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Saturday, December 15, 2007
The Big Picture For The Week Of December 16, 2007
Point of clarification: The Australian bank mentioned is up 25% YTD.
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Point of clarification: The Australian bank mentioned is up 25% YTD.
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24 comments:
Roger: Don't know if you recall me saying well over a year ago that the average boomer had $55,000 in retirement savings and $55,000 in home equity.....and that was before home prices declined.
(it's much worse in Boston area since citizens had to contribute the Matsuzaka posting fee)
On a couple of blogs I visit, commenters have posted a report that says withdrawls from 401ks are rising; probably because many people are having trouble making ends meet on wages alone. So in addition to possibly not saving enough in the first place, now they may be drawing it down. If true, that can't be good; for them or the economy.
Don't know if loans are counted in "withdrawals", but they sure have made it easy to borrow from your 401K these days.
Roger,
Love your blog. I manage both my wife's and mine retirement accounts. Trying to be diverse but I seem to mirror the holdings in each account. It is already tough researching the things I have done. Is this ok or should I try buying different sectors?
a buddy borrowed from his 401k for a downpayment on his house in 1999 or 2000. He got laid off in 2001,could not re-pay his loan and had tax problems that took him years to repay.
good reason not to tap a 401k.
i agree, anon, the implications are grim.
anon 11:15. if each account is a diversified portfolio and they are each the same, that is not the worst thing in the world.
I would suggest you plug the portfolios into Morningstar or something similar to make sure it is reasonably diversified however.
overweight and overlapped is very common if broad based funds are being used.
Regarding single-country ETFs, ishares finally published some data on their new Chile ETF and I was happy to see that it wasn't overloaded with financials like a lot of foreign ETFs (only 8.4%). If you really wanted more exposure, you could always add a Chilean bank stock but for those of us who have been put off by the heavy financial weighting in many of these ETFs (or maybe it's just me) it's a pleasant surprise.
lol, I wrote about ishares Chile several weeks ago for TSCM and said the same thing about financials.
Using a single stock for each country instead of a country etf sounds like a sector betting to me. How do you manage the risk?
Roger.
Thanks again for the excellent info.
Could you please go over some of your criteria for choosing a country allocation? Is it their currency, commodities, etc.?
I view it quite the opposite. i build portfolios sector by sector, deciding what to overweight and underweight versus the S&P 500.
In filling out each sector I have already studied the countries and decided what I think are the best ways to access those countries; single stock, etf, cef, whatever.
How do a I manage risk? moderate exposure, no more than 3% to any common stock. I do the work to feel confident with the decisions and do what I hope is enough followup/monitoring and hopefully that process will be right more often than it is wrong.
Ireland looks like it turned out to be wrong for 2007 but the others I have chosen have worked out. I view this as a good result.
JackS,
I've written about this with some detail in the past to the extent you care but...
the first choices would be commodity based economies because they should be on different cycles than the US. Maybe this includes Aust, Canada, Norway. I like countries I perceive to be in their own world like Vietnam. I like obvious growth stories like China (I have been out of china since the spring but there is no question I will go back in).
I have written about Sweden as having better growth and employment than Euroland, a new less liberal gov't and a generally strong currency. There are other countries with these traits that I own as well.
That should give some idea.
Roger,
Fair enough that you control your position sizes to limit your risk.
But it is a little misleading performance wise to compare a single stock versus an index. The risk/return profile is quite different. If I were to pick a single stock I would certainly want it to significant outperform the country indices. Otherwise, why take the risk?
One other question that I am not sure you addressed before, do you have a currency asset allocation? I find it especially important as the USD will start to import inflation as the USD weakens. However, many asset managers say a portfolio for USD spenders don't need to worry about this.
the ETF for Australia is heavy in materials and yields less than my bank stock. there is no ETF for Norway. the etf for Canada has a lot of energy and materials and yields less than my stock. the ETF for Brazil is heavy in financials.
you should do what you want, i am writing about what i do, going narrower into stocks allows for better management of sector weightings, volatility, yield, style and market cap.
this all creates the outcome for the portfolio as opposed to the components. i have been writing about this for more than 3 years, you might be new but you cna research the archives for more context, but you should feel free to look into top down a little which i feel your comment is totally missing.
Thanks for your reply.
I understand your point on creating portfolio. My point was regarding the benchmarking of such a portfolio.
I do have a macro view and in fact have more invested in non-us driven stocks (might be US companies but those "global growers" or have secular trends) than US.
I also understand your point about choosing "beta" might be easier than "alpha". For example, this year I have held PBR for my brazil and energy proxy. China mobile for china/consumer. NOV for global E&P spending.
However, my point is a little different. It is regarding evaluating performance and managing risk (or large tails).
Anyways, I appreciate your comments, your time and thoughts!
Happy Holidays and may we have a Santa Clause rally!
Anon 2:34 PM (have posted before under AI)
The Yahoo Finance "new" chart tool is a little quirky. When I dial in ANZBY.PK (I'm guessing this is the Australian bank referred to, since you previously disclosed owning it for clients) and select YTD, the plot indicates up 25% on the right edge, but the data only goes to October 15! At Big Charts, the real YTD is more like up 6%. I guess when new tools are offered free, be very wary.
that is the name. so you say the chart works but the data only goes back to 10/15? I am not sure what you mean by data, They had a symbol chnage when the left the NYSE. If you are using the new charts on Yahoo and hover back over the year you get data that way, if that is what you are asking.
I'm saying Yahoo's data set for ANZ ends quite a bit short of Dec 14.
HalM,
ANZ was the first stock i plugged in and just never noticed. Great catch. I will post a retraction/correction today.
Apologies, honest mistake.
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