A bunch of stuff today.
Bill Miller was on with Erin Burnett yesterday for an hour. Toward the end of the show Erin asked what his biggest regret was and he said his biggest regret "was certainly getting the financial crisis wrong, we had very robust strategies for virtually every kind of market disruption from inverted yield curves to the crash on 1987 and that was a case where we just didn't get the difference between a liquidity driven crisis like 1987 and a collateral driven crisis like 2008."
I've picked on him before. What robust strategies could he have had for the inverted yield curve? He was grossly overweight financials (and apparently still is) at the worst time including GSEs that almost went to zero. I had a very un-robust strategy for inverted yield curves, I reduced exposure and blogged about it incessantly.
Since 2000 there have been two market calamities and he fared worse than the SPX during the most recent calamity and went down almost as much as the SPX during the first calamity (you need to look at Morningstar which captures the dividends). Despite his lagging the SPX in 2010 I have little doubt that if the next ten years is good for domestic markets he will do very well but why should anyone expect him to ever see the next calamity. When I hear him speak, I now have no idea if he knows what he is talking about. It would be reasonable to conclude he did not understand what he owned with the GSEs--what else doesn't he understand? Bespoke has a little more about him and his fund.
If his strategies were somehow robust, then they were too robust and missed the forest for the trees. You can have success keeping things very simple. I strive for simplicity.
Next up is possibly the second worst article I've ever read at Seeking Alpha (I would say the worst but I remember saying that before about another article but don't remember what that article was). The other day I made a comment about not confusing being smart with a bull market. The article in question talks about the author having made a portfolio recommendation three years ago to an eighty something year old that was 30% in gold, 30% in silver and most of the rest of it in other commodity related items. He said it was "an illustration" to show this person what a bad job his advisor was doing.
The result was fantastic in nominal terms. The author pointed out that "it still outperformed any standard asset allocation recommended by professionals, with a relatively low level of risk." This is the grossest example of failure to understand the risk taken I've ever read. It is embedded with so many fallacies and biases that at first I thought it was a joke (and if it is a joke then the joke is clearly on me). But it is a great example for the extreme nature of the portfolio of how important the concept of risk adjusted returns are and why it is important to educate yourself on this if you have not already done so.
Deutsche Bank rolled out the following ETNs;
* PowerShares DB German Bund Futures ETN (NYSEArca: BUNL)
* PowerShares DB 3x German Bund Futures ETN (NYSEArca: BUNT)
* PowerShares DB Italian Treasury Bond Futures ETN (NYSEArca: ITLY)
* PowerShares DB 3x Italian Treasury Bond Futures ETN (NYSEArca: ITLT)
* PowerShares DB Japanese Govt Bond Futures ETN (NYSEArca: JGBL)
* PowerShares DB 3x Japanese Govt Bond Futures ETN (NYSEArca: JGBT)
I think this is an important listing not for what the funds cover but because it breaks the ice on foreign sovereign products that go to the individual country level. To be clear these track futures prices and it looks as though there will be no interest payments. Again, I view this as an ice-breaker.
Global X filed for yet more ETFs. One would be called Global X Global Auto ETF and the other would be the Global X Farming ETF. I looked at the site for the index provider for the Farming fund but did not find the underlying index, if you find it please leave a link. The Auto ETF is from a different provider and I did not look them up.
The farming fund of course holds a lot of conceptual appeal to me. The new CROP fund from IndexIQ makes a good first impression but there is nothing to say that fund must be the way in for all times, we'll see what the Global X fund looks like if it ever lists. Generally I believe the demand for better food is a one way trade but I am not saying that would be the case with the stocks. In the face of another meltdown I have no expectation that farms would offer a place to hide even with a great demand story. Any allocation I might implement for clients would be small.
The auto ETF is something of an enigma. About the only business worse than autos is airlines yet it is clear that the number of cars purchased in countries where a middle class is ascending is going to skyrocket. I have zero doubt about this yet I think the businesses stink. Maybe "stink" will turn out to be wrong about smaller companies located in and serving these markets but I am pretty sure that if it happens, it will be without me.
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7 comments:
Seeking Alpha is an interesting resource for me. On one hand, I run across some articles that generate investment ideas or at least a curiosity of the same, on the other hand, more than a few articles provide me with a good laugh because of both content and/or agenda of the contributor.
You, of course, fall into the first category.
T
thanks T, you've done a lot of heavy lifting with income ideas in your posts which help the conversation immensely in a 0.16% world
Wow, that article is something else. That freaking scares me.
The article is too early; it should be released when the 'Buy SILVA' ads are cropping up and gold taps become collectors' items. Right now we're still in a dysfunctional precious metals market but the hype hasn't overcome some rationality. We also have dysfunctional inflation measurements; what is a basket of goods today, how can you measure the price of a tablet when new versions are brought out more often than new lines of clothes, is CPI or RPI accurate or are they both wide of the mark, which category of consumer is in the majority - a retiree, an AB or a BC1, where does the grey market figure in this?
I can only see two markets that have thousands of analysts employed to register and debate the levels of inflation in our economies - stocks and currencies. This is why I have been buying only stocks and ignoring PMs for the last 18 months. Long gone is the Irrational Exuberance and I'm in no position to buy shares of MyFace.
Western governments - for example the Conservatives this week - are starting to make good progress in encouraging companies to invest in Western economies again. They've sorted the wheat from the chaff and the best goods, for example Italian shoes, Scotch whiskey, German cars, French wines, US aircraft and Swiss watches, will never go out of fashion - at least not in my investment horizon.
And, last but not least, a hat tip to you Roger for recognizing the weakness of sterling when it was above $2. We tend to focus on where we could've done better in analysis so I throw out this reminder of your call as balance.
Bruce Berkowitz, arguably the top diversified fund manager over the past decade is also making a big bet, like Miller, on the financials.
we'll see if Berkowitz has time for both JOE and his fund
Berkowitz is concentrated with low turnover, so maye he can. As you know, he is a big Buffett guy, so once he gets the executive team at JOE in place, I suspect (hope) he will become more passive. JOE is a huge contrary bet, but buying a finite asset at a perceived discount and having staying power could give some big upside. disclosure: Long FAIRX
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