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  • John Hussman's Peak PE Ratio as a Long Term Market Indicator [View article]
    CORRECTIONS: the URLs in the article are wrong. For a corrected version, please read
    www.validfi.com/LTISys...
    or the corresponding instablog
    seekingalpha.com/insta...
    We apologize for the inconvenience it has caused.
    Nov 16 11:42 AM | Likes Like |Link to Comment
  • Halloween Indicators Issue Buy Signals: Now What? [View article]
    Meltdowman,

    At ValidFi, we develop strategies based on published sources. In this case, if you read the article carefully, it referred to the 'improved' strategy mentioned in Sy Harding's book, not based on his live proprietary advice to his subscribers.

    We further monitor these strategies live (and with historical performance) so that investors could study and compare performance among them objectively. In no purpose, we are endorsing them and advising people to follow them as it is.

    In fact, in the article, we raised the concern on current market situation.


    On Oct 19 09:54 AM Meltdownman wrote:

    > Sy has broken his own rules this time and put the Oct 16th "BUY"
    > signal on hold for a few more days. I know this as a fact since I
    > am a subscriber and he addresses your concern directly with the indices
    > well above their 200 day moving average.
    >
    > So hold on their skippy and get the facts straight before you go
    > shooting your mouth off without all the facts.
    >
    > The Meltdownman
    Oct 19 11:30 AM | Likes Like |Link to Comment
  • Portfolio Building: Risks, Not Risk [View article]
    I absolutely agree that MVO is just a mathematical tool that was overused/over promoted for marketing and (UChicago's) religious purpose. It is how to properly use it matters.

    For example, on top of MVO, Black and Litterman have proposed a method to incorporate investor's outlook/estimate. Furthermore, in a simplistic manner, one could opt to use other ways to estimate covariances instead of getting that from recent history.

    It is also important that as a TOOL, one could apply MVO to a set of time series objects instead of just those traditional static assets. An example would be to use various strategies (on asset classes) such as long/short etc. as the inputs.

    Budgeting risk factors could be the first pre-processing step to tilt the MVO. Moreover, an overall and weights on individual assets could be capped to limit the 'fat tail' risk. A post processing step could be added to limit such overall exposure.

    Anyway, if you are a practitioner, you choose tools handy smartly to handle the problems, not blindly trusting the output, let alone treating such MPT as the godsend. No wonder Buffett once criticized the EMT(Efficient Market Theory) academics, for that I quoted his Berkshire Hathaway's 2007 annual shareholder letter here:

    "And what did members of the academic community do when they were exposed to this new and important evidence? Unfortunately, they reacted in all-too-human fashion: Rather than opening their minds, they closed their eyes. To my knowledge no business school teaching EMT made any attempt to study Walter’s performance and what it meant for the school’s cherished theory.

    Instead, the faculties of the schools went merrily on their way presenting EMT as having the certainty of scripture. Typically, a finance instructor who had the nerve to question EMT had about as much chance of major promotion as Galileo had of being named Pope.

    Tens of thousands of students were therefore sent out into life believing that on every day the price of every stock was “right” (or, more accurately, not demonstrably wrong) and that attempts to evaluate businesses – that is, stocks – were useless. Walter meanwhile went on overperforming, his job made easier by the misguided instructions that had been given to those young minds. After all, if you are in the shipping business, it’s helpful to have all of your potential competitors be taught that the earth is flat.

    Maybe it was a good thing for his investors that Walter didn’t go to college. "


    On Oct 06 08:59 AM Living4Dividends wrote:

    >
    >
    > Good point ! For example, bonds have done very well (nearly equal
    > to stocks) over past 28 years. I am sure that the MVO heavily overweights
    > bonds due to recent performance.
    >
    > But rather than attacking or blaming MPT for this shortcoming, perhaps
    > the fault lies at the person using the MVO. They use too short of
    > a time period of data.
    >
    > As well, the fault lies in the MVO itself. These are tricky beasts
    > that operate under the "Garbage in garbage out" principle. A properly
    > tamed MVO can give good results.
    >
    > On Oct 05 06:33 PM ff4444 wrote:
    Oct 6 07:31 PM | 2 Likes Like |Link to Comment
  • Portfolio Building: Risks, Not Risk [View article]
    PIMCO's Global Multi-Asset fund PGMAX recently reduced their equity exposure. see: www.validfi.com/LTISys...
    Oct 5 09:42 PM | Likes Like |Link to Comment
  • Buffett Valuation/GNP Indicator: This Market's Fairly Valued [View article]
    Thanks for the comment. As for the links, unfortunately, SA editors removed all of them. I agree with you that such articles should reference back to original sources for data. But for now, we just have to live with it unless SA editors change their mind ...

    Also, you could find links from the instablog.


    On Sep 22 06:41 PM SteadyEddie wrote:

    > So Mr. Buffett estimates the market is fairly valued? But the market
    > does not seem to agree and it keeps shooting up! I guess this is
    > an excellent metric for long term investors but short term ... no
    > body knows.
    >
    > By the way, could not find links in the article for the strategies
    > or data you mentioned. If you present these, wouldn't it be important
    > for people to verify?
    >
    > steady...
    Sep 23 12:41 PM | Likes Like |Link to Comment
  • Benefiting from Simple Hedging Techniques (Part I) [View article]
    Correction: in the table, the Long Only and Hedged labels should be switched. We have corrected this in the Instablog. We apologize for any confusion it may cause.
    Aug 30 11:16 AM | Likes Like |Link to Comment
  • Follow the Gurus in Asset Allocation [View article]
    Several problems in investing mutual funds

    1. the redemption period restriction: usually ranges from 3 months to half year. That makes it very hard.

    2. Tax issues: you incur too much tax when you switch from one fund to another. Investing in the underlying index funds or ETFs will result in trading activities but since you are just trimming or increasing one particular holdings, your tax bill will be lower (however, your trading commissions may be higher since you have to readjust your whole portfolio often, so find a low commission broker)

    ValidFi does have MALOX (Blackrock Global Allocation R). As of 8/13/2009, it has about 51% allocation (40% in US total equity VTSMX and 11% in VGTSX) in equities and the rest in fixed income. Just type MALOX to quote and click on Asset Allocation Analysis. You could also do BERIX analysis in the same way.

    It is also interesting to select good allocation funds (such as with 1 year Sharpe) to a strategy such as Sharpe Dynamics for Equities. That will do what you mentioned: to directly invest into those best funds while pruning out some of them which are performing poorly recently.

    Send us email to validfi@validfi.com if you have further questions.

    Thanks


    On Aug 17 01:13 PM Independent in Greensboro wrote:

    > Why not hire these managers by investing in their funds? Several
    > of these are no-loads and have performed relatively well during '07/'08.
    > I think a component of diversification that is lost on many investors
    > is diversification of strategies. I think we can sometimes get too
    > caught up in trying to achieve the optimial mix of asset classes
    > when diversification of strategy could allow you to include a respectable
    > long/short fund like Hussman Growth and a respectable global allocation
    > fund like Ivy Asset.
    >
    > I'd like to add a couple more respectable funds to your list: BlackRock
    > Global Allocation (seekingalpha.com/symbo...) and a conservative
    > allocation fund: Berwyn Income (seekingalpha.com/symbo...).
    >
    >
    > No matter the strategy, at some point every manager (or team) will
    > experience a period where they don't look as though they know what
    > they're doing. The important thing is to know their strategy and
    > decide if you are willing to stick it out or not. If you blend strategies
    > (bearish managers with opportunistic managers, style managers with
    > go-anywhere managers) in addition to blending asset clases, your
    > portfolio is more likely to hold up better during market down turns.
    Aug 17 08:21 PM | Likes Like |Link to Comment
  • Diversify Asset Classes AND Investment Strategies [View article]
    Thanks for pointing out, yes, RWX should be the one for Intl' REIT.


    On Jul 28 08:17 AM tinscale wrote:

    > Thanks for putting the list together. I think RWX is the symbol
    > you meant to cite for the International REIT class -- SPDR Dow Jones
    > International Real Estate ETF.
    Jul 28 01:48 PM | Likes Like |Link to Comment
  • Diversify Asset Classes AND Investment Strategies [View article]
    Absolutely, in fact, we use CEFs and stocks too. The interesting case is for CEFs, how to utilize the discount rate on whatever the strategies you have. In fact, I would argue even options and futures play a role here, except one has to have a systemic way to deal with (in an overall portfolio). Thanks.


    On Jul 28 01:12 PM Alan Young wrote:

    > Good ideas.
    > As long as we are diversifying, why not diversify investment vehicles,
    > as well? IOW, instead of using all ETFs, have some CEFs, some OEFs,
    > and some individual stocks.
    Jul 28 01:47 PM | Likes Like |Link to Comment
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