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20 comments:
Roger, there's always a critic as you know. You are good to handle it with as much grace as you do!
Something is very strange about an investment advisor doing video casts from a barn. God help us all here. Roger made the comment that he doesn't think anything will happen with the elections. What planet are you living on Roger? Media reports of the computer cards being stolen are all over the net. This election will be the most controversial of modern history.
The larger issue I think, for both oil and the market(s) generally, seems to be a risk premium that has become, in far too many cases, unjustifiably low. Every once in a while there is a shock such as news from Nigeria or a worse-than-expected GNP growth number and the premium is adjusted -- oil becomes more expensive and/or the market sells off -- but the real problem I believe is that investors are still taking on more risk than they realize relevant to the return(s) they are receiving.
In his latest newsletter (http://tinyurl.com/y99ss5), John Hussman phrases it this way:
"Investors are eager to overlook the fact that stocks have lagged risk-free Treasury bill returns over the past 8 years, and are instead focused on the gains achieved during the current bull market. Yet even over the most recent 2.8 years since early 2004, the major indices have outperformed Treasury bills by only about 5% annually.
Now, 5% annually, retained over the full market cycle, is a respectable margin over risk-free rates. But here the 5% margin has applied to a bull-market-only portion of this cycle, where bull-market-only gains have historically outpaced T-bill yields by upward of 20% annualized, on average. Worse, with stocks strenuously overbought and trading at rich multiples on record profit margins, there's a very slim potential for investors to retain that 5% margin they've earned above T-bill yields during the past few years."
WRT technical analysis, why wouldn't any investor wish to optimize exit and entry points, even for an asset they intended to hold for years? Buying stock in a solid, growing company feels good; it feels even better when bought 'cheap' (on price weakness).
-R.
PS: In your post the youtube video object size is set correctly at 425x350 but the embedded flash frame is still set too large at 600x350 -- both the "object" and "embed" commands should have the same width="425" height="350" values -- don't know where that 'bad' value for width is coming from but I still suspect the enlarged frame is what is blowing your sidebar out.
Thank you Leisa.
RW, great comment. WRT to rate of return above riskless return. Might it be prudent to take a longer term view if your time horizon is longer. The round trip of the last five years has been below average but over the last ten years it is about right i'd say?
to the heckler, if you listen to the comment again i say "once the result is known." I do not think the new congress and senate will get much done regardless of the make up. It does seem like there will be controversy but the most controversy in modern history? I'll take the under on that one.
But pretending you are right, will it be worse on the market than 9/11? The crash in 1987? The crash in 1997? The crash in 1998? Worse than the election of 2000? The market has already managed a controversial election in modern times, that is no longer an unknown. The market is afraid of the unkown not a repeat of something that happened six years ago.
I am amused that that you are so motivated by closet doors as to actually comment on them.
Roger, one segment in time isn't particularly good evidence but I'd say the round trip over the past 10 years has been rather poor and, on a risk adjusted basis, has been pretty awful. Beginning with the S.E. Asian currency crisis of '97, the Russian debt default (and subsequent LCTM smashup) of '98, most stocks began falling with only Tech (e.g., Nasdaq) and mega-cap (e.g., DJ30 or S&P500) stocks continuing a run into 2000 when just about everything imploded.
Those with cash to spare in 2000 no doubt did well bottom fishing or increasing exposure to select commodities such as oil and gold but pretty much everyone else, including those broadly diversified, would have been lucky to beat a money market over the past 10 years I think. Investors who were a bit too concentrated in markets such as Nasdaq would be lucky to have even broken even to date IMO.
Oops, meant LTCM in the above comment; a real capital market shaker that was even though, if I recall correctly, the amount of money they lost was barely half Amaranth's recent losses.
In any case I haven't crunched all the numbers so I don't know how accurate my characterization of the past 10 years is but my general impression remains the same: Too many investors appear uncertain how to quantify risk and in consequence are not insisting they be adequately paid for the risks they are in fact taking.
Most investors limit their "diversified portfolios" to stocks. If they have international stocks and domestic stocks in a blend of industries, they feel they are diversified.Stocks are a necessary but not end all for a diversified investment portfolio. Long term investors not considering real estate, bonds, investing in their education and timely employment adjustments are not diversified investors. Marrying correctly - the first time, may be the best investment of all.And investing by serving others in a voluntary capacity lends an incalcuable dividend to the quality of one's life. Holistic diversification, anyone?
Couldn't agree more T -- education/training, career, real assets, financial assets, interpersonal & social relationships, physical and spiritual health -- all part of what real diversification means.
Roger,
Maybe you can give your opinion on the below and some thoughts from other readers; Jim Cramer says that the Housing Builder Stocks have bottomed and he thinks they are a at a great buying level now. What's your thoughts? Toll Brothers, Pulte, Etc??? Is it a buying opportunity now? Cramer says 2 Thumbs way up!!! Maybe you can make this a topic.
Thanks!
Roger, thanks for the website, blog, and the information. I make it a point to read what you have to say and blend it into all the other information. I've never taken anybody else's word as gospel but I definitely craft my own opinion off by the research I do. I apprecite your insights.
As for the election comment by anonymous. A couple of things, about it. First off I'm assuming those are closet doors (it's a Southwestern look that my parents in New Mexico have as well), so the barn remark reduces the credibility of the comment since you are attacking. Second, when Roger mentioned the election, I took it to mean from a market viewpoint. The market isn't going to react wildly since it has been building in the election outcome expectations for weeks and I took his remarks to mean that the market isn't going to have a reaction. Whether there is election fraud, issues, or controversy, I didn't find Roger to be commenting about that. Not sure why you heard something different. I'll leave the political analysis (outside of market impact) for other forums.
Tacky question Roger, how's the perfmormance YTD. I slipped .9percent along with the s&p., which disturbs me since I'm only 62 percent exposed to equities. Up 9.7 ytd. Time to rexamine my risk; RW is so spot on. Great blog and the video is a comfortable saturday am barnside chat. My wife and I drink coffee, listen, and reflect. Is that not a hoot.
Roger I am a client of yours and I want to let you know that I am canceling all business with you come Monday morning. Your preformance for me has been appalling. Half the problem I believe is that you spend all this time ranting and raving on this blog instead of making me money. You have been bearish all year and WRONG and your entry and exit points on stocks is the worst I have ever seen.
You would not post a comment if you were a client canceling advisory business anon.
Wow! that was some comment left at 4:41 firing me! I think I need to call shenanigans on that one.
Client accounts are generally speaking very close to the market YTD. I was ahead by a bit and lost most of the lead as I have chronicled. The only bad entry point that I can think would be the double short ETF. The exit points have actually been pretty good for the most part. If you really are a client you are about even with the market while sitting on a lot more cash than normal while I did get a big call wrong. This is hardly a bad place to be.
Lastly my sitemeter does not corroborate your assertion that you are a client.
If you somehow are a client and really are this upset you can email me right now and I can tell you the mechanics for how to fire us.
Roger, don't want to add any fuel to any fires (no pun intended and assuming there are really any ...fires I mean) but providing market returns while reducing the level of market risk (e.g., cash, inverse ETF, etc.) is what it's all about IMHO; can't see any 'bad call' there at all -- 'nuff said.
Here is what I have to say to the fundamentalists who criticize technicals... Ebitdee, Ebitda, life goes on, yah. La, la, la, la life goes on.
Yeah, if the election results in gridlock we win. That'll remove the federal government from the picture for at least two years.
Eh, I like the blog, too. There are always critics. The more the merrier. Bring 'em on.
Here's how my models are shaping up for this week:
International/U.S. allocation of long positions
MSCI EAFE Index 30%
MCCI Emerging Markets Index 20%
U.S. 50%
Timing Model = +2.5
90% Long, 10% cash
Top Ranked U.S. Sectors
U.S. Telecommunications 6.0
U.S. Pharmaceuticals 5.0
U.S. Health Care 4.0
U.S. Real Estate 3.5
U.S. Leisure Goods 3.5
Small Cap Value 3.5
U.S. Consumer Goods 3.0
U.S. Banks 3.0
U.S. Financials 3.0
U.S. Semiconductor 3.0
Top Ranked International ETFs
MSCI Spain Index Fund 3
MSCI Mexico Index Fund 3
MSCI Singapore Index Fund 2
MSCI Belgium Index Fund 2
MSCI Sweden Index Fund 2
FTSE/Xinhua China 25 Index Fund 2
Roger, the usual asset classes that I think as a risk dampener look very extended. I am thinking of dividend stocks,bonds, global large value, reits, and hard assets. When I look into the rear view mirror, I say, "the market is going to correct,and that's my chance, I'm going to keep a good allocation to cash, and when the correction comes, then I'm gonna buy what I wanted but was too expensive." I can't rationally explain it but this mind set strikes me as something setting myself up for dissappointment. Any suggestions for someone using cash as their major hedge,for now, but wants to position themselves to develop a more diverse group of holdings to offset risk associated with equities? Currencies are a possiblity, but which one and the DBV choice still seems confusing. For global bonds as an alternative, do long bond yields need to move higher for a safer entry? When and what? In search of a plan. Perhaps, it's mostly about patience.
Roger,
I hope the terrorists release you unharmed. I'm sure that there was a masked gunman just off camera, making you do this video. Its just not right.
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