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Martin Vlcek

 
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  • The Contradiction Of 'Passive' Index Fund Investing [View article]
    The Renegade,

    "in-house created index"

    You make a very good point.

    I understand the funds' thinking behind this. It makes it easier for them to manage, lower costs, etc. The tracking error is usually low enough for anyone to notice or mind, most of the time.
    Aug 20 05:22 PM | Likes Like |Link to Comment
  • Margin Debt Peaks May Indicate End Of Cyclical Bull Market [View article]
    Portfolio margin is different from Reg T margin. Those are different types of accounts at Interactive Brokers. I think you have to have a $100,000 balance with IB before you can apply for portfolio margin which gives you higher leverage.

    Is it a coincidence that IB offered me this Portfolio margin just a few months back although my balance with them is way below the threshold? Hmm. Let me think...

    Anyway, I turned the offer down. But if you know how to use it, portfolio margin is more efficient. You can have more cash aside earning (at least tiny) interest, ready to be used if you get close to a margin call (need more cash).

    What is also dangerous is that the margin requirements change. For example, if you have a short options position (say, you sell out of money puts), as the price actually gets closer to your strike, the absolute amount of the margin required increases. Some people don't realize that or underestimate the impact.
    Aug 19 06:28 PM | 2 Likes Like |Link to Comment
  • Margin Debt Peaks May Indicate End Of Cyclical Bull Market [View article]
    Precisely, Samurat.

    It is called a look-back bias = using information that was not available to decision makers back when they were making the decision.

    It is the same as if I wrote that the peaks in the S&P signaled a bear market or a severe correction. Or that a fall in the S&P signals a correction. Well, obviously, these are correlated. But how do you use the info? Stock market (and margin debt) by definition hits all-time highs almost every other day in a bull market which trades above previous highs. How do you know that today's all-time high is the ultimate all-time high that will be the top before a severe correction? In other words, margin debt has very little practical predictive power (especially if released with a lag). A dip in margin debt can easily revert back and margin debt can start rising again.
    Aug 19 05:48 PM | 9 Likes Like |Link to Comment
  • Update: Oclaro Reported Improving Q2 Earnings Numbers But Weak Guidance Surprised [View article]
    My pleasure!
    Aug 19 04:38 PM | Likes Like |Link to Comment
  • The Contradiction Of 'Passive' Index Fund Investing [View article]
    For me, passive investing is designing a clear roadmap of what the asset allocations will be now and in the future in the specific portfolio as one's investing needs change with age, and then sticking to that strategy by buying or selling only because the long-term strategy tells me that I should now sell some stocks and buy bonds as I grow older and have a different risk profile, and not buying/selling because I see the investment as "cheap" at the moment. This may not be the pure definition of passive, but it is what I still consider a passive approach in terms of asset allocation.

    In other words, in my definition, the specific asset allocation breakdown (percentages) has nothing to do with active vs. passive investing. The actual changes within the portfolio is what active vs. passive is about, in my opinion.

    I would not consider a portfolio passive vs. active just because it matches the total world allocation of asset classes. The world asset allocation inherently has some implicit risk-profile. But that profile is not suitable for all investors. For a 3yr old investor with high income from his primary job it makes virtually no sense to own almost any bonds or cash because in a 40yr time horizon, stocks are very likely to beat returns from virtually any other major asset class, she/he will get tons of cash from his primary job, and doesn't need any regular income from the investments for many years. But that does not make me an active investor, if I just buy a Vanguard total world index, in my opinion, instead of perfectly matching the world asset allocation.

    How do the other readers see it?
    Aug 19 07:34 AM | Likes Like |Link to Comment
  • Update: NeoPhotonics Q2 Earnings: Record Revenue But Falling Margins And Weaker Cash Position [View article]
    You are profiting from the Amazon affiliate links to the books about insider trading. Free email subscribers can also be monetized later on, same as free e-book downloads and the partner link to Shortzilla.com. We can take the discussion private, as it adds nothing to the readers.
    Aug 18 03:42 PM | Likes Like |Link to Comment
  • Update: Caesarstone Q2 Earnings Rock-Solid Again - Guidance Increased [View article]
    tex805,

    Thank you for commenting. Innovation and distribution links are important but CSTE doesn't any IKEA deals in non-U.S. countries yet it still has large market shares. The quality of the production is extremely important. Every little production defect (for example congregations of little stones that are now well randomly spread out but clustered) is very visible on the shiny surfaces when light reflects in specific angles. I doubt the Chinese copies will have the same quality soon. Sure, some customer will give them a try but I think they will be disappointed. But increasing competition is a valid point for almost all companies, including CSTE.
    Aug 18 02:30 PM | Likes Like |Link to Comment
  • Update: Extreme Networks Q2 Earnings Better Than Expected, Enterasys Integration Progressing Well [View article]
    JYX,

    I still recommend keeping the downside protection as this stock can be very volatile. The industry is very sensitive, competitive and cyclical as well.
    Aug 18 12:06 PM | Likes Like |Link to Comment
  • Update: NeoPhotonics Q2 Earnings: Record Revenue But Falling Margins And Weaker Cash Position [View article]
    Insider-Alerts,

    Honestly, I have no idea what your point is besides promoting your service of paid insider alerts. I don't ignore insider transactions, but I don't base my decisions on them. Sorry. NPTN fell 50% in a month since you and Fich (perhaps your alter ego set up, with only 3 comments, all on the same article) tried to convince me that NPTN basically can't go any lower because insiders are buying or exercising options, and that I am too pessimistic. Well, it paid to be pessimistic: http://bit.ly/1oUtw2J

    So the fact that NPTN went up since the later update that you mention (the time coincides with a general rebound in the riskiest stocks and the VIX crashing from 18 to 12 in a matter of days) still means NPTN is ~25% down since you tried to convince everyone insiders are buying and it is a sure thing the stock will go up. I just don't like unbalanced views and "sure" things. There are no sure things in investing and there are downside risks. Always.

    I base my investing decisions and analyses on both long-term and short-term factors. Ignoring either is not prudent. I sometimes make trades that last a couple of hours, days or weeks. I also have positions that I've never sold and don't intend to. Why limit yourself by any time-frame or a bias? I try to not have any biases, whether against long-term or short-term investing, insider sales or purchases. All I look at is deep analysis and reward/risk and whether this one investment is the best I can make at this time for my portfolio. I hold ~10 to 13 positions in total in several asset classes and individual stocks and my portfolio returned ~100% in a year and a half.

    In my articles, I usually state the time-frame and the recommended strategy, such as obviously, you should not buy and hold forever a semiconductor stock that is highly volatile, cyclical, and can drop 50% on one piece of news overnight. With such a stock, it is prudent to take profits or hedge the downside. That's all I would add to this conversation.
    Aug 18 11:36 AM | Likes Like |Link to Comment
  • Artisan Partners Asset Management: Continued Rapid Expansion Of International Client Base Will Drive Future Growth [View article]
    AlphaBetaWorks,

    Great additional info! Thanks for posting. It further solidifies the outperformance of APAM. Perhaps the underperformance of their largest picks will mean-revert to outperformance or at least a neutral impact. After all, the fate of a few largest positions can have a great impact on the results. Such as, if you if you don't own just a few of the large stocks that had the biggest positive/negative impact on broad market returns, you have a very low chance to underperform/outperform the indexes with all the cumulative other positions. The biggest holdings will drag you one way or the other.
    Aug 18 09:31 AM | Likes Like |Link to Comment
  • Update: NeoPhotonics Q2 Earnings: Record Revenue But Falling Margins And Weaker Cash Position [View article]
    Both are very risky bets on a turnaround at the moment. NPTN's price kept falling since the previous update. OCLR has Japanese assets to divest now, so they've bought some time. But the weak sales guidance was really disappointing.
    Aug 18 07:48 AM | Likes Like |Link to Comment
  • Update: Oclaro Reported Improving Q2 Earnings Numbers But Weak Guidance Surprised [View article]
    Dale,

    The company guided for significantly weaker overall sales than expected for calendar Q3, 2014. At this point, it looks like the transition towards the 100G products is not fast enough to offset the falling legacy sales. Although OCLR keeps slashing costs to lower the break-even point, overall sales will likely keep falling in Q3, so the turnaround seems more distant now. The company expects it in a year from now in non-GAAP terms.
    Aug 18 07:45 AM | Likes Like |Link to Comment
  • Government Of Canada Prepares For A Housing Crash [View article]
    David, the longer timeframe since 1900 is a good point you make. I think the treasuries have returned higher than historic returns in the past 30 years as well. Same for the commodities supercycle. This is probably caused by the change in the monetary regime (shift from gold standard, etc.). Money is not tied to real assets anymore, it is easy to print money. Until there is a huge crash or a shift back to metal-based currencies, I see trend continuing.

    Going forward, we will probably see lower GDP growth rate, lower population growth, aging population, and correspondingly lower interest rates. Or, everything will mean-return (higher rates, higher GDP, perhaps lower real estate growth? Who knows). It could be that the U.S. and Canada were very young economies 100 years ago, completely different from the current mature economy. So all growth rates could remain very low in the next decades. Nobody knows for sure.
    Aug 15 03:28 PM | Likes Like |Link to Comment
  • The Same Returns With Half The Risk? [View article]
    Dale,

    Thanks for an excellent article. A very sensible portfolio. I sometimes recommend adding physical real estate. Some real estate, like the pyramids, have a very long shelf life:). True, renting a physical real estate has its caveats. So your REIT approach is better for most.
    Aug 15 11:49 AM | Likes Like |Link to Comment
  • Government Of Canada Prepares For A Housing Crash [View article]
    I didn't include dividends in the S&P or other stock returns either. As you said, real estate cycles are longer, and that's also because most people are not really pressed to sell. So they can just keep holding. Who cares if the house only yields 3% net per year, if we have deflation and everything else yields even less? Yes, rent can go down too, but wages are usually inflexible to the downside, so the rent is likely to fall less than yields from other, more flexible assets, such as stocks, treasuries, CDs, etc. Also, if CAD lost 25% of its value over those 20 years (I don't know if it did, I don't follow CAD/USD), then 25% of those real estate gains are just relative - for a U.S. person, the prices of Canadian real estate would have gone up 25% less under the weaker CAD assumption. Big cities have international buyers who consider the price in their local currency. Also, if a Japanese or Chinese, or Even European buyer thinks their economies will do worse than Canada, and their currencies will weaken to CAD, then it makes sense for them, too. Euro and JPY are especially vulnerable.

    As I wrote regarding the Gini coefficient - generally for the pat 30 years, the rich got richer, poor got poorer. Rich buy the houses, poor rent them. So prices will not crash IMO. But rents can suffer a bit. Again, if someone has a pile of cash yielding negative real returns, a 2% to 3% real return on a house is still a great deal, even if the real net yield drops from 3% to 2% due to lower rents/higher prices.
    Aug 15 11:31 AM | Likes Like |Link to Comment
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