So this New Century (NEW) got cut in half again today. The first time I ever mentioned my fear of mortgage REITs was December 2004 and I have reiterated the same sentiment several times since. The big driver for my dislike of these stocks is very simple. I view them as being very complicated businesses, even the healthy ones.
Complicated as it pertains to selling money and managing interest rates makes for volatile stocks as has been the history with these. FYI on February 8 I disclosed selling NEW for one client who gave us a mandate to buy 100 shares last year.
One more CNBC nitpick. This morning Mark Haines asked someone (I was driving to Phoenix at the time so don't know who it was) what good foreign investing is because the foreign markets are all down more than the US market.
This is an example of the wrong question being asked. So far this is a short term event with some degree of panic. Managing for the occasional one-month panic is not what long term investors should do.
Over longer periods some foreign markets to offer protection but some don't. In a recent article for TSCM I bagged on iShares EAFE (EFA) for not offering much protection during the tech wreck aftermath. In a two year period studied the SPX was down about 30% and so was EFA, after taking almost the identical path down. During that same period Australia was only down 10% and so did offer some protection.
The conclusion here is that the broader you go the less you get.
Wikinvest Wire
11 comments:
The conclusion here is that the broader you go the less you get.
So true! I have a pairs trade on with UVPIX and an individual stock. The individual stock is treading water these last few days, while ILF (for example) is selling off with the rest of the emerging markets.
Roger, correct my understanding if I'm wrong on this, please. Last week I bought some FXY. I was having a bit of trouble rationalizing buying this rather than EWJ--because when the dollar falls, other markets are more attractive. However, given that part of the reason for the USDs weakness is it the economy. Therefore, (I conclude, though perhaps erroneously), the Yen is liable to increase against the USD, and the Japanese market is likely to decrease because of their dependency on the US economy. My presumption is that the Yen's strength TEMPERS the decline in the EWJ. Am I wrong-headed on this?
I don't think you are wrong but the notion may not be right for all times either. I think the relationship you are citing is a tad more fundamental than what should be expected in a panic. The yen from its weakest to whereever it tops out on this move will have gone from being too weak, to having corrected and then becoming too strong for the very short term meaning yen will probably over shoot at some point.
"the notion may not be right for all times either."
Understood. I see this position as being short term. Thanks for taking time to answer.
Foreign markets have been going up more than the US because economic growth (GDP) has been growing much faster in Asia and Latin America and Eastern Europe than in the US. And I mean a lot faster.
Their stock markets are "thin" and downturns look like routs almost every time. Easy solution: when you buy IPN for India, or EWZ for Brazil, also order a "Stop Loss" at some price level. As your foreign index goes up, move the price of your "Stop Loss" up too. It's a basic investing habit worth getting into, and cost very little. OldVet
OldVet.
That's exactly what I did this time around with my ETF's and I saved a bundle.
That's another reason why I prefer ETF's to index funds. They trade like stocks.
"The conclusion here is that the broader you go the less you get." I could not agree more. "Put your money where your mouth is" states the same thing. The Buffets of the world (there are more than one) dont make bundles due to diversification. They make money on having their beliefs pay off more often than they crash. If you "say" you believe in nat gas, for example...or India...or double short... "put your money where your mouth is;" or if you contest that you dont know squat (myself included) then it is best to "shut up" and diversify.
"The conclusion here is that the broader you go the less you get." I could not agree more. "Put your money where your mouth is" states the same thing. The Buffets of the world (there are more than one) dont make bundles due to diversification. They make money on having their beliefs pay off more often than they crash. If you "say" you believe in nat gas, for example...or India...or double short... "put your money where your mouth is;" or if you contest that you dont know squat (myself included) then it is best to "shut up" and diversify.
Roger,
I am down about 10% over the last few weeks. I would think everyone is in the same boat {whether they admit it or not}. I own mostly mutual funds and they got hit harder today then the dow. Would you think since I am in long term it is smart to just let it ride as the downside correction must end soon? I have to admit even after the 10% loss I am up about 25% over the last 2 years. But this 10% loss was very drastic and quick. Thoughts?????
I am down 13% during the same period in my million dollar long term account. I think there is still another 5-6% downside left until the tide turns because to many people were buying stocks on margin and have yet to close positions. I also find it hilarious that the majority of the posters seem to be hedged perfectly during this downturn and doing fine. I am skeptical of these posters and believe they are lying.
dls
"I am skeptical of these posters and believe they are lying."
Seems like this is the second time that a poster has gone about singing "liar, liar pants on fire" for folks who did not lose money in the latest decline. I didn't lose a nickel. I made money--albeit small.
But I also did not participate in the gains since last July because I was too conservatively positioned. But this shakeout may very well eliminated those gains, so I may be back to square one, as might be
our skeptical DLS.
It's okay to be skeptical; but name calling and airing your "million dollar account" are in poor taste as well as just bad manners.
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