What is going on is either serious or it isn't. That may seem silly to say but whatever is going on in the last couple of weeks has no bearing on the long term supply and demand dynamic for this space or the long term economic impact either. Notice I am not saying commodities have to go up or that we are doomed to suffer hyperinflation. Whatever your perception here is, the market action has not changed the fundamentals.
If you think the entire commodity theme is hooey, there should be no reason to be convinced you are right and if you think gold is going to $2000 there is no reason to think you are wrong. To the extent that commodities and whatever will happen with inflation are long term idea they do not changed based on a couple of weeks of trading.Example; last fall the financials got pasted then they banned short selling and they skyrocketed. Problem solved some folks thought but of course the worst was yet to come and the market action of taking them up in the last two weeks of September meant nothing (except maybe a short term trade for anyone nimble enough, to the bigger picture.
Commodities, emerging markets and and other reflation plays are generally volatile. The more you add the more volatile you make your portfolio. In the very short term,
The first picture is from a coffee house in Astoria and the second is as we go over the Lewis and Clark Bridge. If you've ever seen the show Ax Men on the History Channel; we drove all through where the show is filmed, saw a lot of lumber yards and logging trucks.
10 comments:
"Commodities, emerging markets and and other reflation plays are generally volatile. The more you add the more volatile you make your portfolio."
I thought the reason to add these asset classes to a portfolio was to smooth the ride and improve the risk adjusted return. You know, the whole low correlation thing...zig when everything else zags.
absolutely. the full context of this thread is that at some percentage you go from smoothing out your ride to making it bumpier.
I'm not sure exactly what that number is but it is bigger than 5% and smaller than 30% and from there it depends on the person.
Roger,
Thanks for the posts, always an interesting read. I've noticed some readers giving you a hard time about the 200-day moving average ("What are you going to do? Hey, that's your rule, what now!?!?") and agree with your response ("Do your own work and chill out.")
I just wanted to add, for what it's worth, that although the S&P 500 went above the Simple moving average for a bit, the story is different with the Exponential moving average, due to the way they are calculated. With the exponential, it looks like a big fat failure at the 200-day. Same goes for the so-called "golden cross" (didn't happen in the exponential). I tried to explain why (just a guess, really) on my blog at http://thestocksurfer.blogspot.com/2009/07/golden-cross.html.
I'm not looking for readers, just wanted to add that to the discussion for those who may be freaking out over the 200-Day.
Re yesterday's fotos...Valley Bank used to have a branch in Salome,AZ that was in a trailer. It was there until about 1984.
I keep seeing bad guys robbing the bank with a pickup truck and trailer hitch.
There's been talk of another stimulus plan....OMG
Here's my idea for a stimulus....
The government mandate that every home loan mortgage originator (or current holder) allow indivudual home owners (not investors) the option to renegotiate their mortgage at the CURRENT appraised value. Any home appreciation from this point would belong to the loan originator.
The debt holders get future appreciation, the current home owner is no longer under water and probably has a smaller monthly payment.
12:54 PM Hussman made a similar suggestion months ago. If they don't listen to him, you don't stand a chance.
One of the difficulties of commodities is the perennial blur among the USD effect, fundamental effect and geo-political effect. Given that constellation of things that go bump in the commodity night, almost every zig an wiggle of prices can be explained.
I re-entered a named today in this space. It's a stock that I sold, not because I wanted to, but because I really had to because it rocketed out of a volatility squeeze. My MO in this uncertain market is to buy low volatility and and sell high volatility. It has been very successful. Admittedly, it requires mind numbing flipping through charts. But, with a glass of wine (or a cup of coffee) it is enjoyable and appeals to my idiot savant tendencies.
I don't know about the savant part but otherwise....just kidding
Great article. Getting your take on it has really given me some insight I didn’t have before.
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