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  • The Role Of VQT And PHDG In Diversified Portfolios [View article]
    VQT has a lower Sharpe and a higher Sortino, as noted here:
    http://bit.ly/17p7lus

    As for the dynamic hedging strategy, that depends on the client.
    Nov 13, 2013. 09:20 AM | Likes Like |Link to Comment
  • BTPs, Bunds And Berlusconi: Do Markets Care About Italian Politics? [View article]
    Vasu,

    Solid analysis.

    As you noted, Italy's interest payments are now 5.5% of GDP, vs. 2.6% for the Eurozone. I assume that these data are backward looking, and based on nominal interest rates of 5% or more that prevailed in 2012. If so, then the debt-to-GDP ratio should improve next year since rates have fallen.

    I realize that this is reflexive. It's basically saying that "rates should be lower because rates are lower." But a shrinking debt/GDP ratio is a sign for the better.

    Meanwhile, the normalization of interest rates in the U.S. will have the opposite dynamic: As rates rise towards 5%, the debt/GDP ratio gets worse. This is hardly inside information, but it will hurt when reality sets in.

    Just a thought--thanks for the article.
    Rob
    Aug 26, 2013. 06:23 PM | Likes Like |Link to Comment
  • Privatized Prisons: Public Relations Nightmare But A Pretty Great Business [View article]
    Filo67: Thank you! You said this exceptionally well and I agree 100%.

    1) Government spending on prisons is already sky high.
    2) Privatization incentivizes incarceration.
    3) Investors make a fast buck, and saddle other citizens with the social costs.

    Jeffrey Dow Jones:

    You say that "An investment like this takes a strong stomach because it's not a socially popular business..."

    I disagree: It takes a strong stomach to stand up for what is right; it does not take a strong stomach to make profits from an inherently dysfunctional business model.

    Rob Martorana
    Jun 8, 2013. 09:08 AM | 1 Like Like |Link to Comment
  • Privatized Prisons: Public Relations Nightmare But A Pretty Great Business [View article]
    I agree. Prisons are necessary, but I don't want to profit from their growth.
    Jun 8, 2013. 08:58 AM | 1 Like Like |Link to Comment
  • Blending Alpha And Beta: Building A 'Mini-Endowment' [View article]
    Thanks Brian.

    It's a trade-off between simplicity and robustness. The small positions are there mainly for diversification, rather than returns. It's true that someone could run money with a 60/40 mix of stocks and bonds (SPY/AGG), but this would not be as diversified as a global mix of stocks and bonds.

    In this case, adding roughly 25% to real assets and alternatives helps hedge the portfolio by holding assets that are not correlated with stocks and bonds.
    Apr 22, 2013. 12:17 PM | Likes Like |Link to Comment
  • A One Day Drop In Stocks And Gold Does Not Mean That Inflation Is Dead [View article]
    Thanks Tom--hope you are doing well.
    Apr 17, 2013. 02:12 PM | Likes Like |Link to Comment
  • Why It's Hard To Get Yield Just Using ETFs [View article]
    Roger,
    Good point about the limits of commission-free ETFs.

    The illustration used in my article is better for small accounts, and commission-free ETFs are my go-to asset for rebalancing. If I assume quarterly rebalancing on a $25,000 account, I might have 40 trades a year, or $360 in commissions. That would be 1.4% of a $25,000 account. (For a $10,000 account, commissions are an even higher percentage, and it's challenging to rebalance systematically without racking up a lot of costs.) Alternatively, I could use fewer securities for small accounts, but the portfolio wouldn't be as diversified, and it wouldn't reflect the strategy I'm using for larger accounts.

    Rob
    Apr 15, 2013. 05:48 PM | Likes Like |Link to Comment
  • Blending Alpha And Beta: Building A 'Mini-Endowment' [View article]
    Thanks Alan. That's a good point. The mini-endowment approach also works well as a core portfolio, with a concentrated strategy in the satellite. With the mini-endowment in the core, you could own lots of things in the satellite:
    1)Stock options
    2) Sector bets (biotech or homebuilders, or other high-beta plays)
    3) Concentrated bets of any kind.

    Thanks again,
    Rob
    Apr 15, 2013. 05:28 PM | Likes Like |Link to Comment
  • Malta: Another Weak Link In The European Chain Of Tax Havens? [View article]
    Good foresight. I would think that more journalists would be doing this kind of research: Anticipating the next shoe to drop, instead of lamenting the last shoe to drop.
    Rob
    Apr 2, 2013. 05:57 PM | 1 Like Like |Link to Comment
  • Which Will Weaken First: The Yen Or The Dollar? [View article]
    Vasu,

    Given the expected inflation in Japan, perhaps a good investment would be domestic Japanese companies that have pricing power. (Hedged for the Yen, which would depreciate.)
    The company would have to be purely domestic, and insulated from global fungible commodities. Otherwise, the weak Yen would mean rising costs, and the company would be merely passing on its higher costs with higher prices.

    Maybe this is a fool's errand. It is hard to tell how massive inflation would play out, especially in the context of a global currency war. We could see restrictions on capital outflows, nationalization of foreign assets, and other nasty things for investors.

    Too complex for me.

    Rob
    Feb 16, 2013. 11:14 AM | Likes Like |Link to Comment
  • Which Will Weaken First: The Yen Or The Dollar? [View article]
    Vasu,
    Great charts and analysis.
    If the deposit base in Yen is growing, would this represent private deleveraging? I'm asking because I thought that it might partially offset the expansion in the monetary base.
    Thanks!
    Rob Martorana
    RBI
    Feb 15, 2013. 06:39 PM | Likes Like |Link to Comment
  • The Real Problem with ETNs: The Spreads [View article]
    Dave,

    Excellent point. These ETNs really have to be seen as investments, not trading vehicles. The spreads make trading too expensive.

    As you point out, these ETNs have not been able to create liquidity. There simply isn't enough interest in the underlying securities. Exotic products have to be connected to the underlying asset either through direct ownership, or synthetic products that are guaranteed by an investment bank. But if you have a synthetic product you now have counterparty risk, so the investment now has less transparency instead of more.

    There is no free lunch, I'm afraid.

    Granted, investors may earn a premium on illiquid assets just to compensate them for lack of liquidity. That's one theory, anyway. I prefer to think that illiquidity is just another form of risk. Maybe it's compensated and maybe not. After all, if you buy collectibles from the 1975 Star Wars convention, why should there be a return due to their illiquidity? And if you buy GEMS, a basket of emerging market currencies, why should you earn a return from illiquidity? Currencies are debateable as an asset class anyway--they are a medium of exchange, and don't generate cash flows. The alpha generation from a currency fund could come from the investment strategy, but that's not the point of a passive vehicle like GEMS.

    Thanks again for the article.
    Rob

    P.S. to NYM: I don't know about the play, but "Dark Knight Rises" was terrific.
    Jul 23, 2012. 11:34 PM | Likes Like |Link to Comment
  • Schlumberger Proves Price Draws Supply [View article]
    Dana,

    I agree, and I have a long-term position in SLB as a premium-play in oil services. Growth in emerging markets is driving oil exploration into extreme places, and this is a secular trend that is bullish for high-tech oil services.

    My main concern is the impact of the Euro recession on China, and on global oil prices. Although oil demand in developed markets is relatively stable (even in recession), the GROWTH in emerging markets is still economically sensitive.

    I'm still long SLB, but I'm cautious about oil demand in emerging markets. This is still a good long-term call, but economic sensitivity clouds the outlook for 2013.

    Thanks for your post.
    Rob
    Jul 20, 2012. 12:10 PM | 2 Likes Like |Link to Comment
  • Burned By The Last Bear Market? Consider This Active Tactical Allocation ETF [View article]
    Vanguard is great if you are happy with passive investing and MPT. I use their funds, but not only their funds.
    Jul 10, 2012. 04:17 PM | Likes Like |Link to Comment
  • Burned By The Last Bear Market? Consider This Active Tactical Allocation ETF [View article]
    Great point. Another reason that this isn't a core retirement vehicle, in my opinion.
    Jul 10, 2012. 01:00 PM | 1 Like Like |Link to Comment
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