A reader left a comment saying they were "selling all their EEM" due to my "getting rid of emerging market exposure." This was in reference o my Smile and Wave post yesterday. This reader has added 1 + 1 and gotten 11. I sold one position that is up 50% in a couple of months that four clients owned. This is a slight tweak, I did not get rid of anything. If EEM is this person's only emerging market exposure he is making a big bet by selling down to zero, one that I never make. It is frustrating when people only see what they want to see but I guess that is human nature.
I found this little nugget that opines frontier markets stand to attract a lot more investment. The countries mentioned were Bulgaria, Estonia, Latvia, Lithuania, Romania, Slovakia and Slovenia.
Neil Hennesey made an interesting comment on the tube yesterday when he compared holding Citigroup (C) to holding a treasury because the stock has such a high yield. I am not a huge fan of this line of thought. If the stock does not do much for some period of time, fine but the risk reward for a common stock is different than for a treasury. I have written a few times about certain holdings being bond-like but I would not think of a large cap financial stock as one of them.
One reader left an astute comment about CEFs that had traded at discounts for long periods of time now trading at premiums. I disclosed buying a Blackrock call-selling CEF a few weeks back. It was at a 1% premium when I bought it and now is at a 4.6% premium. Relatively big premiums can always get bigger but this is not a positive.
Another reader asked for my opinion about the transportation sector. He said that the group has not done very well and wonders if now might be time for them to come from behind, maybe he means as a sort of contrarian call of an unloved group.
I like the thought process and I might use the same line of thought and say that healthcare looks like a candidate to provide some leadership. I made a similar prediction about telecom last December. As with telecom then, there is nothing now (cyclically anyway) to stand in the way of healthcare doing well. For the trannies to do well they need to overcome a slowing economy. The various indicators do give a mixed signal about the economy, I still lean to this cycle being just like most other cycles and the yield curve telling us it will end soon. If that is right then it would be difficult for trannies to lead now. If that is wrong and the economy achieves a soft landing and starts to expand again without a normal stock market correction then I do think the reader is on to something.
I am not trying to be a wise-ass with the skewing of that last paragraph but the idea of betting against a normal economic and stock market cycle is something that is difficult for me to do.
One last item is the new one-week ad to the right from Mountain Hardware. I have a bunch of their clothing for hiking. They are having a contest to give away some merchandise, feel free to enter. I was paid for the ad placement not clicks so I don't think it is click fraud to suggest you try to win some free stuff.
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6 comments:
tomk, Your discipline is paying off and even if the market falls you have been on the right side long enough to feel that you got most of the meat. I had a conversation with a former fund manager, a true veteran who managed quite large sums. His investment model is based on momentum trading. I found it interesting that he said how much easier it is to stick to the discpline when using other people's money. His returns are better for them than his own account. Fear gets in the way. ps...if you get a chance, post at world alpha. Bill
Mr. Nusbaum,
I have used the National Bank of Greece(NBG), as a diluted initial investment in the area of the Balkans.
I have liked using banks in this way previously; and their penetration into Serbia , Romania etc is growing.
Any comments?
Best Regards,
HLP,Jr
Even in the world of hedge funds, emerging market catagory did the best in the past three years(see the latest Bloomger magazine). So from the momentum point of view EM has been great. To decide if I should reduce my exposure to emerging markets I would look at the fundamentals of EM. So far EM probably still is cheaper than US and developed markets. So I would not really need to reduce my EM exposure.
I do, however, replace existing positions with higher return/risk ones. This is on going and I would do to all my positions.
Bill - now is definitely the time to stay disciplined. But if you're a trend follower, this market is a no-brainer. I haven't seen a low volatilty, stair step uptrend like this in a long time.
Iws/mid cap value or EFA or small cap value..have all beaten...truly beaten large cap growth/ivw...9 to 1 in the past 5 years. On a weekly chart, value separated after a few months and never looked back. 90% to 10%..., 60% to 20% in the last three years..and that probably does not include dividends. This amazes me that it could be this easy, in hindsight. I think the next big decision is domestic or developed international, or cash is king. But like Bernake, this should be data driven.
The far better than expected bull market has creat problems with some very good fund managers. THe one came to my mind is Dr. Hussman of Hussman Strategic Growth whose hedged positions cancelled much of the gain this year. It also created an interesting discrepency that IBD's mutual fund index being underperforming S&P 500 for this year. Usually IBD's mutual fund index outperformed the S&P 500 in the past.
Are we entering a new paradigm or new flat tail statistically?
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