The Big Picture For The Week Of March 23, 2008

On Tuesday I am flying to Miami to speak at the World Series of ETFs East on Wednesday and Thursday.

One of the panels I am on is about how to integrate ETFs into an investment management practice. Besides the obvious of just buy them the topics will include how to research them, how to explain them to clients and what the drawbacks are.

The other, and probably more interesting, panel will be about reducing portfolio correlation with fixed income ETFs. That the global TIPS ETF just listed under ticker WIP should make the conversation all the more interesting.

There are a couple of other sessions that I plan to sit in on when I'm not out on the water in a speed boat or racing through the streets in a Ferrari (humor attempt).

The evolution of the investment products (not just ETFs) and the strategies that are now more easily accessed is a great thing for do-it-yourselfers in that very sophisticated can be constructed for individual sized investors. I've tried to delve into some portfolio ideas both here and in articles I've written for TSCM and the cool thing is that the concepts become dated very quickly as new products come out or as readers point out things I've never seen before.

This past week an email came in telling me about the Arctic Glacier Income (AGUNF.PK) which is a Canadian trust whose business is selling ice cubes and blocks. The fund recently got hit hard in the face of an ice industry collusion allegation that has also hit Reddy Ice (FRZ), ice collusion, wow.

Both are fairly recession-proof (good) paid a high dividend even before the price drops (this may or may not be good you need to look under the hood) and both are very levered (FRZ more so) which is not so great.

In general 10% yielders are risky (I have said this before as have some readers), something that yields 10% in a 5% world, generically speaking, is risky. You either know what the risk is or you don't.

There is nothing wrong with allocating a few percent to a levered, high yielding product that you feel is sound (to be clear I am offering no opinion either way on AGUNF or FRZ). A diversified portfolio should take some risks, maybe not a lot but some. A modest weight in something that blows up would be a bummer but not ruinous. Depending on the account size, 5% split between a hydro fund, one of the plane leasing companies and some other high yielding segment (assumes all three are properly researched) is far from crazy.

This turned into a bit of a ramble so I'll finish with how good the games were on Friday. Just wondering, does anyone like Billy Packer? I think Bill Raftery is much better, much funnier and seems to enjoy it much more.