I believe it was noted late 20th century philosopher George Louis Costanza who said "Jimmy Crackcorn and I don't care."I find myself not caring about all of the ink that has been devoted to blaming Alan Greenspan for the mess we are now in.
It's not about agreeing or disagreeing but more about this is where we are now, how long before things fix themselves (some would say they already are starting to fix themselves) and are we at a point where we should still be thinking more about defense and protection or about being fully invested.
We can learn and benefit in future cycles from what happened on this go around. I wrote an awful lot about the abnormally sloped yield curve as an indication for trouble coming. For me and anyone else familiar with the yield curve we can learn that it works as an indicator of trouble coming (but does not allow for quantifying the trouble). For people not previously familiar they have learned about something that will matter again in the future.
The value of knowing why and who is to blame will be of interest to many people but is unlikely to make you a more knowledgeable investor.
So if the debate (if it even is a debate) about blaming Greenspan is a waste of time then why write to say it is a waste of time? As you study and manage your portfolio it is easy to get side tracked or distracted by things that have no baring on whether or not you will have enough money when you need it.
Changing subjects I made a small goof in this weekend's video. I mentioned having found a new (to me) way to access timber, I didn't. I found Cross Timber Royalty Trust (CRT) which despite the name appears to be an oil and gas partnership not anything related to timber. My bad.
One last point about all the Yale/build your own global macro fund theme from this past weekend that seems obvious to me but maybe is a discussion point which is that this concept will be the next evolutionary step in lazy portfolios. Instead of allocating 60% to equities over five funds, 30% to bonds with two funds and 10% to some sort of REIT/commodity combo maybe the evolution is 40% in equities, 20% in fixed income, 10% absolute return, 10% currency, 10% in real assets and 10% in a catch-all combo that includes things like a hydroelectric fund, a meat fund, a carbon credit ETN or a private equity something or other.
What say you?
26 comments:
Maybe it's because I'm a frequent visitor, but I'm finding that my asset allocation thinking is already more along the lines that you're suggesting than simply traditional, cap-weighted funds. Wouldn't it be fun to have a vehicle that allowed one to add collectibles to a portfolio, too--say art, stamps, coins, and vintage autos--all rolled into one?
...and baseball cards?
Someone must have studied this but it seems like collectibles would track with GDP?
I know art dealers would say other-wise but that is my reaction. do you have any idea about that?
Roger,
Blaming Greenspan is part of the on going analysis. This analysis is absolutely necessarry. There are rosie eyed views like yours and then there are views like Roubini.
Blaming greenspan is part of the explaining that when you let idiots like greenspan inflate a debt bubble and keep inflating a debt bubble instead of letting it collapse in a normal recession you get a much bigger debt bubble that eventually has to unwind.
Ar their other areas of free speech you wish to ban? I understand you do not want profanity and have to draw the line some where, but do you really want to ban the basis of an opposing analysis of where we are?
last summer i was accused of being a perma bear because I though a normal bear market was coming.
my opinion has not changed at all but now I am rosie eyed. interesting how sentiment works.
i don't see in the original post where i called for a ban on free speech, I think I said I don't care about blame, that it does not make anyone a better investor and since I did not analyse the greenspan culpability you have no idea what my opinion is.
you appear to have added 1+1 and gotten 111.
Roger, I'm looking for the way to do absolute return with a mutual fund and ran into 3 that might meet that need. Rydex has RYMSX Absolute Return Strategies, RYFOX Alternative Strategies allocation and RYMFX Managed Futures Strategy.
RYFOX, only available since March, has been the strongest fund of the 3 over past couple months. RYMFX has been the strongest over past year and weakest for past month or so.. How can I best decide which would be the way to go?
unfortunately there is no specific answer. the one i own got most of its return for the year in just a few months. looking i have no feel for how to game when another spurt might come along. if anyone does know please share but where the strategy is somewhat mechanized it is difficult (or impossible) to know when one will work better than another.
I agree with Roger that he is post-perma-anything.
As a long-time reader of this blog, Roger's posts reflect a nuanced approach. To say the he's the antithesis of Roubini because he (Roger) writes that blaming Greenspan is a waste, is missing the point.
However, I think understanding the cause and effect is important. This Reagan appointee (Greenspan) was the problem, and emblematic of Reagan's legacy coming back to haunt us. From his retreat in Lebanaon, his hikes on Social Security taxes which paper over the deficit, Greenspan, etc... etc... we need to understand that when we vote, there are consequences (As we're seeing again, in spades, today.)
VennDate, I'm a Democrat, as I suspect you are, and I believe passionately in the need to get the country out of the mess Bush has gotten us into, BUT I just don't think it is useful to try to pin all our financial problems on the Reagan legacy. Greenspan was also the adored darling of the Clintons, and Democratic administrations have done their shoare in perpetuating our fiscal problems.
I hear Roger saying the whole Greenspan question may or may not be important, but it doesn't make you a better investor. The same is true of political conviction. There are plenty of places to debate the next election, but I appreciate Roger's focus on asset allocation. If he doesn't foist his politics on us, we should return the favor.
Linda
Most thinking about the identity of Jimmy Crackcorn and what he's doing agree that the slave doesn't really give a damn 'cause his master is gone. And, that my dear fellow investors, is the view that Roger is telling us to adopt about Greenspan et al & I could'nt agree more because as my polish son-in-law likes to say: tata, this is what is. Willy
George from Seinfeld lol.. Man i miss that show.. there was a lot of tid bits that were said on that show in Gest that really have a lot of application for todays world.
Anon 7:00AM,
The category you're trying to analyze may be too large: Comparing RYMFX, RYMSX and RYFOX as potential choices within the same investing domain is a bit like comparing apples, oranges and a blended juice because they're all forms of fruit. RYMFX is a hedge fund (long/short), RYMFX is a managed futures fund (commodities, financials and currencies), and RYFOX is a fund of funds that may invest in RYMFX, RYMSX and other alternative strategy funds available at Rydex.
If you want a % of alternative assets in your portfolio but do not wish to manage the sub-allocations then RYFOX would be of interest. Otherwise you would leave it out of the analysis and compare specific asset classes w/ associated strategies on their merits; e.g., what % of hedge fund vs. managed futures makes sense in the current environment?
As to Greenspan, IMO he was primarily an enabler; like an aging aunt who couldn't say no when the nephews dropped by and asked for money while requesting she not keep an eye on them (they planned to buy drugs).
Roger:
Can you please tell us how Inflation proteced bonds work? Can the ETF tip also go down if interest rates rise? Does TIP ETF also act similar to a bond ETF? How do the issuers guarantee a return greater than the inflation?
Many thanks for your time.
yours,
Stranger
My politics? lol. Libertarian so I generally make fun of everyone with no real chance of getting elected--oops.
The dynamics of the TIPS market get quite complex.
The basics are that a bond issues at par for example. With a regular bond (or note or bill) you get that par value back at maturity. With TIPS products the par inches up at the rate of inflation over time.
I may not follow your second question, the guarantee that a fund will do what it is intended is no better or worse than with any other ETF. Most generally do what is intended with little suprise and every so often one does not work for whatever reason.
who got us to this point should be largely considered irrelevant; a doc in the emergency room doesn't ask who did what to whom unless it is relevant to the treatment of the patient.
agreed, we need to learn from the past to avoid future errors, but usually blame doesn't help the patient get one bit better.
as for TIPS, roger explained them well although he might have also mentioned that the interest paid on the TIP also increases with inflation. If you bought $1000 of one year TIPs with a 2% coupon, then if the CPI is 5% (just to pick an easy number), the value of the bond will increase to $1050 and the final coupon would be $10.50 (rather than $10--TIPs pay the coupons semi-annually, so the interest on a 2% bond will be 1% per half year.) over a year this doens't mean a lot, but over 10 or 20 years the increase in both the maturity value and the interest payments can become sizable.
once you start to invest $5000 or more, you might be better just buying TIPs rather than an ETF. by buying the TIP you control the maturity date and can essentially guarantee the rate of return over the horizon whereas a TIP ETF will change its maturity as the holdings mature--you may find this undesirable.
Roger,
Please comment on and compare your Lazy Portfolio published 04-09-07 @the street.com, as to the macro fund theme. What was the one year return on your lazy portfolio?
loda
loda,
giving specific numbers about performance on the blog in the context you ask is a compliance issue and there is not really enough there to write a follow up for TSCM "Yeah I wrote about a lazy portfolio and I was right" won't cut it.
Here is what I can tell you some things went down a lot and somethings went up a lot.
I'll write a blog post tomorrow morning with a little detail that might fill in some gaps.
Roger: You might want to check out Rayonier, Inc (RYN)....controls 2.5M acres of timber in the US and New Zealand along with other related assets.
Thanks for all you do!
Reminds me of that 'other' late 20th century philosopher, Cyndi Lauper, when she stated, "Girls just wanna have fun.".
But seriously(sorta), I'm 80-90% on board for some sort of touch-all-the-bases lazy portfolio, the other 10-20% I reserve for my own stock-picking prowess (using TA charts - MACD, CCI, MA's, stochastics) - why should the professional portfolio managers have all the fun ?
Yeah, the yield curve ... and the bond market ... I believe bonds have been in a bull market and the curve was 'inverted' (I've seen the pics). It's starting to dawn on me that bond yields can have an affect on how my stocks do, but the reasons why are a mystery, so I don't understand what this affect is. Bonds may be going into a bear market, so I've heard.
Regarding my strategy do I want to be allocating anything to an asset which is either in a bubble or a bear market? For example buying a REIT in 2006 or equity in 1999? Yes you'd miss some exciting times but you're more likely to remember how you avoided the crash later on. I hear warnings regularly about investing in oil (maybe not the oil companies) and grains so it could be wise to stay clear of those types of situations until after the inevitable correction?
Regarding collectibles Stanley Gibbons (postage stamps) has a fairly active investment plan, although I have not at all researched them.
well you could stay clear until the "inevitable correction" but what if it never comes. This is a point of philosphy but I'd rather own a little of something and be wrong a little than be zero weight and wrong a lot.
That is not right for everyone.
In my opinion, Long/Short funds are used as a marketing tactic by the fund companies in order to stimulate more interest in their products. Instead of investing in one of these products, such as RYMFX which charges approx 2% in fees, one is much better off using low cost index based products using an asset allocation strategy.
The lazy portfolio just posted is an example however may want to use Pacific Rim instead of Pacific Rim ex Japan and Japan as separate classes.
one is much better off using low cost index based
that might be right most of the time but in a bear market predicted by the yield curve RYMFX has beaten SPX by about 18 percentage points. I'd say the extra 190 beep fee was more than worth it. I disagree with your logic.
Attention
I had to remove some comments that gave specific allocation suggestions per compliance.
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