Rhunzzz's Comments

Tactical Asset Allocation Based on the Yield Curve

Mon, 16 Nov 2009 04:03:40 -0500

What do you mean when the yield curve is <0%?

Are you referring to the gradient of the curve? The spread between 2 and 30-year interest rates?

What if Governments Are Directly Buying Stock ETFs?

Wed, 02 Sep 2009 00:26:45 -0400

But what point would there be in buying stocks? Buying bonds directly affects treasury yields and credit markets. Buying stocks... has no direct, appreciable effects upon the operations or finances of the companies listed, let alone the wider economy.

There is this myopia common among stock market commentators, to believe that the stock market is somehow as important and deserving of attention as the real economy. Pfeh.

Applying Value Investing Principles at the Country Level

Tue, 01 Sep 2009 02:41:58 -0400

These studies have intrigued me as well. The problem is, for the retail investor who would be interested in ETFs, hard information on the valuations of national stock markets is hard to come by. One can try to go by the valuations of the representative ETFs, but this becomes difficult since different ETF issuers tend to use different measures for valuation ratios.

As an example, the price-to-book ratios for the iShares Japan ETF (EWJ) and the equivalent SPDR (JPP) are very different - 1.47 as opposed to 1.25.

Then there is the familiar question of which ratio. You prefer earnings rather than asset bases for valuations, but then p/e is already so prone to pitfalls for a well-known index like the S&P, let alone that of a single-country index ex-US. Trailing p/e? Forward p/e? Leave out companies that have negative earnings?

Demographics Make Russia a Risky Long-Term Investment

Fri, 24 Jul 2009 00:16:12 -0400

All other things being equal, a greying population means a population in which more people are trying to liquidate assets (for retirement income) than are trying to accumulate them (saving while working). This means asset deflation. That is why developed countries with greying populations try to offset this by encouraging immigration.

Russia is, however, not a very attractive place to emigrate to. Its image overseas is a violent place punctuated by political murders, rampant neo-nazi movements, Chechen terrorist attacks, heavy-handed state retaliation (Beslan and the Moscow Theater siege come to mind). Meanwhile, the Russian government will not countenance an immigrant-friendly policy either, for reasons unclear (though one can suspect).

Meanwhile, property is not secure in Russia. Look at how the Russian state screws foreign investors over when things are good, the very same foreign investors that it held out the begging bowl for when times were rough. To a foreign investor, Russia is governed by rapacious, kleptocratic ingrates.

If I could buy an emerging markets ETF or index fund that excluded Russia, I would. But I can't, no more than I can buy a developed world ETF that excludes Japan.

How AIG FP Brought Down the World

Fri, 03 Jul 2009 02:14:57 -0400

How about sewing Cassano into a sack and dumping him into the Thames?

Two Asset Classes in Times of Turmoil: Risky and Risk-Free

Wed, 24 Jun 2009 00:30:15 -0400

I am in agreement. Rather than allocating between stocks and bonds, I believe in allocating between safe and risky assets. Safe assets are cash and short-term (less than 5 years maturity) investment-grade bonds denominated in the currency in which I need to spend. Risky assets are everything else - equities, longer-term bonds, high-yield bonds, commodities, real estate.

The Welcome Hike in Bankers' Salaries

Mon, 22 Jun 2009 11:52:59 -0400

How can it be a positive development that once again, bank employees are plundering bank shareholder money? I don't think I will ever directly buy a bank share for the rest of my life.

Chinese Real Estate: Getting in on the Next Bubble

Sun, 21 Jun 2009 11:22:58 -0400

Stock bubbles lead to lots of money wasted. Real estate bubbles lead to death and destruction. Reading this makes me even more leery of China.

What Unites the BRICs? Dollar Envy

Sun, 21 Jun 2009 09:46:10 -0400

Four months doth not an inverse relationship make.

Goldman Forecasts China Ascendancy

Mon, 15 Jun 2009 02:54:40 -0400

Demographics is destiny. Russia has been in population decline for a decade or longer. China is projected to grow old before it gets rich (i.e. its population will have more retirees than workers before it attains First World standards of living). India... the majority of the population is under 30.

How Rising Interest Rates Could Affect ETFs

Tue, 09 Jun 2009 02:36:30 -0400

Is there any asset class that does well in a rising interest-rate environment? I really can't think of any... except perhaps money market funds.

Do We Really Need More Treasury Bond ETF Trackers?

Thu, 04 Jun 2009 07:17:28 -0400

Perhaps the treasury trackers are meant as loss leaders... a short-term TIPS etf would most definitely be intriguing.

The Importance of Earning Dividends

Wed, 03 Jun 2009 08:56:07 -0400

I'm sure I recall some companies who paid dividends with borrowed money... hmm...

Do Dividend Stocks Underperform the Market?

Tue, 02 Jun 2009 05:46:10 -0400

So there are seasons in stock investing too. Dividends go in and out of favour, and it depends which time period you're looking at. Thus, perhaps it's best at the end of the day to simply buy the entire market at the lowest possible cost, and look at total return.

India ETFs and ETNs Are Not the Best Emerging Market Investments

Thu, 21 May 2009 22:37:08 -0400

China has the more effective government and a huge warchest of foreign reserves.

India has the more open society and favourable demographics.

I'd put my money on India over China in the long run...

The Curious Case of Goldman’s Disappearing December

Sat, 18 Apr 2009 00:53:22 -0400

How very convenient. Goldman's rights issue is an open invitation to suck- er, investors to fund their employees' BMW payments. They've stated that their main reason for paying back the TARP (oh, apart from their bounden duty to the common weal) is to evade restrictions, such as on executive pay.

Japanese Lesson for U.S.: Demographics Matter a Lot

Fri, 17 Apr 2009 05:43:27 -0400

Actually, the US does manufacture lots of things still. It's just that they're not all that visible, or that they hide in plain sight.

www.sfgate.com/cgi-bin...

Think of it this way - it is retirees who liquidate assets like stocks and houses (or consume the cash flows therefrom instead of re-investing, which amounts to the same thing), and it is working adults who accumulate assets. So an economy where there are more people retiring than entering the workforce should see a tendency towards falling asset prices (a BAD, bad thing).

China started its one-child policy around 1979... now, in 2009, the first generation born since that year would be 30, newly-entered into the workforce and still behind their prime earning years (typically around 46). The generation before would be in their 40s. When this pre-one-child-policy generation hits retirement age... watch out. That's why China is forecast to grow old before it gets rich.

Demographics really is destiny.

Solution for Singapore: Just Print Money

Thu, 16 Apr 2009 00:14:54 -0400

Alright, I know you were meaning to be ironic...

But to clarify, we can't print money, because we import everything from food to chemical feedstock to gasoline to micro-motors for disk drives. An oft-mentioned statistic was that a 1% devaluation in the Singapore dollar leads to a 0.75% rise in imported inflation (though this was from a decade ago).

Our currency is not a widely-traded reserve currency, so for us to print money would result in a currency collapse. Suddenly we wouldn't even be able to afford the food on our tables. We do not have the option, unlike you "lucky" citizens of reserve currency-issuing countries (US, UK, Japan, Europe) of inflating our way back.

All we can do is hang on and take some payouts from the government to tide us over.

Alternatives to Buy and Hold for Income Investors

Tue, 31 Mar 2009 07:55:44 -0400

One thing I don't understand about using the EMA or SMA. When I look it up on Yahoo! Finance, what is the "range" I should choose? 1 day? 5 days? 1 month? Depending on which range I pick, the 200-day EMA or SMA function might be above or below the stock or ETF price chart.

Active ETFs Continue to Lead Their Passive Peers

Sun, 22 Mar 2009 02:35:40 -0400

How on earth does the creation/redemption process work with active ETFs? If the fund managers are picking stocks and trading, there can't be a "standard basket" of securities for which to redeem or issue creation units surely? So these active ETFs should have rather high premiums or discounts to NAV, just like CEFs?

Nationalization: Why Continental Illinois Isn't Relevant

Wed, 25 Feb 2009 04:31:27 -0500

This is such a ridiculous and contemptible argument.

Just because William Isaac was there doesn't make him right in this instance. Just because Felix Salmon may not have managed anything larger than his 401k doesn't make him wrong in this instance.

Ad hominem makes you feel smart, but completely misses the issues.

On Feb 24 12:24 PM klarsolo wrote:

> Hmm, who are we to believe: a financial blogger who never managed
> a dime in his life (except maybe his 401(k)) and only read about
> Continental Illinois or a guy that was actually there?

Untangling the Citi Speculation

Mon, 23 Feb 2009 10:25:51 -0500

It's really pretty simple. The news was deliberately leaked to the press as though it were a done deal. Citi was trying to pressure the government into bailing out its shareholders (as described by Henry Blodget in the link).

Time to Buy Bank Stocks

Thu, 12 Feb 2009 21:08:34 -0500

Well the problem is this - the toxic assets have to go, it's that simple.

And as long as the Obama administration does anything that does not involve overpaying for toxic assets (which would be political suicide), shareholder equity in the banks holding those assets will be hurt.

Let's run through the options:

1. Nationalization - 'nuff said.

2. Stealth nationalization - the Treasury takes a stake in the banks in return for injecting new capital, clearing out the toxic assets, guarantees, etc. This would dilute shareholders.

3. Delayed nationalization - the Treasury gets warrants or preferred stock convertible to common stock, in return for capital injections, clearing out the toxic waste, guarantees, etc. This would still dilute shareholders, albeit over a longer period. It would still hurt shareholders unless the share price is rising.

Canary in the Coalmine: Singapore's 2009 Budget

Wed, 21 Jan 2009 13:53:33 -0500

Despite the appearance of normality, the fact remains that domestic consumer spending has never been sufficient to sustain Singapore's economy. Thus one can have shopping centres and restaurants still packed, and still see a severe retrenchment in economic activity.

Returning to a Gold Standard Is a Bad Idea

Sun, 04 Jan 2009 11:11:45 -0500

There is simply not enough gold in existence today, nor was there ever in history, to back up every single dollar of the US economy or in circulation at current spot prices.

To achieve a gold standard, there would have to be MASSIVE deflation, as well as a huge transfer of economic wealth from those who do not hold gold to those who do. Maybe that's why the goldbugs are so for it.

This is the tyranny of humble arithmetic.

The Bull Case for Hedge Funds (Yes, Hedge Funds)

Mon, 29 Dec 2008 11:45:08 -0500

HOGWASH.

Hedge fund managers still charge 2%, more than most mutual fund managers. You think that doesn't incentivize them to grow AUM as well?

And performance fees. Here's the hedge fund deal - you have to share a healthy chunk of the upside with me, but you have absolutely no downside protection, and could in fact risk not being able to withdraw your money, at my discretion.

Hedge funds should not be unduly made a scapegoat for what was after all mostly the sins of bankers. But it's still a rigged game, where the house takes a cut of your winnings but you could lose everything.

Dividend Paying Stocks: You Only Have to Be Lucky Once

Mon, 22 Dec 2008 09:05:29 -0500

"That's why I favor index investing over individual stocks, and dividend payers over non-dividend payers."

Is that therefore a recommendation of dividend-focused ETFs/index funds?

3 Steps for America To Regain the World's Trust

Sun, 14 Dec 2008 02:16:30 -0500

What I found particularly illuminating in this book were the chapters on China and Japan.

China's demographic time-bomb, the opacity of its public companies, its pursuit of negative real interest rates, its stockpiling of commodities... all ominous rumblings behind a facade that is still relentlessly bullish.

Are Japan's housewives finally starting to buy stocks? I saw a NYT article to that effect recently, but who knows.

Own Gold? Time to Fold

Mon, 08 Dec 2008 09:19:23 -0500

I would buy gold, but it would not account for more than 10% of my portfolio holdings. Does that make me a goldbug?

Thanks for daring to sound a contrary opinion against the goldbug mafia of SA. It's astounding really, I keep seeing at least 3-6 articles on a daily basis regarding GLD, almost all of them relentlessly bullish. One might almost think the goldbugs were trying to convince others to buy from them.

Our Growing Inactive Population: Demographics and the Economy

Wed, 03 Dec 2008 10:48:39 -0500

What is scarier is that China's population is going to reach the same phase pretty soon. Since the enactment of the one-child policy in 1979, the demographics of China have become increasingly like an inverted pyramid, with a much smaller generation born after 1979 than before. Thus, around 2020-2025, when all of the pre-1979 generation have reached age 46+ and begin scaling down on consumption and investment, you will see the same kind of asset deflation and fall in aggregate demand portended by the retirement of the US boomer generation.