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Michael Allen  

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  • End Of An Era For Gold Investors [View article]
    Interesting. I cancelled my subscription to Shadowstats because its forecasts were just too wrong for too long, but I take your argument seriously. No one, least I, argues that the CPI is flawless. Let's say we use the Shadowstats version of the data. Then what should the real price of gold be? None of the other arguments change.
    Aug 5, 2012. 04:34 PM | 1 Like Like |Link to Comment
  • Why Corporate Earnings Could Drop More Than 50% [View article]
    I'm not aware of any evidence that increases in technology have ever had any ability to eliminate economic cycles. I have of course plotted the ratio on a linear basis and there is some evidence of a gently sloping trend - one that since 1969 has brought the mean from 3.5% to 4% - but I don't know what causes this or if it is sustainable, or for that matter, if it is even real, since it is largely caused by the outsized profits in 97. Excluding that one very brief instance, we have an extremely stable ratio with an extremely stable range. At any rate, the slope does not have any effect on cyclicality nor does it effect the accuracy of the model.
    Aug 5, 2012. 03:50 PM | Likes Like |Link to Comment
  • The Death Of Equities? Hardly, Mr. Gross [View article]
    Incidentally, what is your source for figure 5. That data does not fit with anything else I know, but I'll keep an open mind if you can identify the source.
    Aug 3, 2012. 09:07 AM | Likes Like |Link to Comment
  • The Death Of Equities? Hardly, Mr. Gross [View article]
    Although I am no fan of equities given present-circumstances, Gross's arguments seem remarkably ignorant to me. Equities out-perform the economy over time because they are leveraged. It's that simple. This doesn't mean you should always buy them. There have been many times when equities made an absolutely horrible investment even in the long-run.
    Aug 3, 2012. 09:05 AM | 1 Like Like |Link to Comment
  • Why Corporate Earnings Could Drop More Than 50% [View article]
    The issue of foreign earnings is important, but as US companies have increased their earnigns from overseas, so too have they increased their imports. According to the National income accounts, the net foreign impact on earnings has been negative since the early 80s and has grown increasingly so. Also, despite my aggresive headline, I do not argue that an earnings collapse is immanent or even for that matter inevitable - just extremely likey.
    Aug 2, 2012. 12:28 PM | 1 Like Like |Link to Comment
  • Why Corporate Earnings Could Drop More Than 50% [View article]
    For this article, I use NIPA earnings, not S&P earnings/share, so stock buy-backs do not have any effect.
    Aug 2, 2012. 12:20 PM | Likes Like |Link to Comment
  • Why Corporate Earnings Could Drop More Than 50% [View article]
    Funny you should ask. Its in process. Please stay tuned.
    Aug 2, 2012. 12:13 PM | 1 Like Like |Link to Comment
  • Winning In A World Without Yield: A Portfolio Level Solution [View article]
    How do you get comfortable with all the fraud in the US? The answer is that you never get comfortable. You always hedge your bets, and never be surprised if any of them turn out to be wrong.
    Aug 1, 2012. 10:16 AM | Likes Like |Link to Comment
  • Turning The World's Most Successful Investment Strategy On Its Head [View article]
    Well I did suggest that I was turning PP on its head, and I'm not calling mine permanent, so I suppose I should thank you for noticing. The point is, the PP benefited from things that are no longer true, namely low valuations. If you do the math, it is impossible for PP to achieve anything like the returns it did before, and quite likely that it will lose money going forward.
    Aug 1, 2012. 09:40 AM | 1 Like Like |Link to Comment
  • Turning The World's Most Successful Investment Strategy On Its Head [View article]
    There is no algorithm for determining the asset allocation. The allocation is 25% to each asset class, rebalanced annually. I use a different model to decided whether or not to go long or short each asset. I use leverage on the long side, not on the short. There are no neutral positions - it is either long or short each asset class. Although it is possible to find out, I do not know what the net effective exposures were at any given time. The back-testing process was to develop a theory about how a particular market works, test this idea and optimize over a 10 year period not including the most recent 2 years. We then tested the model on that two-year out-of sample period as well as the previous 33-year out of sample period and were able to confirm our ideas. It is still entirely possible that the models won't work going forward. I use them as a guide, not a rule, but I will not personally bet very heavily against them.
    Aug 1, 2012. 09:20 AM | Likes Like |Link to Comment
  • Winning In A World Without Yield: A Portfolio Level Solution [View article]
    All fairly reasonable points, but no one is predicting deflation here and my arguments are certainly not purely focussed on the US. The point is to find cheap alternatives to the bond-portion of your portfolio, which is a portion you would have not necessarily because you expect deflation, but rather because you don't know. It would make a great deal of sense, in my view, to be long emerging markets equities and short US equities but that's for another discussion.
    Jul 31, 2012. 10:03 AM | Likes Like |Link to Comment
  • Winning In A World Without Yield: A Portfolio Level Solution [View article]
    A fair point I suppose. Much is left out of this article for future discussion, so that I could just focus on bonds. My strategy is to alwasy be exposed to assets that protect against all four of the key risks: expansion, contraction, inflation, deflation. If I buy the least expensive of these, and sell the most expensive, I think I will make out better than if I only held cash, which is the logical conclusion that your suggestion would lead to. I do own equities, but not US equities.
    Jul 31, 2012. 09:50 AM | Likes Like |Link to Comment
  • Winning In A World Without Yield: A Portfolio Level Solution [View article]
    Well then as long as we agree that profits are mean reverting, I think my strategy will work. As for Montier's formula, first, I suppose it could be a coincidence that the formula exactly equals earnings in every quarter that data is available, less about 2% for data reporting errors since 1969. Do the math. Second, stocks and bonds are not productive assets. Third, it's not Montier's formula anyway, it was first derived in 1914 by Jerome Levy. If you'd like more information on it, I would suggest http://bit.ly/Q9FesG
    Jul 30, 2012. 08:32 PM | 1 Like Like |Link to Comment
  • Winning In A World Without Yield: A Portfolio Level Solution [View article]
    No problem with these. I try to keep it simple, that's all.
    Jul 30, 2012. 08:15 PM | Likes Like |Link to Comment
  • Winning In A World Without Yield: A Portfolio Level Solution [View article]
    I realize that they are designed for day-traders. Long-term holders pay a price, but with major liquid indeces, the cost is not prohibitive in my opinion. All of the alternatives, such as buying options, or borrowing money, have costs as well and are riskier in my view. There's no free lunch. I generally don't expect to hold the geared funds long enough for these costs to compound. You could hold SH, which is an ungeared inverse ETF for the S&P500.
    Jul 30, 2012. 08:11 PM | Likes Like |Link to Comment
COMMENTS STATS
164 Comments
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