I have written countless times about Australia as an investment theme. Today I reduced my exposure because I think something may have changed, a little.
Most clients had two Aussie stocks, one bank and another stock that's not a bank. I sold the one that's not a bank. To make this article a little easier to read I will fictitiously call it G'Day enterprises. Please focus on process, not product. The name of the stock is irrelevant. I added G'Day last fall because I expected the Australian market to do well. The market did very well but G'Day really didn't capture the effect. Something went wrong. I might be able to figure it out or not but the fact is the stock was not meeting its purpose. Most clients lost 2%, but I care more about where I think its going than where its been.
The change was last night's economic results in Australia. The Reserve Bank of Australia raised short term rates and the GDP showed slower growth than expected. Add up the stock doing poorly, higher rates and slower GDP and I made the decision. This may or may not turn out to be correct but that was the process.
Today Maria jumped on some stock picker about AIG, questioning why he didn't like it. Stocks like AIG always have fans and it seems to me like Maria is one of them, but I may be wrong. Here's how I look at the situation. There is Spizter risk, I written this a lot. If the Spitzer risk bares no fruit how high can the stock go? There are plenty of financial stocks that will go up just as much as AIG with the same dividend yield without taking on the risk of Spitzer. Why does any individual investor need that risk?
Lastly I have had several hundred hits since I posted my comments about Jim Jubak and as yet no one has emailed or commented one way or the other. I have to say I'm a little surprised.
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7 comments:
Thank you again for the info about income stock funds. I posted a thank you on my site today.
I am playing NEM for a bounce and as a way to hedge my bets a little but I believe it is close to its high for the cycle. It seems our situation is similar to 1995. The stock market rallied, gold rallied too, the US economy strengthed, the dollar strengthed and by '96 gold was in retreat. I took a look at Jubak's site. If I read his performance numbers correctly, his annualized returns are mediocre at best. I only took a quick look but it seems more like a "stock pickers" site.
Roger...
BUYING AUSTRALIA TWO STOCKS AT A TIME
I hope you see the disconnect; for someone who seems to understand the benefits of a diversified portfolio, how smart was it to represent Australia with two stocks? If you want to buy the country, buy EWA (and understand you're buying MSCI Australia, not the Sydney blue chips, cobber)or a CEF, understand how much of the return comes from the currency move, and...err...move on. Two companies give you a good shot at being wrong on both and the way US-traded Aussie banks - NAB WBK for two - have done in the last few weeks, you'll probably be out of that too.
AIG
Great performance over a long time but famously non-transparent; the Spitzer risk is one thing, but recent disclosures about just why it might have preferred non-transparency - bid-rigging (Spitzer), related-party transactions enriching employees out of the sight of shareholders etc etc - leaves suspicions of a nest of (self-dealing) vipers. And on the succession front, Hank Greenberg makes Michael Eisner - see Andy Kessler's commentary in the WSJ - today look like Mr Delegation.
Disclosure: Seriously thinking of getting short AIG with some of the profits made today on being short CME...
Roger...
BUYING AUSTRALIA TWO STOCKS AT A TIME
I hope you see the disconnect; for someone who seems to understand the benefits of a diversified portfolio, how smart was it to represent Australia with two stocks? If you want to buy the country, buy EWA (and understand you're buying MSCI Australia, not the Sydney blue chips, cobber)or a CEF, understand how much of the return comes from the currency move, and...err...move on. Two companies give you a good shot at being wrong on both and the way US-traded Aussie banks - NAB WBK for two - have done in the last few weeks, you'll probably be out of that too.
AIG
Great performance over a long time but famously non-transparent; the Spitzer risk is one thing, but recent disclosures about just why it might have preferred non-transparency - bid-rigging (Spitzer), related-party transactions enriching employees out of the sight of shareholders etc etc - leaves suspicions of a nest of (self-dealing) vipers. And on the succession front, Hank Greenberg makes Michael Eisner - see Andy Kessler's commentary in the WSJ - today look like Mr Delegation.
Disclosure: Seriously thinking of getting short AIG with some of the profits made today on being short CME...
This is to the anonymous comment.
I'm not entirely following the comment about Australia. I don't usually buy ETFs for people with enough assets to own stocks. I de-emphasize stock picking but I do pick stocks, its my job. If you look through my archives you will see that I am just trying to get more right than wrong and avoid down a lot when it comes.
You can also see in the archives more about why I use individual stocks, when possible. As I have said many times in putting together 40-45 stocks in a portfolio there is no way to to get them all right.
BTW, nice trade shorting CME congrats.
Roger...
First, sorry for messing up and posting the same thing twice...duh.
AUSTRALIA
As any Aussie will tell you, it's horses for courses (it's one of the world's great gambling nations apart from anything else...not for nothing called the lucky country). I don't see how anyone based in the US can do sufficient "real" research on Australian stocks to pick 'two' with any real confidence. "Not buying ETFs for clients with sufficient assets to own stocks" seems a blindered approach and especially so for a large, complex, economy; you wouldn't do it for the US, would you?
Not sure of your holding period, but I suspect EWA and most of the Aussie-loaded CEFs have outperformed your picks. If you've decided on Australia as a theme, fine; but you should apply the same principals you apply to your other selections including the benefits of diversification without letting silly rules: "I don't buy ETFs for clients who can afford stocks" get in the way.
Disclosure: Covered some of the CME yesterday, but still short at an average around $217.50; confidently expect to spit some of it up today but even if it goes to $300 it won't break me..."It's not whether you're right or wrong, it's how long you can afford to hold the position."
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