Michael Steinhardt was on Squawk Box on Friday morning and had a very interesting comment that I have transcribed below off of my DVR.
Carl Q: But Michael, you on the other hand think there is not enough information to make a call (on the broad market) and my question is the fallout from that just to stay in cash and stay out of the markets completely?
Michael Steinhardt: I've been in the market all my life, and I focused on projections all my life and I have always taken great pride in being right and I don't open my mouth unless I think there is a reasonably high probability that I'm going to be right and I'd say most people are random in their judgments and are perfectly happy to express their views no matter what.
So with that background I would say it is a very difficult time to make judgments. I think Lee (Leon Cooperman) is a very smart guy but if we are sitting here six months from now it is at least 50/50 that he will have a different view then he has today because it is just a strange difficult time because there are too many imponderables and too many things that are going to change that we can't anticipate now.
So I would rather be liquid for sure to be liquid be relatively risk adverse and just hang in and say most of us have lost a lot of money in the last year and I'd rather not lose some more.
It doesn't sound like he is too worried about timing a turnaround and is quite content sitting in what sounds to me like a defensive position. My two cents here, which I have said often, is that there are times to let your money grow (most of the time) and other times where protection of assets are most important.
I found this by Chuck Jaffee at the site for the Fort Worth Star Telegram (so presumably it ran on MarketWatch first) about the potential importance of the sale of iShares by Barclays Bank. The article explores whether the sale would create a new ETF powerhouse and whether this is a path to active ETFs.
Many agree that active ETFs are the next big thing but I have never understood the appeal. In a manner of speaking we have had active ETFs for decades; closed end funds. Obviously there are structural differences. The biggest and most popular ETFs (SPY, EFA, EEM and IWM as examples) are used by large pools of capital because they are fast, easy, liquid proxies. The levered, inverse and certain sector ETFs are used the same way but also for speculation. Beyond that there are the majority of funds (including a couple of active or quasi active) that do not trade a lot.
Maybe I'll turn out to be wrong about this but given the difficulty that so many mutual funds have beating the market I doubt a new, more expensive exposure can gain much traction. One point I have made about ETFs is in the context of portfolio construction and being able to rely on what a given ETF will look like six months from now. There is no way to know what an actively managed product will look like in six months. I would note that any active ETFs will be transparent.
What if it ends up being overweight the wrong sector and at the same time another fund you own is overweight that same wrong sector. It would be like owning both the Legg Mason Value Trust (LMVTX) and Davis NY Venture (NYVTX) in 2008. Those funds were down 55% and 40% respectively that year.
Lastly Barry has a post from John Mauldin that excerpts an op-ed in the WSJ by Gary Schilling and Richard LeFrak. Basically the idea is to give a green card to any immigrant who will buy a house. The idea is interesting and would probably, as the article asserts, stabilize things. But for how long? A commenter on the post said that it would simply delay the final result however bad or not it may turn out to be. This probably also has truth to it.
What do you think?
13 comments:
Housing: I see giving green cards for houses nothing but a recipe for disaster. Its fixing the results of the housing crisis (low home values further dragging other homes down) and not fixing the cause of the problem (mortgages given to people that can't afford them).
An honest banker will be having a harder time trying to review the credit history of a person from another country with possibly questionable legitimacy of the documents.
A dishonest banker will now have greater access to a person who knows the language and housing laws less then the rest of us. Heck how many of us truly understands everything they signed in their mortgage?
At the very best this shifts the problems from economic to social. We already have tensions with immigrants in the U.S. Now we will have immigrants coming in and buying a house for half or less of its value because a citizen was foreclosed on. The hate groups will have a field day with that. The WSJ link you posted paints a very rosy picture of the millions of people with $1 million in assets just waiting to become productive members of society. I think it ignores more of what the reality would be. It also says that only homes of a certain value would count. The higher the homes value the less of a problem empty houses have on a local community so would it really be fixing anything?
Don't get me wrong. I am all for anyone having a house that can afford one. Getting that done correctly is my concern.
Actively managed ETFs: So where as a mutual fund was a collection of various companies from across multiple sectors that was charging a fee, we have actively managed ETFs being a collection of various companies from limited sector choices that will charge a fee?
I'm oversimplifying it obviously but the only thing I am seeing here is a way to attract people turned off by mutual funds to come back to paying fees for the same service. Maybe I am just not understanding how it would be a different product
I think I would like to know if you are letting your assets grow or are still in the preservation mode...if the latter due to the 200 day M.A., what % do you allocate to equities i.e. how do you define preservation? I am sure many of readers of this blog are wondering the same. Thanks..
Odd idea. I'm not sure how much house they think someone who doesn't have a green card can afford...
Maybe I'm missing something, but I just don't see a need for actively mananged ETFs when I already have mutual funds. But then I'm not a trader.
I think the target for the green card for house idea are people with H1b visas who want to stay.
Anon, where is the S&P 500 in relation to its 200 DMA? that is your answer. I made some changes a few months ago in case the market rallied still keeping a high cash level. Those changes were too early but I am still quite defensive.
You usually tell us where your pictures are from. This one is not Hawaii, I'm sure.
oops, that is the Mendenhall Glacier in Juneau.
sounds like a new way to launder drug money into the US.
nice piture..
thank you
Roger,
I have lots of respect for mr. Steinhardt. I have read his book No bull my file in and out of markets and learned lots about trading and timing markets. I do not know if his hedge funds are loosing money, we are living in extraordinary times. As far as give green card to anyone that buys a house will not go a long way, because the affluent from other countries do not want to be in the USA. The ones that came to the states are the needy, the people that looked for work and to have a future. It is a different thing what we do to them after they received a green card and became Americans.
Jeff from Milan, Italy
Steinhardt is a tough customer.
What kind of guests would CNBC attract if they said "I don't know what's doing to happen. I don't want to be wrong if I don't have a high degree of probability of being correct. I just don't open my mouth". :)
Steindhardt has money spread amongst the best hedge fund managers so he will do fine in an up or down market. His Wisdomtree etf's have a lot of flexibility to them...and offer individuals a nice alternative to a unique niche of product offerings.
Capital preservation is #1.
Why am I not inclined to buy stocks now?
I've lost faith in America. Since America has always been a world leader (not true any longer...at least for now), I can't fathom any other market as being vibrant and a leader at this time.
The United State had always thought it had the answers or, if it worked very hard, the right answers would evolve.
We are now realizing: 1) we don't have the answers, 2) we have been wrong many times.
When I look at leadership in government and in business, I am shocked and dismayed.
We've built all kinds of slogans, such as, "buy when there is panic in the streets". This is all meaningless and it is relative. NO ONE can prdict what will happen in the future. We can use models...but that is all they are....MODELS, not accurate predictors.
This is the first time in my life, I do not want to invest in America.
didnt canada do the house thing a few yrs ago with pretty good success??? supposedly you had to bring in like 400k...
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