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Krystof Huang  

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  • Warren Buffett Is Wrong About Dividends [View article]
    To Sumflow, I welcome your interest in my comment. In reply to your questions.
    #1. I am not trying to single people out by age. I just think it is a shame that many young people and their parents feel that they "must" get their own home. This high expense at this early time in life is exponentially damaging to investment potential--although not as damaging as having several children. Retired people on fixed incomes face an inverse but equivalent dilemma. Incidentally, anybody at any age who owns a home should consider buying a very large (!) used camper, both for storage and for emergency living space. Zoning codes often make it difficult to fully install the camper, but there is no need to install it. When in use, you can contract with a portable toilet company to empty the septic tank regularly. Also I know several people who would be much wealthier today if they had bought a large camper instead of building an addition--which is not only costly up front, but you pay every year in double the property taxes.
    #2. You are arguing for buy-and-hold vs. trend-trading. Trend-trading certainly has pros and cons as discussed in my article:
    Anyway this does not pertain to individual stocks vs. ETFs. My point is that I lost money a few years ago because RIMM/BBRY was highly and repeatedly recommended by Forbes Special Survey, which in turn had the highest gain vs. downturn ratio of any investment guru tracked by Hulbert Financial Digest during 2001-2010. Meanwhile I would have done great with a tech ETF, which does not depend on whether or not Apple or Nokia beat out BBRY, etc. Holding-on to BBRY as it fell, based on my faith that it would rebound, would not have helped! Similarly, BP may have looked great before the gulf oil spill, or Exxon before Valdez. Buy XOP instead. ETFs are not immune against non-rebounding. QQQ's Nasdaq-100 index has even today not rebounded from its peak in 2000. Someday the S&P might not rebound from another 2008, just as the Euro-zone EZU is not rebounding well today. But if QQQ was rebalanced annually to 1/10 of portfolio, you could still have done well. Anyway, for those with less than a million to invest, it seems to me that a portfolio of 10 ETFs is far safer than stocks by offering more diversification than 100 stocks. Also far cheaper to trade if you think a downturn is coming. Also far less time and nuisance to figure out year-after-year what and when to buy.
    Feb 8, 2014. 12:01 PM | Likes Like |Link to Comment
  • Warren Buffett Is Wrong About Dividends [View article]
    * For me, Charlie Zap has the most enlightening comment: how the tax code disincentivizes dividends.
    * I also like the way that the main article implies that (a) dividends are popular and (b) ex-dividend drop in share price does not last. Therefore offering shrewdly-moderate dividends might boost share price, by boosting investor popularity more than its cost to the company.
    * I also like the basic idea of retirement planning via dividends=retirement plan. I believe that maybe 1/10 of investors understand financial planning to a degree that would provide them a more sound plan.
    * However whether dividend guru or not-dividend guru, a universal suggestion by investment gurus is re-investing and not-spending. My main suggestion is that, rather than pay rent or home maintenance costs, young people or elderly people should consider buying a large used 2-door camper. Or for those who do not have parents or children with a house to park a camper, find people with whom to share rent or home maintenance. Also do not have more than one child unless you are quite well off. That will do a lot more than dividend investing.
    * Also what I know for sure is that (a) I pay more taxes on dividends and (b) every time I look at what dividend investors claim to be making, so far it does not sound as good as my non-dividend expectations.
    * Meanwhile I am equally focused on gaining + not-losing. I am wide open to some dividend-fan looking at my portfolio someday and making suggestions. But until then I have enough to think about.
    * Also, I am increasingly enamored with ETFs vs. individual stocks. A great dividend-paying company can have a disaster and plummet. This generally cannot happen to an entire index ETF. Or if it does happen you can sell on the downtrend and rebuy on the rebound. With individual stocks like RIMM/BBRY you can never be so sure that there will be a rebound. And "total return" of dividend-focused ETFs never look outstanding.
    * On the other hand, recently I have also focused on long-short mutual funds. The two best in my opinion are MFADX and DGQIX which has a dividend emphasis. I suspect that its dividend focus adds to the probability that the losses of DGQIX will remain consistently mild.
    * However I am completely re-writing my long-short strategy after discovering the hedging ETFs PHDG, VQT and XVZ. These are many times more effective than dividends in cushioning portfolio downturns.
    Whether or not focused on dividend investing or ETF investing, hedging ETFs can minimize portfolio downturns. The only downside is that hedging ETFs may lose all value if derivatives collapse--as might have happened if not for the banking bailouts of 2008. Therefore, I advise against more than 1/10 portfolio in PHDG (semi-derivative) and 1/20 each for VQT and XVZ.

    XVZ gradually loses over time but gains twice as much twice as early during S&P downturns. PHDG and VQT gain about half as much as the S&P over time--3/20 on them more than pays for the losses of 1/20 in XVZ. If you also trend-trade then your portfolio value can actually shoot up during downturns. However, if derivatives collapse -100% then general equities can be expected to lose at least -70%. I.e., derivatives are not less secure than equities, they are simply not more secure than equities. I.e. it is not safe to replace a gold or TIPS allocation with derivatives. However it certainly is a good idea--and a much more effective hedge than dividends--to replace some of your investment allocation with PHDG, VQT and XVZ.

    Also, you can create your own long-short portfolio by combining PHDG, VQT and XVZ with better-than-S&P index ETFs--such as GURU, PKW, QQQ, SVXY, VBK, XRT, VCR. I am adding EVA to my list, which generally does the same as the S&P, to support environmental conservation. I.e. with hedging ETFs you can create your own long-short mutual funds while directly controlling the level of market exposure and derivative exposure.

    I will soon post an article about gold and then start working on a new article about PHDG, VQT and XVZ. Incidentally, for maximum security as you age and savings increase, in my opinion older investors should hold at least 2/10, and increasingly more of savings, in individually-bought TIPS or a combination of short-term-only TIPS ETFs and perhaps just a bit of SGOL. FDIC or SIPC insured cash or CD's are not any more secure than dividends or derivatives! See this article:
    Feb 8, 2014. 10:09 AM | Likes Like |Link to Comment
  • Best And Less Long-Short Funds, 2013 [View article]
    In my opinion, MFADX and DGQIX are the best available long-short funds. MFCDX is a variant of MFADX with a higher expense ratio. Compare the 2-year performance lines and you can see the difference.;range=2y;compare=mfcd...
    Jan 10, 2014. 11:31 PM | Likes Like |Link to Comment
  • Covered Call Tools: Stop Leaving Money on the Table [View article]
    January 2014: Callpix has been taken over by the $60 monthly Born To Sell. has a call and put screener for $15 monthly. And there are others as well. If only interested in a limited number of specific stocks, you can populate your trading platform with those stocks, and activate an IV column for a pretty good idea of the current option price situation. But a screener may be needed to aggressively seek out stocks with desired option values, as well as other parameters.
    Jan 3, 2014. 01:46 AM | Likes Like |Link to Comment
  • Canadian Discounts On Precious Metals (Christmas Update) [View article]
    Thank you for the details, Fred. After considering the following, I have decided to use only one non-mixed fund from each of the two closed-end managers, Sprott and Central.

    Firstly, I compared the 2012 performance of SLV with PSLV (Sprott silver) and SVRZF (Central silver)--starting in February to remove the IPO glitch you just described. They all come very close several times, which indicates that this starting date is not biased--but in the end, SVRZF ends up about -3% lower than SLV and PSLV about -18% lower.

    Then looking at 2013 only, PSLV stayed very precisely on-track the whole year but SVRZF lost -8%.;range=1y;compare=pslv...

    Based primarily on this superficial observation, I suspect it is simply too early to know whether we might be losing -5% annually in these closed-end funds. If so that is very serious, even after tax savings. And I would like to believe that its 2013 performance shows that PSLV now has its act together. However SVRZF seemed to have its act together for 2012, but which now seems disproven by the 2013 performance. So evidently this is just not enough time for a clear perspective.

    For me, the last straw is that on top of these ambiguities, Sprott and Central each have a mixed-metal fund. So instead of a Yahoo lookup, we have to spend an hour with a spreadsheet just to figure out what the price discrepancies are. And it is not the discrepancies themselves that bother me, so much as the fact that Sprott and Central post tacky websites that do not bother immediately to do the spreadsheet work for me. I find no visitor-friendly pages that clearly explain the discrepancies, or even list vault locations. For me, this is the warning sign of a cult-like mentality that assumes it has a captive audience--or is simply not very bright.

    On top of this, as you probably know, Sprott and Central are managed by the same clique. (According to my Yahoo lookup two of the five "key executives" for the Central fund GTU are Mr. Neal Russel Nenadovic CFA, Chief Financial Officer of Sprott Asset Management Inc., and Ms. Anne Louise Spork, Director of Sprott Asset Management Inc. )

    Therefore, in spite of the fact that I believe Canada is as secure a locale as Switzerland, I would not feel comfortable placing more than 1/10 of my total metals ETF allocation into one Sprott fund and 1/10 in one Central fund. Also I am especially avoiding any mixed metal funds, which seem basically a questionable concept, on top of managers who seem uninterested in making them user-friendly.
    Jan 1, 2014. 11:19 PM | Likes Like |Link to Comment
  • Canadian Discounts On Precious Metals (Christmas Update) [View article]
    What about PSLV? A 2011.12 to 2013.12 perspective shows PSLV has fallen -10% below SLV. Is this a "price discount"? Is PSLV sure to go back up to SLV--and thus to more than make up for the current "premium"? Or is PSLV likely to keep falling farther below SLV, thus averaging an extra cost of several percent every year?;range=2y;compare=pslv...

    As a US resident, I am generally optimistic about these Canadian metal PFIC funds. Firstly the possibility of low US tax rates. (But be sure to use a professional tax preparer because the laws are complex and changing.) Secondly because after the next economic apocalypse, I might have a better chance of hitchhiking to Canada than Switzerland. Thirdly I do not think London is all that secure, especially after a soccer match. Fourthly I find that these PFICs have low spread during regular trading hours, thus are just as convenient as metal ETFs.

    However, there are now ten ETF-like funds that certainly enable push-button high-security diversification between four metals, two continents and two islands: GLD, IAU, GTU, PHYS, SGOL, AGOL, SLV, SIVR, PPLT, PALL.

    Therefore the GTU and PHYS funds might be plenty for Canada. Pending Mr. Piard's reply to this comment, PSLV seems dodgy. Platinum and palladium are highly volatile, so I wouldn't want more than a bit. Maybe I have read too much Dickens, but when combined with the price wavers, somehow I have less confidence in someone named Sprott than in the half-Swiss funds PALL and PPLT. I might invest in CEF later if I discover that the lower taxes are real and a big deal. Otherwise, the mixed-metal CEF seems unnecessary and less than ideal.

    Anyway, thank you Mr. Piard for the chart that clarifies the fees and contents of these relatively obscure ETF-like funds.
    Dec 27, 2013. 06:10 PM | Likes Like |Link to Comment
  • The Best Precious Metal Funds: Gold, Silver, Platinum And Palladium [View article]
    Fred, I am glad to find you have discussed ZKB. There are not many references for ZKB and I am wondering if my impression concerning US residents is correct...

    ZKB is excellent by all accounts. However, according to a 2010 discussion at the "Permanent Portfolio Forum," ZKB will not even pick up on phone calls showing a US origin. ZKB does not comply with US reporting standards and does not want to be made to comply.

    As pointed out by a forum member--sure there are ways around this--but the point is that you are on your own in knowing about the current US laws every year--and neither ZKB nor the US government will supply friendly customer service for any misunderstanding. More likely the tone will be, if you want your gold back then go get a lawyer and good luck you will need it. If so, ZKB seems the last thing that a US resident would want for what is supposed to be a push-button failsafe investment.

    Also, although I am unhappy about the inaccessibility of ZKB, I am happy for the emergence of numerous Swiss and Canadian funds. For example, 1/10 of total metal allocation might go to each of the following: GLD, IAU, GTU, PHYS, SGOL, AGOL, SLV, SIVR, PPLT, PALL. This corresponds to 35% in London, 30% in Canada, 20% in Switzerland, 10% in Singapore, 5% in New York. This also corresponds to 60% gold, 20% silver, 10% platinum, 10% palladium.

    I would prefer more in Switzerland and less in London, but on the whole, these are rather appropriate ratios for minimizing location risk and price risk as well as custodial risk.

    Also, there are pros and cons to everything. GLD is denounced for being able to lease its gold. But oops, London has a nuclear disaster, and half of GLD's gold is safe because it is on lease in other countries. Singapore is not Switzerland--it is a tiny island surrounded by underdeveloped nations. But oops, some of your relatives happen to be in Asia during a global economic collapse. They are stranded and nobody wants US dollars--but you have gold in Singapore.

    Also, if someone really wants to be secure, I think you might agree that stashing close-to-spot gold coins in ten different states might be far more secure than anything that can be done with ETFs.
    Dec 27, 2013. 04:23 PM | Likes Like |Link to Comment
  • Are VQT And PHDG Investments Or Hedging Tools? [View article]
    Thank you for the encouragement, Fred. Starting in January 2014, VQT and PHDG are likely to have starring roles in my series of articles about long-short mutual funds and hedge funds. However, Jonathan Selsick seems to have created a do-it-yourself VEQTOR, and therefore has the most important contribution.

    After thinking for another week, I feel the need to clarify the following.

    * The economy today would be much stronger if, during 2008, a few bankers became homeless while a few million ordinary investors had golden parachutes. VEQTOR could have done this. If millions of people had used VEQTOR to hedge their portofolios, their ability to continue paying for mortgages, stocks and consumer goods--or their ability to remain retired instead of to compete for jobs--could have dramatically bolstered the economy, the stock market, jobs, "life, the universe, and everything."
    * However, during a recession, both VQT and PHDG are predominantly derivative.
    * Derivatives cannot collapse in a bull market, and properly used, are not more risky than equities.
    * However, derivatives are not less-risky than equities. Using derivatives to insure equities is like one farmer insuring another against crop failure.
    * Therefore, VEQTOR is analogous to a wooden fire escape. It will probably be safe. Nonetheless, it is unnecessary and irresponsible to make it out of wood.
    * Derivative-buying for insuring equities is a decades-old standard tradition. Because derivatives are efficient and 2008 had not happened.
    * Derivatives might have collapsed in 2008 if not for the federal bailouts of banks. And it is debatable that anything significant is being done to prevent 2008 from happening again. And the first derivatives that might be allowed to collapse would be those that are equivalent to short-selling--a traditional scapegoat.
    * I.e. it is unlikely for derivatives to collapse. But if they do, the disaster will make 2008 look minor. And if they do, a non-derivative VEQTOR-alternative could safe the nation if not the world from chaos. And there is no rhyme or reason for remaining derivative-reliant with hedge positions.
    * Therefore, I hope that the type of research done by Jonathan Selsick may result in a non-derivative alternative to VEQTOR. (If anyone might like my collaboration on such a project, feel free to "send message.")
    Dec 25, 2013. 01:53 PM | 1 Like Like |Link to Comment
  • The Dead Cat Dollar Outperforms Gold, Silver And The HUI [View article]
    My thanks for this article. This should be required reading in the future for anyone responding to television and junk mail advertisements for gold and silver investing. This is a succinct matter-of-fact story of what happened and of what gold-buggers thought before and after the metalmageddon of 2013.

    Gold is good to hold for an heirloom investment for your grandchildren. Ipod and Blackberry stocks may come and go, but gold remains. Having some close-to-spot gold coins is also the only absolute assurance of having cash available in a state of emergency. It could save your life. However, be sure to buy little enough so that if the price goes down, you can average-down (buy more) with aplomb.

    In terms of price risk, TIPS are much safer than gold unless the US government collapses. And if the US government collapses, you might do better to sell dogfood in exchange for gold than to sell the gold in exchange for dogfood.

    Unless the US dollar collapses, both gold and silver always plummet in a recession. As an example of what really happens to valuables during a crisis, see the opening scene of "Casablanca." And silver will always fall farther than gold because, quite simply, there is a lot more of it. And then there is the certainty of special taxes and the slight possibility of possible confiscation. I.e. gold investors should expect to keep 2/3 of the gains and lose 100% of the losses. Unless as I say you keep it for emergencies. Or for your grandchildren, who, if you speak with an estate planner, probably only pay taxes since the date of inheritance.

    For people who understand derivatives, there are safe ways to hold gold without exposing yourself to price risk, confiscation or special taxes. However there are also popular but unsafe methods. Please be sure to understand thoroughly what you are doing.

    Incidentally, please consider this. President Obama recently bragged that, "for the first time in a long while, Americans are using up just as much of our own oil as we are importing." And if I were Obama, I would say the same thing. Because, although nobody thinks we should sell Fort Knox gold to China, everybody liberal and conservative, and including gold-buggers, raves incessantly that Americans should burn up our oil reserves a.s.a.p.

    Oil is "black gold." In addition, if we sell gold to China, we have some hope of buying it back some day, like going to a pawn shop. However if we sell oil, whether it be to China or to ourselves, it is burned up. And unlike gas and uranium, oil is a ubiquitous necessity for plastics, chemicals and high-performance military fuels. Oil is far more valuable than gold. The future of the planet does not depend on which country has more oil today, but on which country is "the last man standing" with native oil reserves. And every ten years, the value goes up and the extraction technology improves. Americans might logically be in a hurry to burn up the oil of other countries. But the last thing we should be doing with our own oil is burning it.

    Chinese today are in a frenzy to buy-up oil exploration rights all over the planet. Americans, liberal and conservative, are instead clamoring to burn up our own oil a.s.a.p. Or to burn the oil of our staunch ally and global partner Canada, which is just as stupid.

    I am not criticizing Obama or any particular person or ideology here. I am merely pointing out that, before you follow anyone's advice to invest in any commodities, make sure you understand that, from the leaders of the nation to the followers of the fringe fads, there are no limits to the prevailing stupidity.
    Dec 23, 2013. 03:47 PM | Likes Like |Link to Comment
  • Trend-Trading SLYG Beats Leveraged ETFs [View article]
    P.S. CSD disqualified from my portfolio because a 6-year perspective shows it was very slow to rebound from 2008. Replaced with VCR consumer discretionary ETF.
    Dec 18, 2013. 05:04 PM | Likes Like |Link to Comment
  • Trend-Trading SLYG Beats Leveraged ETFs [View article]
    * Dec 18, 2013: SLYG now seems feasible for trend-trading, but better trend-trading choices are available.

    Today, the spread on SLYG is only about 30¢ on a share price of about $174, less than 0.2%. That might be tolerable. However, probably the best small-cap ETF for trend-trading is VBK: over $3.5 million in assets, virtually non-existent spread, and performance levels about midway between SLYG and IJR (the standard non-optimized S&P 600 Small Cap ETF).

    My current picks for trend-trading ETFs with high gain and low spread (during regular market hours): FDN (leading internet companies), XRT (S&P Retail Index), CSD (young spin-off companies), PKW (companies that self-invest), GURU (companies preferred by hedge funds), VBK (leading Small Cap companies).

    Trend-traders often focus on highly specialized industries or countries. However, with the above value-investing ETFs doing consistently much better than the S&P 500, I currently avoid the hassles, sudden pratfalls and moral ambiguities of highly specialized ETFs. Therefore avoiding ETFs for banking, real estate, energy, biotechnology, pharmaceuticals and health care.
    Dec 18, 2013. 02:09 PM | Likes Like |Link to Comment
  • Are VQT And PHDG Investments Or Hedging Tools? [View article]
    VEQTOR = CSLS plus free added hedging. And VEQTOR = VIX without long term losses.

    Thank you Fred, for assuring that perhaps I am not wasting too much space. I spent Thanksgiving studying some charts and consequently feel obliged to share the following.

    1. The 2-year performance of VQT during the current bull market is very equivalent to CSLS (Credit Suisse Long-Short Equity Index). However during an S&P downturn, VEQTOR goes up while CSLS goes down. This means that VEQTOR achieves its market-inverse upward spikes virtually cost-free relative to the average long-short system. /echarts? s=^GSPC# symbol=^gspc; range=2y; compare=vqt+csls;

    2. I have viewed the 5-year charts of the index of every VIX ETF. Only two do not seem to have a seriously negative long-term expectation: XVZ (Dynamic VIX Index) and SVIX (Long-Short VIX Index). XVZ performs much like a mid-term pro-VIX index but without the huge long-term losses. (To see this comparison, select "5-year" and compare to "S&P 500" and to "S&P 500 VIX Mid-Term Index MCAP." You can also add several variations of VEQTOR.)

    I.e. if you want to bet precisely pro-VIX or anti-S&P, XVZ might be a good choice. However during bull runs, any XVZ combination will do more poorly than a VEQTOR combination. Because during bull runs, XVZ goes steadily downward, while VEQTOR goes steadily upward.
    Dec 12, 2013. 11:45 PM | Likes Like |Link to Comment
  • 5 Common 'Junk' Bond Investing Mistakes [View article]
    Good point, Michael. The junk bond rage of the Milken era is also credited with fueling the tech bubble of the 90's, thereby indirectly causing a stock market bubble and inevitable crash. This all should be discussed.

    However, I am unclear whether blaming bonds for a market crash might be like blaming slaves for a slave rebellion?

    So long as stocks are vastly more significant than bonds, then the imprudent massive investing in bonds--or imprudent massive investing in derivatives--or in subprime mortgages--or in whatever by whatever means--will again and again cause a pop in an economy that is always in a bubble. By bubble I mean P/E ratios of 10 being "normal." Meaning the price of most stocks is generally about 1/10 reality and 9/10 hysteria.

    And by the way, how much money is there really in the world? What would happen if every billionaire and trillionaire clan converted their assets to cash? Would there be enough cash? Or would this have the same affect on the value of cash as suddenly doubling the supply of diamonds would have on the price of diamonds? I do not think that anybody has even thought about this, much less looked into it.

    And why do corporate executives climb over each other to make risky investments? Do you know the US banks are paying huge money to lawyers and lobbyists to "defang Dodd-Frank"? I.e. the US banks are fighting tooth-and-nail for the right to repeat the debacles that caused their massive bankruptcies in 2008. Their rationale: if US banks are not allowed to play high-stakes games with the money of depositors--then international banking conglomerates will steamroller right over the US Banks. And this is probably true, somewhat.

    Because again the stock market enables people and companies to create an unstable situation and walk away with billions after it crashes. It does not pay to build up an original Sears & Roebuck or original Mercedes Benz or other old-fashioned company or product that is built to last. Why work for 50 years to build something to last--when instead you can make billions more profits in 1 year by playing high stakes games--and the players themselves never pay for the ante?

    We are all looking superficially at the way things are, not the way they should be.

    Bonds are fundamentally based on what companies need and can afford to pay. Bonds should be relatively safe, even for the average Joe. But because of the supreme emphasis of society on the stock market, bond investors are forced to take high-risk situations. Because bond rates are much lower than they should be because so many companies get easy money by playing the stock market game--where you get billions of dollars by promising nothing except supposedly a "share" of a company that itself is 9/10 paper promises. If stocks were less accessible, companies would be forced to compete for higher bond rates. And consequently the average Joe would be better able to get good return on investment without entering a poker game. And the entire world would not be sucked into the poker game. And banks would not feel they have to play high-stakes games with derivatives. And with less stock investing, money itself would not have the same tendency to become worthless, thus costing money even for those why never buy stocks. Etc., etc.
    Dec 12, 2013. 05:20 PM | Likes Like |Link to Comment
  • Are VQT And PHDG Investments Or Hedging Tools? [View article]
    VEQTOR + trend-trading hybrid system:

    Before the end of this year, I hope to initiate a system which combines VEQTOR ETFs with trend-trading, thereby reducing VEQTOR from 50% to 25% of total system. I also intend to post the trend-trading signals on my instablog here, if people are interested. The results of trend-trading are much less predictable than for VEQTOR. If you want to be rather certain of aggressive and consistent gains, use only VEQTOR. However, if for example you are content with 10% of portfolio in VEQTOR, and do not wish to add more derivative exposure, then perhaps consider increasing the long-only ETFs while also doing some trend-trading.
    Nov 27, 2013. 01:26 PM | Likes Like |Link to Comment
  • Contango In Futures-Based Commodity ETFs: A Real Profit Killer [View article]
    I recently developed a strategy for investing in oil prices, and was actually looking for a list of other investments with a contango problem to explore. However this article and the replies to it have inspired me instead to consider more deeply just how important oil contango is for many people. Gold is popular but nobody requires gold to run their car or heat their home. Meanwhile there are non-contangoed methods of investing in gold, for example putting some in a drawer. Therefore thanks to this article, I have suddenly decided somewhat to specialize for awhile in refining my strategies for investing in oil prices. Thank you.
    Nov 27, 2013. 03:28 AM | Likes Like |Link to Comment