By 2 Cents on August 15th, 2011 | Category: Investing |  Continuity gives us roots; change gives us branches, letting us stretch and grow and reach new heights.
~Pauline R. Kezer
My computer will be packed and we will probably be en route for stage one of the move by the time you read this. It’s unfortunate that this geographical move is coinciding with more historical economic and market moves. I wish I could follow it all a little more closely. Alas, life happens.
The good news is that if you’ve been reading BJ for the past year or so, you weren’t lulled into complacency by the 2009-2011 rally. To borrow a metaphor from David Rosenberg, you knew that the rally was a house of straw rather than bricks. Hopefully, you managed risk accordingly.
Besides the market, I’ve been short on time, sleep, and as a result, brain power. So I’ll use today’s [...]
Read on and enjoy … On the Move
By 2 Cents on August 8th, 2011 | Category: Investing |  Poetry is nearer to vital truth than history.
~Plato
In our recent discussions about the Couch Potato style of investing, I mentioned that this strategy relies on historical market returns. I pointed out that including a component that reflects valuations might improve the strategy. This is basically the Valuation Informed Indexing approach about which Rob Bennett often writes.
I mentioned in my last post that I like to look at historical data regarding market performance and valuations, but that I didn’t want to rely on it completely. I’ll explain my thinking here and you guys can let me know what you think.
Past Performance Is Not Indicative of Future Results
“History is a vast early warning system.” ~Norman Cousins
One of the [...]
Read on and enjoy … History Only Rhymes
By 2 Cents on August 7th, 2011 | Category: Investing |  It was widely rumoured around trading desks on Friday that S&P would downgrade the U.S. credit rating, stripping its coveted AAA status. Many dismissed the rumour. After the markets closed, it happened. Now what?
I have no idea what will happen when markets open tomorrow morning. It seems like there’s a pretty good chance of another major sell-off, although the market seems a lot more concerned about the situation in Italy than the U.S. debt downgrade. So far, Middle Eastern markets have opened down sharply, but they weren’t open on Friday, so they could just be playing catch-up.
On the optimistic side, it’s possible that the ECB will come up with something that (at least temporarily) calms the market’s concerns about the European debt crisis. According to some, there’s even a chance that markets could enjoy a kind of “sell the news” rally in the wake of the [...]
Read on and enjoy … What Happens Monday?
By 2 Cents on August 4th, 2011 | Category: Investing |  I know what I have given you. I do not know what you have received.
~Antonio Porchia, Voces, 1943, translated from Spanish by W.S. Merwin
Well, it took about two weeks, but the Couch Potato cabal piled on all at once in response to my post on Why This Is No Market for Couch Potatoes. Unfortunately, they did so on the day I was out of town with my son for his follow-up surgery so I wasn’t (and to some extent still am not) in the best condition to comment. I’m still busy with post-op pain management and preparing to move, so I’ll have to make this quick, and therefore less thorough than I’d like.
While some fine points were made, I was fascinated by the number of people who commented and attributed a point of view to me that I didn’t think I had put [...]
Read on and enjoy … Couch Potato Rebuttals
By 2 Cents on July 27th, 2011 | Category: Investing |  If I had a formula for bypassing trouble, I would not pass it round. Trouble creates a capacity to handle it. I don’t embrace trouble; that’s as bad as treating it as an enemy. But I do say meet it as a friend, for you’ll see a lot of it and had better be on speaking terms with it.
~Oliver Wendell Holmes
When I wrote about Why This Is No Market for Couch Potatoes, it sounded like I was saying that there’s elevated risk in both the stock and bond markets at this moment in history. I was. That begs the question then: Where can we invest? If not stocks or bonds, where? Gold? Real estate?
An astute reader posed that exact question and I said I would address it in a future article. So here we go. I [...]
Read on and enjoy … Portfolio Options for a Risky Market
By 2 Cents on July 21st, 2011 | Category: Investing |  The conventional view serves to protect us from the painful job of thinking.
~J.K. Galbraith
A recent article in the Globe and Mail delivered the following advice to investors: Don’t Let a Fear of Bonds Infect Your Healthy Portfolio. The implications are clear:
1. Concerns about ultra-low interest rates eventually turning higher are overblown.
2. If you succumb to the paranoid people who think interest rates can actually rise above 0% – 3%, your portfolio will be unhealthy, damaged, infected. (The image with the article showed people in protective masks.)
3. And my personal favourite: Long term investors need not concern themselves with shorter term market movements because markets always rise over the long term – whenever that is.
So there you go. “Stop worrying so much about bonds.” All you have to do is put your desired allocation in bond mutual funds or [...]
Read on and enjoy … Yes, You Can Live Without Bonds
By 2 Cents on July 18th, 2011 | Category: Investing |  Never accept the proposition that just because a solution satisfies a problem, that it must be the only solution.
~Raymond E. Feist
Update: This article was featured in the Totally Money Carnival at Family Money Values. Thanks!
A recent article in Money Sense magazine offered some data on investment returns for the publication’s preferred investment indexing method: the Global Couch Potato portfolio. It’s a simple, low-cost way to invest in a set allocation of stocks and bonds with limited effort on the part of investors. The rise of ETFs over the past decade has turned this strategy from a questionable alternative to mutual funds to a near standard in the DIY investment space. Many personal finance and investing sites promote it as the best way for individual investors to manage their portfolios.
The strategy grew out of a desire to circumvent the [...]
Read on and enjoy … Why This Is No Market for Couch Potatoes
By 2 Cents on July 15th, 2011 | Category: Investing |  Prosperity is a great teacher; adversity is a greater.
~William Hazlitt
If you believe the opening quote, we are in for some great lessons – at least according to Felix Zulauf of Zulauf Asset Management in Switzerland. The transcript of a recent interview with him was published by McAlvany Weekly Commentary. It is optimistically entitled Marching Full Speed into Calamity.
It’s rare to find such great detail in a single interview, especially if you’re accustomed to consuming your market commentary via television, where guests are rarely allowed to finish a sentence let alone expand on their thoughts. This far-ranging discussion covers Zulauf’s views on everything from stocks, bonds, and gold to sovereign debt and the fate of the European Union.
His views are not too far from my own, and he even uses a similar weather analogy. (See 5 Year Market Outlook: Felix Zulauf
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