PM | 1 Like Like |Link to Comment
  • High Conviction: Taking On Clean Water in China [View article]
    The type of risk you are bringing up, fraud risk, is one that should be considered when investing in any small emerging markets company. So I would say your point is well taken, but we have no reason to believe there is any accounting fraud with TRIT.
    Apr 5, 2010. 02:41 PM | 2 Likes Like |Link to Comment
  • High Conviction: Taking On Clean Water in China [View article]
    Alan, Looks like that one could have been included in a list of competitors. It's not a name that we're familiar with or follow, but it looks interesting.
    Apr 5, 2010. 01:41 PM | Likes Like |Link to Comment
  • High Conviction: Taking On Clean Water in China [View article]
    Tony, I am not sure I have the answer to your question. We have a top level estimate for sewage that is processed within China, but we have not developed or come across a number for how much sewage TRIT is processing through existing projects or an estimate of future sewage processing. So I don't think we have the number you are looking for in your question.
    Apr 5, 2010. 01:09 PM | Likes Like |Link to Comment
  • High Conviction: Taking On Clean Water in China [View article]
    Alan, I agree that it is a high risk pick. We tend to craft portfolios using low cost beta (index funds and ETFs) and seek add alpha by adding positions that we think will move significantly. The risk of course is that they don't work out the way we hope and that is factored into how we design a portfolio. For our firm this would be high conviction pick even though it carries significant risks. Your point is a valid one, for others this could be too risky or a "gamble" as you called it.
    Apr 5, 2010. 01:02 PM | 2 Likes Like |Link to Comment
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