Inverse/Leveraged ETFs: Inappropriate For Long-Term Investors [View article]
Coincidentally, the February ETF Snapshot from SPDR came out this morning and indicated the Inverse/Leveraged category has seen a 4% increase by assets YTD. Link below.
Inverse/Leveraged ETFs: Inappropriate For Long-Term Investors [View article]
Agreed; these vehicles may certainly be more practical (than options or short positions) for the average investor to express short-term trends. Then of course it is a question of whether or not average investors can correctly identify such short-term trends. History suggests not!
Inverse/Leveraged ETFs: Inappropriate For Long-Term Investors [View article]
Thank you for your comment Chris. What prompts your decision to go short? Technical analysis? Fundamental analysis? Macro view? Interested to hear your feedback.
Inverse/Leveraged ETFs: Inappropriate For Long-Term Investors [View article]
Thank you for your feedback. To your point, the compounding problem is well established, but we have not seen nearly as much attention paid to the potential combination of an inverse ETF with its traditional counterpart in a portfolio as in the last chart.
An Emerging Markets Investment That Could Double Over 10 Years [View article]
You'll notice I used a nominal value ($6,790) rather than a percentage...$6,790 will likely be far less than 6.79% in 10 years. I assume no distribution growth in nominal terms.
An Emerging Markets Investment That Could Double Over 10 Years [View article]
Thank you for sharing your very valid thoughts. The quarterly distributions are and have been erratic, but I would point out that my projection shows the distribution as being flat over the 10 year period in nominal terms. And while the data points may demonstrate variability, practically speaking, the general trend line will be up and to the right as the nominal value of distributions increases over time just like anything else due to inflation/debasement.
I believe this projection is reasonably conservative as a proposition for satisfactory total return.
A Basic Accounting Equation Applied to Financial Markets Today [View article]
You're absolutely right. What you are essentially describing is an increase in productivity; which next to population growth is the driver of value creation.
Certainly consumption is too high. However, when interest rates are at the floor people are not incentivized to save either!
Most Mutual Funds May Be for Fish: DFA's Funds Aren't [View article]
To echo the comment above, as a retail investor, you must use an intermediary to access DFA funds and the additional cost completely negates the value add of low portfolio turnover and the low book to market stock selection process.
Also, when you own 20% of an asset class, your systematic risk will be unavoidably high. That being said, DFA's approach is certainly well researched and based on sound ideas.
A Basic Accounting Equation Applied to Financial Markets Today [View article]
I fully understand the velocity component of inflation; too many dollars chasing too few goods, which would be a happy problem for us. However, you should note that the word "inflation" appears only once in the article, and it is in reference to emerging markets, not the U.S. Rather it is currency debasement, the creation of too many currency units, that will destroy our standard of living here in the States. Eventually, we run the risk of the dollar's replacement in global trade.
On interest rates; I encourage you to be more skeptical or even cynical in your analysis of U.S. policy. "To encourage investing" is a nice PR tool, but in reality it the government cannot afford an increase to its weighted average cost of capital. Remember, those interest rates dictate the rate at which our government borrows money. As Kyle Bass and his team at Hayman Capital estimate, a 1% increase to the government's WACC signifies an additional $150B interest expense!
A Basic Accounting Equation Applied to Financial Markets Today [View article]
I like your thinking in the expansion of the equation; it does present a clearer view. The problem is that liquidation values are lower, and perhaps far lower, than values on a balance sheet.
Throughout this crisis we have seen bailouts not liquidations.
EFSF: Too Small? Too Big? Or Just Wrong? [View article]
Providing weak sovereigns with access to credit at rates not commensurate with the risks involved; isn't this what caused the Euro problem in the first place? Hard to see this ending w/o millions of very angry Germans when this all blows up...
It is all relative; if all of the developed world is in the same boat then how does a downgrade affect the cost of borrowing for the U.S. relative to Europe or Japan or Switzerland? It doesn't. As one friend in real estate said regarding credit scores; 680 is the new 780!
While I agree with the general thesis that TIPS are not a great investment, the analysis in your linked article applies to a security held to maturity. When dealing with a fund or portfolio of TIPS as we are here, there is turnover.
USCI, The 'Contango Killer' ETF: An Imperfect Solution [View article]
Inverse/Leveraged ETFs: Inappropriate For Long-Term Investors [View article]
http://bit.ly/XFXgYz
Inverse/Leveraged ETFs: Inappropriate For Long-Term Investors [View article]
Inverse/Leveraged ETFs: Inappropriate For Long-Term Investors [View article]
Inverse/Leveraged ETFs: Inappropriate For Long-Term Investors [View article]
An Emerging Markets Investment That Could Double Over 10 Years [View article]
An Emerging Markets Investment That Could Double Over 10 Years [View article]
An Emerging Markets Investment That Could Double Over 10 Years [View article]
I believe this projection is reasonably conservative as a proposition for satisfactory total return.
A Basic Accounting Equation Applied to Financial Markets Today [View article]
Certainly consumption is too high. However, when interest rates are at the floor people are not incentivized to save either!
Most Mutual Funds May Be for Fish: DFA's Funds Aren't [View article]
Also, when you own 20% of an asset class, your systematic risk will be unavoidably high. That being said, DFA's approach is certainly well researched and based on sound ideas.
A Basic Accounting Equation Applied to Financial Markets Today [View article]
On interest rates; I encourage you to be more skeptical or even cynical in your analysis of U.S. policy. "To encourage investing" is a nice PR tool, but in reality it the government cannot afford an increase to its weighted average cost of capital. Remember, those interest rates dictate the rate at which our government borrows money. As Kyle Bass and his team at Hayman Capital estimate, a 1% increase to the government's WACC signifies an additional $150B interest expense!
A Basic Accounting Equation Applied to Financial Markets Today [View article]
Throughout this crisis we have seen bailouts not liquidations.
EFSF: Too Small? Too Big? Or Just Wrong? [View article]
Don't Worry About U.S. Downgrade [View article]
TIPS: A Poor Inflation Hedge Today [View article]