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- Managing Portfolio Allocations With ETFs [view article]
- Asset Class Performance in 2008 [view article]
- Hedge Funds Moving Into a New Marketplace [view article]
- And They All Fall Down: No Broad Stock Index Is Up [view article]
- Risk/Reward of Owning REITs, Raymond James in this Boom Bust Cycle [view article]
- Risky Waters, But Opportune Waves [view article]
- Gaining in Popularity
- No Present Tense in the Stock Market [view article]
- A Month of Seeing Red [view article]
- Some Advice from Warren Buffet for Difficult Times [view article]
- Quant Approach to TAA: Equity-Like Returns with Bond-Like Volatility [view article]
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- Eight US Real Estate ETFs
- Managing Portfolio Allocations With ETFs
- Asset Class Performance in 2008
- Hedge Funds Moving Into a New Marketplace
- And They All Fall Down: No Broad Stock Index Is Up
- Hedge Funds Make the Move into the Indexing Marketplace
- Risk/Reward of Owning REITs, Raymond James in this Boom Bust Cycle
- Replicating Portfolios with ETFs
- No Present Tense in the Stock Market
- A Month of Seeing Red
- Full List of Articles »
Managing Portfolio Allocations With ETFs [view article]
Where are your asset classes? You have 11 industries, yet you have 10.8% in financials. What about foreign securities? What about real estate, commodities, or alternatives? Secondly, where is the investment selection process? I don’t see how any asset allocation software could deliver the asset allocation mix you own. Thirdly, where is your risk management? If you change your risk model to Conditional VaR (Expected Shortfall) and weight your data using GARCH you would have avoided financials all together.Diversifying assets following the concepts asset allocation is not true portfolio optimization. You might enjoy reading Mandelbrot’s book ‘The (Mis) Behavior of Markets to better understand the newer asset allocation strategies like Extreme Value Theory. Cheers
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Asset Class Performance in 2008 [view article]
Although Treasuries haven't lost anything in nominal terms, we're in a highly inflationary period. What is the rate of inflation? Somewhere between the official rate of 4 percent and and the Shadow Government Stats rate of maybe 16 percent. Treasuries aren't paying even the official rate of inflation, so with Treasuries, you're losing money.Oil is certainly good for the long run, but there may well be a consolidation. Gold is probably about to start another swing up--though no one can see the future that exactly. Reply
Hedge Funds Moving Into a New Marketplace [view article]
Just one more example of a market gone crazy... ReplyHedge Funds Moving Into a New Marketplace [view article]
I did some further reading atwww.indexiq.com/downlo...
It appears that the actual hedge fund index is in the unfortunate position of trailing the S&P 500 over the past 5 years. So these guys made up a new hedge fund index via backtesting...that is, they looked back in time and figured out what sort of hedge fund index would have beaten the S&P by enough to make their fund seem like a good idea. This is kind of like looking back in time to find out that investing in Berkshire Hathaway, Walmart, and Microsoft would have been a good idea a long time ago, then creating a mutual fund that attempts to mimic the returns of having invested in those companies in a forward direction. Also the really high expenses and tax costs will wipe out a lot of this imaginary return. I can't believe this product exists. Reply
Hedge Funds Moving Into a New Marketplace [view article]
The (misnamed) IQ fund should be able to lock up the market of "investors" who would like to pay 1.6% expenses to hold widely-known ETFs with expense ratios of .11% (Vanguard Bond). My head spins at how many stupid ideas I've just learned about from this one fund.What's the value in tracking 9,000 hedge funds? I mean, maybe the top 10, 100 or 1000 have some market-beating potential, but how is it even conceivable to anyone that hedge funds 1000-9000 are going to outperform mutual funds or indexes?
How does holding a bunch of ETFs lead to tracking hedge funds? Hedge funds reveal little information about what they do with a long time lag, trade frequently, and engage in strategies you can't get with an ETF. If you could match hedge fund returns by investing in some of the most popular ETFs according to a mathematical formula, why wasn't somebody already doing this?
Let's assume that a hedge fund index is reasonable and possible. This fund isn't even doing it! They're changing weightings monthly according to some sort of ill-explained modeling.
The guy that runs this company thinks hedge funds are an asset class (quoted in linked article). He must know this isn't true. Hedge funds are a managerial strategy. The asset classes are listed right above here in the holdings - bonds, REITs, stocks, currencies, commodities, etc. These are the same things anyone invests in, usually at much lower expense levels than this fund. What matters is strategy, and this fund has one of the most dubious ones I've ever seen (unless we're talking about a strategy for managerial enrichment). Reply
ng
And They All Fall Down: No Broad Stock Index Is Up [view article]
what you expected with Texas in charge! ReplyRisk/Reward of Owning REITs, Raymond James in this Boom Bust Cycle [view article]
A concerned investor - if a chance shot me an email. ReplyInvestor
Risk/Reward of Owning REITs, Raymond James in this Boom Bust Cycle [view article]
Your analysis of RJF makes very good points. As I assume your research indicated, there may be more issues than you had space to detail. Our analysis has turned up some questions as well.Raymond James Financial is viewed by most analysts as a brokerage firm but it is actually a thrift holding company, with its savings bank subsidiary now holding 45% of its assets, over which RJF has more leeway in mark to market reporting. The RJF management takes the position that the discounted Commercial Real Estate, Alt A I/O hybrids, and the other loans that are held in the RJBank subsidiary do not have to be marked to market. They seem to know the position is a bit shaky. As you probably saw in looking at the RJF press releases and SEC filings, RJBank announced in late March that it had increased the write-downs in the CMO portfolio you referred to from $3 million to $62 million, finally recognizing deterioration in market value of real estate assets. This was an admission that the real estate assets in the Securities portfolio had to be written down. The CEO went on to say, in so many words, that although logically this real estate mark down process should also extend to the bank loan portfolio, there are bank accounting rules that allowed them to not report the loans on a ‘marked-to-market’ basis. This forbearance of the accounting rules on mark to market and write-downs might make sense if RJBank actually were run as a normal bank, but in the RJF holding structure the bank is just a “holding pond” (a quote from the CEO in an Earnings call) for assets from the brokerage accounts where RJBank gets basically all its deposits like E*Trade did. RJBank has no checking or other bank services and only one branch. Does the argument they should get the benefit of bank accounting rules make any sense? If other brokerages like Bear Stearns (or a Merrill) had used the RJF savings bank subsidiary approach to buy its riskier assets and protect them from write-downs in a massive way like RJF did, then Bear or Merrill would not have had to write down their assets. Does it seem like RJF should get special treatment from regulators or auditors here? This inconsistency in treatment of brokerage structures and the ability of RJF not to mark to market does not make sense from either a regulatory or investor protection standpoint.
On the other side, even if you say RJBank is a bank then there is still a strong argument that the accounting rules would not protect the Bank from a proper valuation and increased write-down or provisioning against its loans. Whether the RJBank loans should be marked down is a question that depends on whether the loans in its portfolio can properly be considered ‘temporarily impaired’. It would seem clear from the evidence that the loan portfolio is impaired and it is not a temporary condition. RJBank will have a difficult question to answer from the bank regulators. If RJBank is able to buy these loans at a discount from other banks like Citi whose risk managers have presumably required that the loans be categorized as impaired, marked down, and now sold off at ‘impaired prices’ months ago (and conditions have worsened) then how can RJBank continue to say the loans are only temporarily impaired.
The regulators would seemingly also have to be concerned about the relatively low levels of reserves given the deterioration of the type of real estate assets that RJBank holds – a mere 26 bps for the Alt A hybrid loans where losses are projected at 5% to 7%, or even the seemingly higher 194 bps for the commercial real estate loans that the bank has probably been buying at a 500 bp or higher discounts. In the meantime, as you seem to suggest there might be a significant earnings benefit enjoyed by the bank on the loan purchases depending on the way they book these discounted loans.
It seems clear why RJF is avoiding any suggestion of mark to market or impairment for as long as it can. A markdown of the loans would obviously result in a significant difference in the asset value of RJF and in its stock price. Under a strict mark to market, given the problems in the construction portfolio and where Alt A I/O and syndicated commercial real estate loans are now marked, the write-downs could be $450 to $500 million. You mention the CFO’s comment on the record level of earnings at the bank, and correctly question if that is really an accurate picture if delinquencies are coming, the loans are impaired and earnings not sustainable? A relevant question would also be aren’t bank accounting and SEC rules set up to make sure investors know more about the source and quality of bank earnings and the true valuation of the assets?
You are correct in your short call if, as it appears, writedowns are inevitable; but more digging by you or other analysts, or more pressure brought by regulators, would hasten the process. Reply
ng
Risky Waters, But Opportune Waves [view article]
I listedmy 8 stocks that will outperform on mywebsite and BELIEVE THIS IS THE TIME TO BET BIG ReplyGaining in Popularity
Hello ReplyGeneral Discussion on VNQ
sell ReplyNo Present Tense in the Stock Market [view article]
Good insight. Thanks for the reminder. ReplyA Month of Seeing Red [view article]
I think your GS Market Portfolio index makes all the sense in the world so to speak. You are adopting David Swensen type approach which has been super successful for Yale Endowment Fund for last 20 years with 16% + annual return average. By the way Vanguards new Managed Payout Funds use a somewhat similar approach and provide a very easy way to invest following Swenson/GS Market type models and theory. See for example VPGFX. ReplyA Month of Seeing Red [view article]
Where do you think the market is going now? It has taken a hard hit today, even in the face of relatively good economic news (ISM and Construction Spending were better than expected). Also I read an article recently that said the housing market in Central Florida was stabilizing. I think the same can be said for California to some degree. Governor Swartzenegger went on record recently as predicting the California real estate market will turn upward in California in 2009. I know there are still some write down problems, but even Greenspan is saying that we are at least 2/3 through it. Do you think the stock market will turn upward now? Or will the S&P500 go right through its resistance level of 1250? To me it looks like it might hold (at least temporarily). I know there has been the flooding in the midwest. However, the grain futures have been down the last 2 days due to a report asserting that more acreage was planted this year (for corn). This means that even with the flooding, the food supply should not be much lower (if at all) than previous years. This should be good news for the markets. It make be temporarily bad news for Agriculture stocks. However, even the author writing about this seemed to think the report was too optimistic about the acreage that would be productive this year (after the flooding). To me this means that the Ag stocks can bounce back, and the inflation situation due to Ag is not too bad. I think this should allow the markets to move higher. What do you think? ReplyA Month of Seeing Red [view article]
What are the approximate weights you are using? How would you weigh assets like "cash"? Reply