When A Stock Gets Away From You: Asset Allocation Daily

by: SA For FAs

Cashflow Capitalist: Western investors should minimize exposure to most Chinese equities before the property bubble bursts.

Russell Investments is decidedly negative on the outlook for stocks.

Thought For The Day: Regret is not a productive emotion – at least when it comes to investing.

Minimize China Exposure

“In San Jose, the average price per square foot (PSF) is $636. In Shenzhen, the average PSF reaches $759. And even that is nothing compared to Hong Kong’s staggering $1,475 PSF — almost rivaling Manhattan’s $1,773 PSF. The problem is the difference between real estate prices and the salaries that are supposed to support them. In San Jose, the average salary is $84,141, but in Shenzhen, the average salary is $15,456. In neighboring Hong Kong, the average salary is higher at $47,892, but still nearly half that of San Jose. How in the world are workers making that amount able to sustain such elevated real estate prices?” (Cashflow Capitalist)

U.S. Wages And Benefits

“After taking inflation into account, we find that hourly wages and salaries have risen by 5% from 2004-Q1 to 2018-Q3 and that their benefits have increased by 19%. Together, the inflation-adjusted total compensation of civilian employees in the U.S. has increased by 9% from 2004-Q1 through 2018-Q3.” (Ironman at Political Calculations)

Market Outlook

“We strongly believe that the better days for U.S. equity investors are solidly in the rearview mirror for a long while. After all, U.S. stocks have outperformed all international developed stocks and emerging market equities for the past one-year, three-year, five-year and ten-year periods. Zooming out to a wider timeframe, history tells us this won't last.” (Russell Investments)

Thought For The Day

Infrequently, but occasionally, I will write or record a podcast about a specific investment idea that I’m considering. I rarely follow through and make the investment. There are many things pressing in my life and I simply don’t feel the sense of urgency to tweak my portfolio. And so it was that I recorded a podcast on Dec. 20 laying out my reasons for purchasing a Brazil ETF (NYSEARCA:FLBR). I won’t rehearse them here, but I convinced myself at least that it would be a worthy investment at its then price of $23.36. I took another look at the ETF on Dec. 24, when it fell in price to $22.96 and again on the 26th when it fell to $22.68. I was poised to buy it that day, but just got too busy.

The next time I looked at the ETF a few days later, it had climbed in value to somewhere around $23.36 again. For some odd reason, I felt a little less enthusiastic even though that was the original price that satisfied me when I published my podcast. I still leaned toward a purchase, but got preoccupied with life. Each subsequent time I checked the ETF, its price rose only higher – quite possibly on the basis of the reasons I offered in my podcast. The ETF is now valued at $26.70, 20% above its price on the 26th, the date I was most serious about buying it.

I don’t have the space to detail all my mistakes in this non-investment of mine, but perhaps a key error was not determining in advance an acceptable range I’d be comfortable buying it at rather than just passively sitting on the sidelines feeling regret.

In any case, I thought about the matter a bit and no longer feel much regret. I’ve decided that regret is not a productive emotion – at least when it comes to investing. There are plenty of fish in the sea. Does my future wealth rise or fall on Brazil’s economic performance? Nonsense. There are numerous investment securities out there; surely I can find one I’d be at least as happy with.

There is no shortage of mental blocks that impede our investing success. If you encounter one of your own, know in advance there is a way to overcome it; think it through and you’ll reach a better place. Feel free to note it in the comments section too – maybe other readers could suggest a method to correct the behavioral challenge.


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