CM in MA

35 Comments

    • Fear Not Yet a Factor [view article]
      kimasabe--I agree with you and wpdragon. Shorts help to make a market. My point is that a market can't be considered free, open, transparent, etc. when one side is allowed to keep its cards from view. The fact that a sell order is a short sale is known by the person placing the order and the firm executing the order. This fact isn't disclosed to the buyers until well after the transaction--using the car analogy above (and it's not a perfect analogy), it would be like buying a car or house from someone and then finding out that the title isn't clear. My solution is to let the market know that the seller is short the shares. The only reason that I can think of not to do so is to provide the short seller with protection from longs. Since longs don't get such protection, why should shorts? I have nothing against shorts, I just believe the playing field should be level. If someone wants to sell shares short, go ahead. The short sellers should have the confidence of their conviction, just as longs do. Aug 22 06:35 PM
    • Fear Not Yet a Factor [view article]
      Make that twice a month. Sorry. Aug 22 03:09 PM
    • Fear Not Yet a Factor [view article]
      Sure, shorts are valuable to the price discovery mechanism. IMHO, the problem with shorts is that they hide in the weeds. Longs cross the tape in full view and in real time. Shorts disclose their position once a month, and the information is already dated when it comes out. Mark the tape as a short sale and make it a truly transparent market. As it stands, short-selling is too easy a deck to stack. Aug 22 03:00 PM
    • Is the Steel Industry Preparing for the Future - or Just Raking in Dough? [view article]
      Mike, another part of the picture is expansion by domestics into overseas markets (i.e. Nucor). Perhaps this will smooth results during bumps in the U.S. economy. Good article. CM Jul 31 09:04 AM
    • Is the VIX a Fear Index? [view article]
      Bill, an absolutley outstanding article! I've spent countless hours modeling the VIX and observed exactly what you've written. You, however, said it better than I ever could have. Thanks for the great read! Chuck Jul 31 08:58 AM
    • No Atheists in Foxholes - No Libertarians in Financial Crises [view article]
      bearfund has it right. The folks leading the executive branch are Republicans. The folks leading the legislative branch are Democrats. The folks leading the judicial branch are Democans or Republicrats--take your pick. Please don't confuse any of the aforementioned groups with Libertarians. When (or if) the Libertarian Party has a turn at the helm of any of the branches of government then, by all means, fire away! Jul 18 10:58 AM
    • The Current Market Atmosphere: Easy Money Hard to Come by [view article]
      Interesting article, but forming any opinion, thesis or course of action on "facts" such as "the median wage-earner is unable to afford the median priced home" is fraught with danger. I glanced at the study and am fairly certain it is using national medians. Well, we don't live in a median world. Wealth and earning power tends to cluster. Those earning at or below the national median wage in a high-wage area will likely find themselves consistently priced out of the local real estate market where most homes will tend to run above the median house price. Conversely, a person earning at or above the median wage in a low-wage area will be able to afford a home at the upper end of what is likely to be a below median priced housing market.

      Facts and data only have meaning when put in context. And also remember that all studies have biases (yes, even at Harvard) and perhaps even hidden agendas.
      Jun 25 01:39 PM
    • Portfolio Planning and the Lost Decade [view article]
      Geoff--thanks for the link to the DALBAR study. I gave it a quick look, but will read it in detail.

      I was in the TSP while in the military. I think it is a great program. Keeps things simple. Many 401k/403b plans could (and do) do worse than use the TSP as a model.
       Jun 16 05:37 PM
    • Portfolio Planning and the Lost Decade [view article]
      ok, I give up: I typed "reallocating&quo... correctly twice and both times it changed to reallocati... Jun 16 01:50 PM
    • Portfolio Planning and the Lost Decade [view article]
      above should have read: "folks were rebalancing/reallocati... too frequently" Jun 16 01:50 PM
    • Portfolio Planning and the Lost Decade [view article]
      Geoff--yeah, don't know if the equal weighted portfolio would be a good benchmark or not. Seems to me, though, the only other choice would be to lock in the original P20 allocation as the benchmark for subsequent changes. My rationale for that is the need to isolate the effects of future reallocation decisions. After all, once the portfolio strays from equal weighting, it becomes an exercise in index/sector timing and rotation.

      On a related topic, are you familiar with the government's Thrift Savings Plan? www.tsp.gov The reason I ask is that it is potentially a giant laboratory to study investor behavior vis-a-vis asset allocation decisions and results. As of Nov 2007, there were 3.8 million participants with $231.5 billion in assets. The TSP provides three asset class choices: equities (large-cap, small/mid cap, international), bonds, cash. There are some recently introduced lifecycle funds consisting of these choices. Awhile back, there was some discussion of including other asset classes, but that has not happened yet. For all intent and purposes, reallocation is cost-free, so that removes a factor from the decision process. It is interesting that limits were recently established for interfund transfers--folks were rebalancing/reallocati... too frequently and driving up plan costs for other participants. So, even with just five choices, it would seem there were some people attempting to time the swings in the markets rather than using some basic asset allocation to smooth the long-term ride. Anyway, I couldn't say whether the government has ever studied the results plan participants have achieved, or whether they'd even be interested in doing so. However, it strikes me as a well-controlled experiment in investor behavior.       Jun 16 01:48 PM
    • Portfolio Planning and the Lost Decade [view article]
      Geoff--no vitriol from me. I don't find your approach to diversification at all objectionable. Sure, diversifying beyond the S&P 500 (or any other index) makes sense, but doing so via funds that represent other indexes (either market or sector) means that there are, at the very least, four certainties: 1) the portfolio will never outperform the leading index or sector, 2) the portfolio will never underperform the trailing index or sector, 3) the portfolio will experience less volatility than the most volatile index or sector, and 4) the portfolio will experience more volatility than the least volatile index or sector. Again, there is nothing wrong with damping volatility in this manner, so long as that is the objective within the investing universe the portfolio encompasses. It does not, and cannot, guarantee positive returns over any time period be it short, intermediate or long. Moreover, taking the approach you describe means that it is no longer valid to look at portfolio return against the S&P 500. The returns would need to be weighed against an equal weighted blend of the portfolio constituents to determine the advantage of the weightings found in P20.

      Berkshire, or more specifically Buffett, doesn't look at risk premiums or benchmarks. Nor, I suspect, does Buffett care about diversification as it relates to returns during any time period. He simply seeks to buy good companies at reasonable prices. The reasonable price approach addresses the risk you are trying to reduce via diversification because any index/sector approach is not a business oriented approach to investing. From a business perspective, there is no inherent margin of safety in buying an index or sector fund. It is comparing apples to oranges. Whatever the measure of diversification within Berkshire's portfolio turns out to be, Buffett would likely consider the measure a curiosity at best.

       Jun 15 06:35 PM
    • Portfolio Planning and the Lost Decade [view article]
      Geoff--an interesting article as far as diversification goes. One reminder to ETFers, though, check the portfolio in the ETFs for overlap. IGE and IVV (23% of the portfolio) have 20% overlap in their top 10 holdings. To be fair, P20 doesn't appear to have a great deal of overlap overall.

      In down (and flat) markets, the wonders of diversification are always trotted out. Not that any of us, myself certainly included, can lay claim to the mantle of Warren Buffett, but he had this to say about diversification: Diversification serves as protection against ignorance. If you want to make sure that nothing bad happens to you relative to the market, you should own everything. There is nothing wrong with that. It’s a perfectly sound approach for somebody who doesn’t know how to analyze businesses."

      Remember, the website is Seeking Alpha.       Jun 13 04:05 PM
    • Want to Fix the Fed? Get Rid of It [view article]
      An outstanding article, and good commentary. Thanks, folks, you gave me food for thought today. I appreciate it. May 16 08:09 AM
    • No Uptick Rule: A Convenient Scapegoat? [view article]
      Herb, I'd recommend folks take a look at a chart of the VIX from mid-1998 to early 2002. Now that was volatility, and the uptick rule was alive and well. There is no correlation between the existence of the uptick rule and low volatility. Likewise, there will no doubt be little or no correlation to the lack of an uptick rule and high volatility. I have nothing against short selling (or short sellers). The only thing that bothers me is that short sellers can hide their activity due to the delayed reporting of short positions. Shorts should have the courage of their convictions and operate in full view. Mark the ticket and ticker as a short sale so that the market has full, real-time knowledge of short interest. Apr 30 10:08 AM
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