Loading...
Symbols:
DJP Forum Topics
- All Comments on DJP
- General Discussion on DJP
- Tactical Asset Allocation, Part I [view article]
- Bailout Cost, per Taxpayer, by Income [view article]
- ETF Insights: The New Hard Assets Producers ETF [view article]
- A Rundown of Broad Commodities Indexes [view article]
- An Endowment Portfolio From Publicly-Traded Vehicles [view article]
- Commodities Boom and Rotation [view article]
- Don't Get Caught in the Dot Commodity Bubble [view article]
- Simple Asset Allocation Yardstick [view article]
- Cost of Higher Commodities [view article]
- Van Eck's Hard Assets Producers ETF: A Better Alternative to Commodity ETFs? [view article]
- More Thoughts on Mohamed El-Erian's 'When Markets Collide' [view article]
- A 360 View of Returns (July 2008) [view article]
loading ...Recent DJP Articles
- Currency ETFs Shine Through Bleak Market
- Bailout Cost, per Taxpayer, by Income
- Tactical Asset Allocation, Part I
- The Benefit of Higher Commodities
- Cost of Higher Commodities
- The 15 Basis Point Portfolio and Bobodex 10 Collide
- Simple Asset Allocation Yardstick
- Van Eck's Hard Assets Producers ETF: A Better Alternative to Commodity ETFs?
- ETF Insights: The New Hard Assets Producers ETF
- More Thoughts on Mohamed El-Erian's 'When Markets Collide'
- Full List of Articles »
Trading Center
Hedge Fund Jobs
Job Seekers: Search jobs by category, get job alerts by email or live feed, apply online See full list of jobs »
Employers: See all recruitment options, get applications online or by email Post a job »
Tactical Asset Allocation, Part I [view article]
Vernl, downside risk only measures the standard deviation below the mean. In the real world, a loss is a peak-to-trough drawdown, so standard deviation is inherently superior as it is the probability weighted maximum point above the mean to the minimum point below the mean. If the maximum historical drawdown is what one is worried about, then a simple heuristic ( 1 / maximum drawdown in % ) can be used to allocate.Reply
Gruneisen
Tactical Asset Allocation, Part I [view article]
I'm new to this forum, so hopefully this is an ideal place to start with a comment.If one were able to buy MVV or any of the 2X long ETFs on margin they'd in effect be 4X long the index. Correct? So, in the event the investor might time that purchase such that the index subsequently rallies +10% , the investor might be up about +40%. Of course, this assumes the risk that the index might continue falling, and they are on the hook X4 to the ongoing losses that index might continue sustaining. This is not for the risk averse investor, however it seems like it might be a tempting investment tactic for those who are able to handle the risk.
After seeing QLD fall from $83.55 on 8/15/08 (at its 200 DMA resistance) to the $40 area now, the probability of a +10% rally in the coming weeks seems rather good. Anyone?
I originally attempted to post this comment in response to the 7/11/06 article by Greg Newton seekingalpha.com/artic...
which mentioned the then soon to be introduced 2X ETFs linked to the major indices
2x Long the NASDAQ-100 (QLD)
2x Long the S&P 500 (SSO)
2x Long the S&P MidCap (MVV)
2x Long the Dow Jones Industrial Average (DDM)
2x Short the NASDAQ-100 (QID)
2x Short the S&P 500 (SDS)
2x Short the S&P MidCap (MZZ)
2x Short the Dow Jones Industrial Average (DXD) Reply
Tactical Asset Allocation, Part I [view article]
Geoff: i hope you don't get tired of my posts, but i have to tell you, once again, great article!!!!!!! ReplyBailout Cost, per Taxpayer, by Income [view article]
Nicely put, Smarty_Pants!However, keep in mind that most of the losses have already been accounted for due to mark-to-market principles, so anything paid above market value will appear as a profit on the next quarterly report for the company.
Also, normal supply and demand rules still apply, so when the Treasury starts buying $850B of these toxic assets at market price, this market price will rise sharply.
On Oct 02 02:17 PM Smarty_Pants wrote:
> Purchasing bad debt won't eliminate the losses that it represents.
> At best it will transfer them.
>
> Three cases:
>
> A) Treasury buys toxic securities at original values - original owner
> avoids losses, taxpayers take them.
>
> B) Treasury buys toxic securities at true value - original owner
> forced to realize the loss NOW, taxpayer avoids loss.
>
> C) Treasury buys toxic securities between full value and true value
> - original owner forced to realize partial losses NOW, taxpayer gets
> partial losses.
>
> No matter what, any schedule 3 asset that is not bought at full value
> will put an immediate loss in the company's bottom line (which is
> the fact we're trying to avoid right?). This still leaves the original
> owner with the same problem NOW instead of later.
>
> Any other option requires the taxpayer to take the hit instead.
> Blather about "holding until profitable" is just that, Blather.
> If that were truly the case, Warren Buffett would be buying level
> 3 assets instead of loaning money to Goldman and GE at 10% interest
> with warrants.
>
> The reason Warren Buffett isn't buying toxic assets is that there's
> no way to make money on them without risking a huge loss. Reply
Bailout Cost, per Taxpayer, by Income [view article]
Purchasing bad debt won't eliminate the losses that it represents. At best it will transfer them.Three cases:
A) Treasury buys toxic securities at original values - original owner avoids losses, taxpayers take them.
B) Treasury buys toxic securities at true value - original owner forced to realize the loss NOW, taxpayer avoids loss.
C) Treasury buys toxic securities between full value and true value - original owner forced to realize partial losses NOW, taxpayer gets partial losses.
No matter what, any schedule 3 asset that is not bought at full value will put an immediate loss in the company's bottom line (which is the fact we're trying to avoid right?). This still leaves the original owner with the same problem NOW instead of later.
Any other option requires the taxpayer to take the hit instead. Blather about "holding until profitable" is just that, Blather. If that were truly the case, Warren Buffett would be buying level 3 assets instead of loaning money to Goldman and GE at 10% interest with warrants.
The reason Warren Buffett isn't buying toxic assets is that there's no way to make money on them without risking a huge loss.
Reply
Tactical Asset Allocation, Part I [view article]
That's IIH...... ReplyTactical Asset Allocation, Part I [view article]
Hi Goeff,Another interesting and informative piece.
Regarding the internet etf, IHH, I notice that there was an odd downward move in the price of the index on one day in May. There was barely a corresponding volume blip or even the typical explosion in volatility one typically sees after a movement of this size. Of course, arbs sometimes come in to exploit the premiums or discounts on these etfs, but then you see the volume spikes and volatility. There are 14 stocks in the index and I looked at the price action of the top 10 of them on that day. There was no corresponding price move in any of them. Perhaps the etf was either restructured, reorganized or split.
In any case, there are odd changes in securities prices because of cap distributions and reorganization, spin outs and what not. I’m wondering how qpp deals with these odd events to ensure robust and accurate data in the program?
Thank you,
JMorace Reply
Shrugged
Bailout Cost, per Taxpayer, by Income [view article]
It isn't a bailout, it's what is referred to in the venture capital industry as a "cramdown". The US Treasury, and therefore the taxpayers, will make a profit on this cramdown. Replying
Bailout Cost, per Taxpayer, by Income [view article]
probably the US economy will grow more than 7%, even 14% in next years, but only in dollar terms, not in hard currency... ReplyBailout Cost, per Taxpayer, by Income [view article]
JasonC.Interesting point. But did you stop to realize that aggregate GDP is not spread uniformly? What if most of the gains/benefits accrue to the top 5% (those who own stocks of these companies and others) yet the bonds are repaid by a broader spectrum? (those who consume most of their income)
And more things come to mind that should be considered. What of the costs of inflation caused by injecting dollars into the economy, which is born more heavily by "working class" people, as the costs of necessities is a higher percentage of their income. And what of the intangible costs of the moral hazard created? Put a value on that one! And from what I'm reading $700B is not the end of it. What happens when CDS and credit card and auto loans are added to bailouts? Where does it end? And once we're in for $700B, there would be severe pressure to "protect our investment" with further cash outlays.
I think the calculations required here are beyond any one page column. Reply
Bailout Cost, per Taxpayer, by Income [view article]
The more money congress takes from taxpayers, the more money they spend. We don't have a revenue problem. We have a spending problem. But what the heck does congress care. It is easy to spend money that is not your money. I could do the same, too. I would like to see every incumbent in the house of representatives get voted out of office in November. All of them need to go. Also, get rid of 1/3 of the Senate that is up for vote in November, too. VOTE FOR NO INCUMBENTS IN NOVEMBER. Sent a big message to the fools. ReplyMarkToMarket
Bailout Cost, per Taxpayer, by Income [view article]
Glad to see some discussion of mark-to-market...an indepth examination of what would happen if it was suspended temporarily or phased in while abusive CDS practice is phased out would be interesting. ReplyBailout Cost, per Taxpayer, by Income [view article]
No, we will grow 6-7% per year long term average after all the noise.The market dropped 777 points on Monday. But the same index was *worth* 777 points at the 1982 low, 26 years ago. In 26 years, a day's hard fluctuation is the size the whole market was then.
The permabears will be screaming "doom, doom" when the market drops 10,000 points in one day, 26 years from now. All the way down to 175,000.
Perhaps it won't be quite that good, and perhaps it will meander around for 5 years before taking off again. Or perhaps it will take off within 6 months after a bailout bill passes. Nobody knows, and I for one don't much care. As long as we don't deliberately nuke the golden goose that is our financial system, a generation from now every doom mongering short today, will look as dumb as the doom mongering shorts of 1982. Who all said that recession was Hoover all over again and Reagan was a dunce, etc, etc. Reply
Bailout Cost, per Taxpayer, by Income [view article]
iThinkBig:Too bad the world is going to end on December 21, 2012, per the Mayan Calendar. We'll never see the start of the next bull market. :-)
Seriously though, you're right. Things will get worse before they get better. ARM resets will continue until at least 2010 and foreclosures will follow the resets. Housing prices will continue down until the excess inventory clears. New building will slow to a crawl and economic activity with it. Hunkerdown and look for bargain basement prices on things of value to build your net worth on. Until then, protect your savings and add to them every chance you get. Reply
Bailout Cost, per Taxpayer, by Income [view article]
What was the economy like in 1980? Did we use the Efficient Market Hyposis then? No? Then perhaps as an economist I take into consideration what an entire economic model the USA has run with the last 25 years. Then I will consider if the USA will remain the global currency peg in the foreseeable future Jason C.Yes, we'll move on and grow the economy yet again. But are we still a $14 T economy? I don't think you or I could answer that at this time.
Will we grow 6-7% a at some point, sure. But your information is providing false hope for investors and citizens alike.
Here is my advice since 2007 which has remained consistent and has been accurate as all can click on my screen name and see since then: We are going into a depression. Our 25 year economic model has failed. Inside greed from Washington and Banking accelerated this process.
Prepare for a Depression. Plenty of ways to make money and buy up great assets cheap during one. People will become fabulously wealthy or fabulously poor in short spans.
The start of the next sustained stock market and Bull will be 2013. I can click on your comments Jason C and see many, many incorrect forecasts. But on financial knowledge you are very bright in general, just over-optimistic about the short and mid-term.
Hey, I want it to be wonderful too, but I am a realist not a cheerleader and as such I have a responsibility to advise those I care for about the realities I mentioned. Much of it is simple common sense and fundamentals. Reply