rayhendon

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    • Fri Nov 14th 20:07 PM | Rating: 0 0
      Commented on:
      The G-20 Sings a Song of Sixpence
      I suggest you do a little more research on J.M. Keynes, including his role at the Bretton Woods Conference, and his place in establishing macro-economic theory. If you look at any elementary economic text book for the last forty years, Keynes' theories and policy recommendations have dominated about half the volume.

      I also reject any bias because I use to teach economics and finance in college. No one deserves to be assigned either a liberal or conservative label just because they chose that profession. Economic theory does not come in flavors of liberal or conservative. It comes as a study in trade-offs between competing goals with limited resources.

      If you want some current relevance of Keynes, study his liquidity trap theory, which thoroughly explains our current situation of trying to use monetary policy to get out of a serious economic downturn.

      Lastly, I did not expect any great things from the meeting of this week. I suggest you re-read what I wrote. I think the next meeting, in 100 days or so will be the more meaty of the two. All participants need some tome to study their options, and there will be some fundamental differences about the role of regulation, size of stimulus and IMF participation.

      I also disagree with your assessment of the IMF over the years. Check out the hundreds of countries what have borrowed from the IMF and taken their advice on how to straighten out their economies. I think once you are more familiar with the facts of the situation, you will draw a different conclusion.

      Everyone of good will wants the situation to get better. I have no particular biases that cannot be broken if it would help. I am not sure you understand the seriousness of the crisis we face. The wheels have come of the world's economies. Major stuff is needed to put them back on. Clinging to ignorance and prejudice will not do the job.

      Also, to assign to Keynes the problems the UK has had since WWII is rather simplistic and, simply, wrong. He was a private economist and currency trader. The British Empire was at the end of it life because of a host of factors, none of which were under the power of J.M Keynes.

      Best wishes,

      Ray
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    • Thu Nov 13th 11:54 AM | Rating: 0 0
      Commented on:
      The G-20 Sings a Song of Sixpence
      The major contributors to an expanded IMF fund would be Europe, America, Japan and Saudia Arabia. All these nations have good supplies of foreign reserves, and could make contributions in the hundreds of billions of dollars if needed.

      I agree with you that the Bush Administration has used the IMF and the World Bank as dumping grounds for washed up hacks. But it hasn't always been that way, and it will not be in the future, at least is the G-20 members gave their way. Also, some of the past Administrations have actually put good people in these positions.

      Best Wishes,

      Ray


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    • Tue Oct 28th 01:01 AM | Rating: 0 0
      Commented on:
      Opportunities for Currency Investors Amid Market Turmoil
      I do not expect the dollar to weaken in a long-term sense. It has spent the last seven years doing that, and I believe it has weakened past the point where it was reasonably valued.

      You seem to be taking a narrow point of view about the dollar, looking at it from your American perspective. But the demand for dollars is truely world wide, and all over the world, the dollar is still a sought after currency because it can be used to purchase what America sells or what other countries sell and will accept dollars for. America produces over 35% of the world's GDP, and people want what we sell, whether computers, software, airplances or stocks and bonds.

      Nor is the bailout relevant to the dollar supply world wide. The bailout is a mere trading of assets. We sell debt and trade the proceeds of that debt for other debt. We may win or lose on the trade, but this is not the same as pumping raw money into the bankings system. We are buying assets that will, in the long run, be quite valuable. Even if there are mortgage defaults, the underlying property can be re-mortgaged to more qualified buyers.

      Also, things may be bad here, but they are not as bad as elsewhere, at least for many places. Europe is further into a decline than we are, and all of developing Asia is hurting. With the decreasing supply of world dollars eminating from reduced foreign purchases by Americans, there is even more need for dollars to satisfy world liquidity needs. No other currency can take its place, at least for now. And, I don't think there will be a viable competitor for its place in world finance for some time to come.

      In this sense, then, the dollar is not being over produced. It is now or will be soon, actually undersupplied as the world's clearing currency. I see the demand for it going up rather than falling, because all other currencies are now taking their turn being hammered.

      You may be right. I confess I don't know what will happen. But I'm still long on the dollar and will be until the fundamental value gets out of line. It is still out of line on the down side for now. And it will probably take a long time for it to get into an overvalued position. At least that is my take on it.

      Best wishes,

      Ray
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    • Mon Oct 27th 11:44 AM | Rating: 0 0
      Commented on:
      Opportunities for Currency Investors Amid Market Turmoil
      Joe: This is a very real possibility. As of today, not only Japan but the G7 finance ministers also, are talking about selling yen in order to keep it from getting too higy. I put some references in my latest blog about this development it you'd care to check it out.

      Best wishes,

      Ray
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    • Fri Oct 17th 17:38 PM | Rating: 0 0
      Commented on:
      Sleeping with Short Bond ETFs
      If short interest rates go down further, which some are predicting, then you will get a little price bump of SHV or SHY--less so on BIL or USY.

      You must forgive me if I tend to write as if all accounts were like mine, were almost everything is in a tax protected account. The disavdanatage is that you don't have the freedom to move your money around into and out of savings accounts.

      This is one of the oddest periods, financially, that I have every experienced. So much of what we expect is not relevant today. But, I think more normal times will return once the dust settles on the banking and credit crisis we have experienced.

      Thanks for the comment.

      Ray

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    • Fri Oct 17th 13:10 PM | Rating: 0 0
      Commented on:
      Sleeping with Short Bond ETFs
      I think money markets are fine, most of the time, but usually short bond ETFs and short bonds will outperform MMs. As you extend out the curve, to 2+ years AD, it is almost impossible for MM to keep up with the yield.

      When you say that most of the funds mention are not performing well, how do you mean that? I see them as performing fine. If, by chance, you mean over a few days or weeks, then I can see that. But, if you will look at the average duration of a prospective fund, and measure the average duration against the length of time you can keep your money invested, then as long as the AD is as long as your investment horizon, you cannot lose money. The arithmetic of average duration will work that way.

      I got out of MMs some time ago because of their returns were well below inflation. Now, however, almost all short durations obligations are below it, too. So, I try and at least keep as close to inflation as I can, and a longing short-term bond ETF is the best bet, at least as far as I can see.

      Best wishes,

      Ray
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    • Fri Oct 17th 10:13 AM | Rating: 0 0
      Commented on:
      Sleeping with Short Bond ETFs
      Good question. With my fixed income holdings, I use current market conditions to determine where new monies go. In a rising or unstable interest rate environemnt, I always go short. In a falling or stable interest rate environment I extend out to the intermediate range. I do not try and time the market. I simply go where I see the best spot at the moment. Fortunately, going from an average duratio of 2.5 to, say 4.5 is not exactly a techtonic shift in assets. And, in my view, one cannot be over or under-weighted in short or intermediate bond holdings. There isn't that much difference to justify any kind of attempted precision in allocation percentages.

      For most of my fixed income portfolio, I keep my allocations fairly constant, but do vary the short-intermediate allocations slightly as market conditions change, but only to the extent that I am putting in new money.

      In terms of "after the fact", I could say right now, that any time the equities market takes a major downturn, short fixed income investments will beat equities. This is not rocket science, but merely the simple observation that short bonds do not fluctuate much in price. I can also say with great precision exactly how much a bond fund will appreciate or depreciate given a 1% change in interest rates. This is not because I have any special predictive powers, but rather it is because the relationship between bond prices and interest rates is scientifically defined by the value of the funds' average duration.

      Best wishes,

      Ray
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    • Sun Oct 5th 15:12 PM | Rating: 0 0
      Commented on:
      A Peek Under the Wisdom Tree
      John: I'm not sure I can provide you with the answer you need, but here's the way I understand their structure. First, only a few of their currency ETFs hold the actual currency. In all emerging markets they buy non-deliverable forward contracts or currency swaps if multiple currencies are involved. In both cases, an interest rate is built in to the contract, which is part of the forward market mechanism.

      For the currencies they own directly (Euro or yen, e.g.) they use the currency holdings to invest in local short-term, high quality financial instruments, that on maturity, pay interest.

      They may collateralize their forward contracts with U.S. Treasury obligations, and will earn interest on the holdings in addition to that paid on the forward contracts.

      It is my understanding that all interest earnings are retained for the shareholders and are added to the net asset value as they accrue. This provision, I believe, is part of the requirements of the Investment Company Act of 1940 which regulates mutual funds and most ETFs.

      Best, wishes,

      Ray
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    • Sat Sep 27th 11:58 AM | Rating: 0 0
      Commented on:
      Barclays Will Not Pick Up Lehman ETNs
      The bonds will be paid accouring to: their status with respect to other debt--some are senior, some are subordinated, etc., and subject to how much in assets are left to distribute. Also, some bonds may be tied to specific assets, such as mortgages, railroad cars, airplanes, etc. I doubt Lehman had any railroad car bonds, but they may have some that are tied to other specific assets.

      Generally, I think the bond holders are just above stockholders in the long line of creditors. Both classes are probably going to take one for the team!

      Ray
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    • Fri Sep 26th 21:01 PM | Rating: 0 0
      Commented on:
      Barclays Will Not Pick Up Lehman ETNs
      Exchange Traded Note, a financial insturment somewhat similar to an exchange traded fund, except with an ETN the value of the note is strictly limited to the credit worthiness of the sponsor. They are not protected by any of the provisions of the Investment Company act of 1940, as mutual funds and ETFs are.


      Best Wishes,

      Ray
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    • Fri Sep 26th 14:04 PM | Rating: 0 0
      Commented on:
      A Peek Under the Wisdom Tree
      Indexor: Here is the official reply from WisdomTree:

      Income distributions by the Funds, including distributions of short-term capital gains, will be taxed as ordinary income. Capital gain distributions by the Funds, if any, will be taxed as long-term capital gains. Gains from sales of fund shares will generally be taxed as capital gains in accordance with the investor's holding period. Shareholders should refer to the applicable WisdomTree Dreyfus Currency Income ETF prospectus for important tax information and should consult their tax advisers regarding their personal tax situation.

      Hope this helps.

      Ray
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    • Fri Sep 26th 11:39 AM | Rating: 0 0
      Commented on:
      Barclays Will Not Pick Up Lehman ETNs
      It isn't going to help. But, they were always toxic to me. I have never understood, from an investor's point of view, what the attraction of an ETN was over the much more protected and transparent ETF.

      An odd sidenote to this whole episode is that the three ETNs at question have less than $5million in assets each. In total they are just over $13Million. So there are no big enchaladas at stake.

      But, the entire story hasn't been told, yet. The bankruptcy judge may arrange a sale of these assets to another buyer sometime before they are otherwise liquidated. Investors in these unfortunate insturments still have a glimmer of hope. But, had they been mutual funds or ETFs, their assets would have been protected from Lehman's failures as money managers.

      Best wishes,

      Ray
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    • Thu Sep 25th 15:02 PM | Rating: 0 0
      Commented on:
      A Peek Under the Wisdom Tree
      I discussed the tax issue with Mr. Lavine, and he provided me with an answer that I can't recall with enough specificity to do you any good. I am going to submit your question to WisdomTree for their official response. As soon as I get it, I'll post it here.

      Thanks for the comments and question.

      Ray
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    • Wed Sep 24th 13:28 PM | Rating: 0 0
      Commented on:
      A Peek Under the Wisdom Tree
      Thanks for your comments, Brian. You do have a good point about the potential relationship between hot money and its effects on currency prices, but I am not signing on to the scenario you outline about inflows and interest rates. I think there are some flaws in the plan, but I'm not going to make a counter-argument now. It would take a lot of space and time, but this is something we might revisit at another time.

      I will make one note, however. I think the most important variable in predicting the interest rate effect is not the relative rate of interest, i.e., high or low, but the direction of expected change. If interest rates are expected to rise and do, this would devastate longer-term bond prices, regardless of where they start from. It would, of course, help bond prices if they were expected to fall and did, in fact. fall.

      Also, emerging markets do not support a sufficiently liquid high-quality credit market, so all of the ETFs that specialize in this segment of the market use forward contracts as their primary assets, and they depend on the roll for their interest earnings. You can only extend this out so far, and contracting with an exceptionally long roll period places a huge burden on the fund's net asset value. What if thery're wrong? I don't know of any that want to take on this type of risk.

      You might consider contacting your local WisdomTree rep with your suggestion about venturing out the yield curve. From what I have learned from Mr. Lavine and from his counterpart at Barclays, they listen to their advisors clients. You might start a revolution in the business. (:~)

      Thanks again for your input.

      Best wishes,
      Ray

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    • Fri Sep 19th 10:33 AM | Rating: 0 0
      Commented on:
      Bond Wars Update: International and Junk
      Doubling down is a risky strategy, although I have used it successfully in the past. It does lower your average share price and if a recovery occurs, your profits are enhanced. I'm not certain about PCY's prospects for recovery as far as timing. There is great turmoil in the markets now. I would certainly never recommend it--just point out the risks and leave it to you. My risk preferences are probably much more conservative than yours.
      However, I am bullish on emerging markets over the long haul. Russia and Turkey have a lot of room to grow, but it's going to be bumpy. My concern in Russia is the fate of the ruble. It is mostly a free floating currency, as far as I know. It could take a huge hit if the political situation there gets much worse.

      Good luck.
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