fatpitch2

What Was Good About Boom-Era 'Lazy' Portfolios

Larry:
Yes, being "lazy" has not been good... of course being "anything" but in cash or gold for the calendar year 2008 has not been so hot ... as of about a week ago I read that gold was the only asset showing net positive return YTD.

No matter, in general being lazy (in the correct way) removes emotion and frees up time for important stuff like ... oh ... like having a life.

Based on your research can you recommend any semi-lazy portfolios?

I'm trying help build one for a young friend just leaving college with a small inherited nest egg, and as a younger boomer am trying to make my own portfolio lazier as well ;-)

Hedge Fund Redemptions May Crash Q1 Markets

I guess I wonder what is left to redeem?

Tudor Investment Group had $5.7 billion invested at June 30 as disclosed in its 13-F. Its September 30 filing shows only $453 million.

Atticus Capital, another much-celebrated hedge fund, went from $8.1 billion to $510 million.

SAC Capital, run by the Steven Cohen, went from $14.4 billion to $7.7 billion.

Vinik Asset Management, led by Jeffrey Vinik, who once ran Fidelity Magellan, went from $11.8 billion to $1.8 billion!

These numbers are as of September 30. So they do not include the awful months of October or November, so current assets at these funds would be even lower now, but if you are already down 90% .... who cares?

The reduction is of course the combination of selling to meet redemption requests, and a decline in market value of existing positions, if these funds are anywhere close to "typical" I have to conclude that downward pressure on the market on a go-forward basis has got to be minimal as ... well as they are all pretty much out of money....?

Bye Bye Greenback

I am current shareholder of both the Prudent Global Income Fund (PSFAX) and the BEARX fund. While the income fund has not done amazingly well it has held up in "relative terms". BEARX on the other hand I am pleased with....

Unfortunately the take over by Federated Investments results in the funds now becoming front-end load funds which is very disappointing for folks that are not current shareholders -- current no-load shareholders as of date of conversion are grandfathered into the no-load shares even for additional purchases ... at least as I understand it.

Why Buy T-Bills Now?

"Interesting observations on zero yield 3mo T-bill and prices of crude/gold. No explanation can satisfy me on the -0.05% 3mo rate 2 days ago...makes no sense at all. "

This made no sense to me either until I heard a good explanation... as follows:

If you have $10K you COULD and perhaps should just stuff it in a safe deposit box or a mattress. BUT if you have $10M or $10B to roll over as, for example, sovereign wealth funds and other "big" players have to do ... you can't really "stick it in the mattress"... you have to do something "digital" with it....

Other that this ... I can offer no explanation either...

Will the Price of Oil Sink Much Lower?

Patient:

Can you post source(s) of the 5MBPD cuts rumors?

How Many iPhones Could Wal-Mart Sell?

Another question is:

In a declining economy, how many more people can afford to sign on for paying a minimum of $75/month for two years to get on-board?

Inflation on 'Sale' as Deflation Dominates Markets

Deflation AND inflation - why not both...

I would vote that we have both Deflation AND inflation spread across different sectors....

As others have pointed out, I think much RE will continue to DEFLATE, as will lots of luxury goods (Coach handbags, private jets, .....)

On the other hand, the essentials of modest everyday living are likely to respond to all this money printing by going up in price ... Why will the middle east want to continue to sell oil @ $45 USD/bbl when there are twice as many USD in the world as there was just a short time ago?

Why won't the price of food head north?

I suspect that many will not have their cake and not eat it either....

Considering a Position in Oil Again

CLH:

On the tanker situation - I'm not saying it is true, but another explanation for oil tankers sitting around full and not unloading cargo is that whoever owns the oil thinks prices will be higher soon and has the time keep the ship anchored until this comes to pass.

Random:
With regards to new supply coming on line, yes we have new supply scheduled to come on line, but who is excited to hurry these projects along at current $40/bbl let alone $25/bbl? Projects are now, and will continue to be pushed out. Petrobras has all their deep water fields but the cost of brining it to the surface is $50+/bbl... so I can't imagine they are in a hurry to spend billions to loose $10/bbl on the markets?

According to the IEA current producing wells are being depleted (i.e. their maximum production rates are falling) at a rate of 6% - 9% annually.... That means we have to bring more than 5M+ bbl/day on-line just to keep even --- assuming that demand if flat. The latest figures I have seen from sources like the IEA still conclude that world-wide demand is going to be slightly UP in 2009 despite this raging recession we've got going on... i.e. the developing world is picking up the slack...

TIPs to Protect Yourself from Future Inflation

Annette:

The simple answer to your question is "no" if you went into the market right now and bought some TIPS you most likely NOT get 8% annually, and the returns WILL most certainly fluctuate.

TIPS have a coupon rate (nominal interest payment made) and then
TIPS bonds' principal is linked to changes in the Consumer Price Index (up or down) and can provide an effective hedge against inflation in an investor's portfolio relative to standard Treasury bonds. As CPI rises, the principal in the individual TIPS bonds is adjusted upwards. The nominal/coupon interest on the bond is then paid on the higher principal, which raises the overall effective yield of the security.

Also, note that inflation is just one component of interest rates and that changes in the "real rate" or the risk free cost of capital will cause the value of TIPS bonds to oscillate up or down just like Treasury bonds. It is also important to note that because of the inflation adjustment on TIPS, the yield you get today is not set in stone and investors should be prepared for it to move up or down depending on the movements of the CPI.

It is more complicated than it appears at first glance.... but there are many good articles explaining how the work ... far better than I can do here...

TIPs to Protect Yourself from Future Inflation

Like other bonds the nominal return on TIPs (the part not connected to inflation) has been dropping. Take a look here: www.treasurydirect.gov...

For example it appears the last 5-yr note auction offers only 2%.

Yes, the TIP is inflation adjusted, but since the adjustment factor is based on the CPI which, at least I think, understates inflation you may not be doing all that well. That is to say that a 2% nominal return with a CPI adjustment that does not really make you "whole" from an inflation standpoint may not look so hot if inflation rates start rising....

Comments?

I do currently hold the Vanguard TIP fund in my 401k to keep the taxes simple, but I am starting to question myself on this.......

$25 Oil Could Happen Before a Return to $100

I keep trying to figure out how much of the demand is discretionary and will be extinguished by consumers turning down thermostats and etc...
Offset somewhat by the fact that it now costs only half as much to fill up gas tanks.

Industrial demand for energy is clearly down and will stay down ...

I'm too stupid to figure out the details on that stuff

BUT as Alan points out...

As the price of oil slides the marginal (highest cost) producers have to shut down in the longer term ... yes???

If the cost to produce a barrel of oil from the tar sands is $70 why would I go to the trouble to produce and sell only to loose $20/bbl. Indeed I have some fixed overhead I would like to support etc.. but do I not continue to do what is already being done... stop CapEx for expansion and hunker down

How much SUPPLY gets extinguished incrementally as the price of oil drops and producers throw in the towel and go home?

Further... since it is much easier to take production OFF-line than it is to put it back ON-line ... will we not wake up some day after a cold snap wishing for more oil only to find that it will take producers 3 months to bring some extra production back on line?

My head hurts as bad as my commodity-over-weight portfolio....

Considering a Position in Oil Again

Point #1:
Very interesting, I had not considered reductions in transit time.

See if I have this down:
If we assume that "supply" at the export point is constant then the temporary "oversupply" we are seeing here should diminish over a period equal to about 1x to 3x the elapsed transit time for a tanker to make it from the export point to the USA. Does anybody know how much time it takes?

Point #2:
Yeah what you said ... the US dollar has been the (I think temporary) beneficiary of the flight-to-safety and demand for dollars has been increased as they are the currenty used for settlmeent in the liquidation of much of the leverage in hedge funds and those exotic financial instruments we hear so much about... this is winding down I think ... and we have Mr. B printing paper and digital US dollars as fast as he can....

Point #3:
Yeah... I keep trying to figure out how much of the demand is discressonary and will be extingushed by consumers turning down thermostats and etc...
Offset somewhat by the fact that it now costs only half as much to fill up gas tanks.

Industrial demand for energy is clearly down and will stay down ...

I'm too stupid to figure that out....

New question:
As the price of oil slides the marginal producers have to shut down... ???

If the cost to produce a barrel of oil from the tar sands is $70 why would I go to the trouble to produce and sell only to loose $20/bbl. Indeed I have some fixed overhead I would like to support etc.. but do I not continue to do what is already being done... stop CapEx for expansion and hunker down

How much SUPPLY gets extinguished incrementally as the price of oil drops and producers throw in the towel and go home? Further... since it is much easier to take production OFF-line than it is to put it back ON-line ... will we not wake up some day after a cold snap wishing for more oil only to find that it will take producers 3 months to bring some extra production back on line?

My head hurts as bad as my commodity-over-weight portfolio....

How Impossible Is Market Timing?

Mebane:

Thank you for your postings.

I read your longer article regarding using the very simple (approximately) 200 day moving average indicator and was quite impressed with the result.

Given that these are VERY unusual market conditions I wonder how this technique might perform "going forward". I assume the 200 day average at this point has you OUT of pretty much EVERY asset class. So a student of this model is more or less prepared for Great_Depression_2 alas.... the big question ... if you are not "invested" in any asset class and are sitting on the sidelines then you are (presumably?) actually "invested" in the paper currencies of one or more governments ....

Now I recall the pictures of post-war Germany where it took a wheelbarrow full of money to purchase a loaf of bread and that folks resorted to burning currency in their home furnaces as it was the least expensive fuel and wonder how/where one should SAFELY sit "on the sidelines" ....

Thanks!

Breaking the Back of Buffett

Mr. Buffet is quite a guy ...

I have only one concern about buying BRKB....

Any thoughts on what might happen to BRK shares if he were to leave the company?

Reality Hits Oil Market, Dollar Could Benefit

The IEA has released its latest report --- It says peak oil won't get here until 2030 ... That's the headline anyway.......

When you read the rest of the article it says we only need to spend $1T+ per year and (unless you're a bank in trouble I don't see anybody getting ready to spend $1T a year on recovering more oil in a declining market...)

Oh yeah, and IEA says we need to go find 64 million barrels of oil equivalent a day of additional gross capacity between now and 2030 --- the equivalent of six times the amount Saudi Arabia produces today!

Piece of cake???? mmmmmmmmm I think not ....
Why invest in rigs and exploration ....

I think we will see declining supply soon -- production coming OFF-line shortly as the marginal cost is above market price this coupled continued yr-over-yr increases in world-wide demand for oil will (yes WW demand is still increasing even in this crappy envronment) ...

This will NOT be pretty ...