A Tactical Approach To Incorporating Bonds Into Your Inflation-Protected Portfolio [View article]
It seems we are repeating one another. I don't think you're wrong either, and I agree it's complicated. But if you calc it out, the correlations cluster right around .59-.61 (annual) over the last three years as well. It actually looks like the correlation was near 1.0 in 2008, which was PDR's point. Of course the new normal is that all assets are highly correlated in that kind of correction.
A Tactical Approach To Incorporating Bonds Into Your Inflation-Protected Portfolio [View article]
I think you are both right. Looking at late 2008, PCY and JNK behaved near identically (major correction). Since then PCY has outperformed substantially. There is low/moderate correlation between them overall - about .60.
This Gold Slam Is A Massive Wealth Transfer From Our Pockets To The Banks [View article]
Well, WMARKW - is it logic that is keeping you interested in manipulated (non) markets? If you continue playing the game, why? If not, what's the problem?
Consolidated Water Is A Worthy Speculative Buy In The Water Segment [View article]
True that such an impairment write down would be non-cash, but I don't think it is a minor event given the market reaction when companies miss earnings. And this wouldn't be a penney ot two - it is more than a third of last year's net.
Pretty fair assessment. I traded out of this one already. The best performing pharma ETFs and CEFs (e.g. PJP, HQH) don't have it in their portfolios. Of course the index funds have to include it...
A Tactical Approach To Incorporating Bonds Into Your Inflation-Protected Portfolio [View article]
Thank you for a very thorough and well-written article. I am absolutely on board with the notion that bonds are a valid allocation in a diversified portfolio. I don't feel the same degree of concern that you seem to feel though, probably because I think you mistate the facts when you say, "In general bonds do not offer good value in the current inflationary environment."
That is clearly not true - at least not yet. While I agree that it will likely be the case sometime in the future, I share your inability to predict the future accurately as to time the markets. This is why I follow a largely passive allocation strategy. I would have had the same assessment of bonds for the last 10-15 years - that they are overvalued - and missed some great uncorrelated return.
The most I allow myself to do is dabble with the weighting of average maturity and duration. I do not change overall allocations, and I rebalance at 5% deviations between broad asset classes (equity, bond, hard asset, real estate, and cash equivalent). Boring but consistent. Then again, I'm significantly older than you are and while I CAN tolerate big drawdowns, there's simply no reason to do that.
Although I agree with your assessment of some of the weaknesses of inflation protected bonds, I really don't think they are even in the same asset class as traditional bonds. They probably should be some part of the inflation hedge, event driven flight to quality, fear driven hard asset part of a portfolio (which might also include DBC, DBA, and/or IAU).
I'm sorry to be so long winded. I think your article is an important topic to address. For a while 4-5 years ago I thought that deflation was a much more likely outcome. I think that possibility has diminished, but not disappeared. Clearly no one in power wants that to happen, preferring a controlled inflationary solution to our debt situation. I'm just not sanguine about their ability to control things that well. Remember the "pushing on a string" problem.
Consolidated Water Is A Worthy Speculative Buy In The Water Segment [View article]
Investing in this sector seems to be a no-brainer. People will always need water, right?
The risk to unregulated utilities like CWCO is that governments will NEVER allow what they consider to be "unreasonable" profits, as already demonstrated when one of this company's plants was nationalized. I looked at this company six years ago, and nothing has changed, except that the Virgin Islands took their plant. Oh, and the stock is half the price it was.
From a 2012 filing:
"We could be required to record an impairment charge to reduce the carrying value of our goodwill if the market price of our common stock does not significantly increase in the future. The market price of our common stock has declined over the past 12 months and, at times during this period, the carrying value of our stockholders equity has exceeded our market capitalization.
A decline in the market price of a company’s common stock below its book value is one indication under U.S. generally accepted accounting principles that the carrying value of a company’s goodwill may exceed its implied fair value.
Our goodwill amounted to $3,587,754 as of March 31, 2012. We could ultimately be required to record an impairment charge for a portion or all of this goodwill if our common stock continues to trade at prices that are less than our book value. Such an impairment charge could have a material adverse impact on our results of operations for future periods."
A Smart Way To Look At A 'Dumb' Investing Strategy [View article]
LeftBanker, Laplace, spielerman - my understanding of the additional reading in the links was a conclusion that the equal balancing aspect of allocation and rebalancing was what really resulted in risk reduction. The jury is still out on added alpha, as the author points out - the diversity of asset class vehicles has the potential to change results.
As for predicting the future, well... I would have missed AT LEAST 10 years of great bond performance if I am honest about what I would have thought or done with a subjective allocation a decade ago. One thing I remain convinced of is my inability to reliably predict the timing of future investment outcomes.
A Tactical Approach To Incorporating Bonds Into Your Inflation-Protected Portfolio [View article]
Take Profits In Refining Or Ride It Out With Dividends? [View article]
A Tactical Approach To Incorporating Bonds Into Your Inflation-Protected Portfolio [View article]
Take Profits In Refining Or Ride It Out With Dividends? [View article]
Take Profits In Refining Or Ride It Out With Dividends? [View article]
Disclosure: Still long HFC & PBF.
Whisper Number Impact: Earnings Preview For Intel [View article]
This Gold Slam Is A Massive Wealth Transfer From Our Pockets To The Banks [View article]
This Gold Slam Is A Massive Wealth Transfer From Our Pockets To The Banks [View article]
Fred Schwed
P.S. I'm long gold, permanently, but I don't type in caps or wear tinfoil hats...
Gold: The Fear Bubble Bursts [View article]
Consolidated Water Is A Worthy Speculative Buy In The Water Segment [View article]
Is It Time To Buy AbbVie? [View article]
A Tactical Approach To Incorporating Bonds Into Your Inflation-Protected Portfolio [View article]
That is clearly not true - at least not yet. While I agree that it will likely be the case sometime in the future, I share your inability to predict the future accurately as to time the markets. This is why I follow a largely passive allocation strategy. I would have had the same assessment of bonds for the last 10-15 years - that they are overvalued - and missed some great uncorrelated return.
The most I allow myself to do is dabble with the weighting of average maturity and duration. I do not change overall allocations, and I rebalance at 5% deviations between broad asset classes (equity, bond, hard asset, real estate, and cash equivalent). Boring but consistent. Then again, I'm significantly older than you are and while I CAN tolerate big drawdowns, there's simply no reason to do that.
Although I agree with your assessment of some of the weaknesses of inflation protected bonds, I really don't think they are even in the same asset class as traditional bonds. They probably should be some part of the inflation hedge, event driven flight to quality, fear driven hard asset part of a portfolio (which might also include DBC, DBA, and/or IAU).
I'm sorry to be so long winded. I think your article is an important topic to address. For a while 4-5 years ago I thought that deflation was a much more likely outcome. I think that possibility has diminished, but not disappeared. Clearly no one in power wants that to happen, preferring a controlled inflationary solution to our debt situation. I'm just not sanguine about their ability to control things that well. Remember the "pushing on a string" problem.
Thanks again for a good article.
Consolidated Water Is A Worthy Speculative Buy In The Water Segment [View article]
The risk to unregulated utilities like CWCO is that governments will NEVER allow what they consider to be "unreasonable" profits, as already demonstrated when one of this company's plants was nationalized. I looked at this company six years ago, and nothing has changed, except that the Virgin Islands took their plant. Oh, and the stock is half the price it was.
From a 2012 filing:
"We could be required to record an impairment charge to reduce the carrying value of our goodwill if the market price of our common stock does not significantly increase in the future. The market price of our common stock has declined over the past 12 months and, at times during this period, the carrying value of our stockholders equity has exceeded our market capitalization.
A decline in the market price of a company’s common stock below its book value is one indication under U.S. generally accepted accounting principles that the carrying value of a company’s goodwill may exceed its implied fair value.
Our goodwill amounted to $3,587,754 as of March 31, 2012. We could ultimately be required to record an impairment charge for a portion or all of this goodwill if our common stock continues to trade at prices that are less than our book value. Such an impairment charge could have a material adverse impact on our results of operations for future periods."
A Smart Way To Look At A 'Dumb' Investing Strategy [View article]
A Smart Way To Look At A 'Dumb' Investing Strategy [View article]
As for predicting the future, well... I would have missed AT LEAST 10 years of great bond performance if I am honest about what I would have thought or done with a subjective allocation a decade ago. One thing I remain convinced of is my inability to reliably predict the timing of future investment outcomes.