Posts Tagged ‘asset allocation’

FUND MANAGER BULLISHNESS COULD BE WARNING SIGN

FUND MANAGER BULLISHNESS COULD BE WARNING SIGN

Courteswy of The Pragmatic Capitalist

The January Merrill Lynch Fund Managers Survey showed very optimistic expectations from the majority of money managers.  This is a sharp change from last months survey when fund managers were entering 2009 with cautious optimism.  The latest survey showed the highest surge in Merrill’s Risk & Liquidity (46%) indicator since May of 2006.   In the past, this indicator has served as a fairly good contrarian indicator.

FMS1 FUND MANAGER BULLISHNESS COULD BE WARNING SIGN

In terms of asset allocation, fund managers have turned substantially more aggressive.  Cash levels are now at their lowest levels since 2007.  Fund managers have aggressively deployed cash into the equity markets:

“Average cash balances have fallen to 3.4 percent, the lowest reading since mid 2007 and down significantly from 4.0 percent in December. Appetite for equities is strong. A net 52 percent of asset allocators are overweight equities, up sharply from a net 37 percent in December.”

FMS2 FUND MANAGER BULLISHNESS COULD BE WARNING SIGN

Much of this cash has poured into commodities:

FMS3 FUND MANAGER BULLISHNESS COULD BE WARNING SIGN

In terms of regions, the U.S. remains an underweight as investors continue to favor emerging markets:

FMS4 FUND MANAGER BULLISHNESS COULD BE WARNING SIGN

This survey is showing some contrarian sell signals.  Just 45% of fund managers are protecting themselves against a downturn versus 52% in December.   The survey also shows a strong appetite for risk and high beta names. According to Merrill’s analysts the survey could be cause for alarm:

“This survey is one of the more bullish we have seen and suggests that investors buy into the idea that this recovery has legs,” said Gary Baker, head of European Equities strategy at BofA Merrill Lynch Global Research. “We are, however, seeing early signs that might alert contrarians looking for a selling opportunity – namely low cash allocations and possible complacency against a sell off in stocks,” said Michael Hartnett, chief Global Equities strategist at BofA Merrill Lynch Global Research.

Source: ML

 


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Asset Allocation

Asset Allocation

asset allocationCourtesy of Rick Bookstaber

I appeared last Friday on a the PBS program WealthTrack, where the topic was asset allocation, in particular, as host Consuelo Mack put it, how to build an all weather portfolio. I was the skeptic of the group. I don’t think there is some magic asset allocation that protects you from the buffetings of financial storms without it also trimming your sails during fair weather. Here is an encapsulation of my views from the program.

Asset allocation and risk appetite
One of the participants, asset allocation guru David Darst of Morgan Stanley, proposed various portfolios to protect against a 100-year flood, 30 to 70-year flood, a 25-year flood, etc. Those portfolios boiled down to putting less in risky assets and more in bonds; the more severe the flood you anticipate, the less risk you take. Of course, that will do the trick. If by asset allocation you mean determining where to set your risk tolerance dial, we’re all on board.

Asset allocation is like clapping with one hand
But the discussion of risk tolerance highlights that we can only go so far with asset allocation if we only look at assets. What matters is assets versus liabilities, because the liabilities determine our risk tolerance and, related to that, our demand for liquidity. It is impossible to formulate an ideal asset allocation strategy without knowing the liability stream those assets are intended to meet. There is no one-size-fits-all for asset allocation. This reminds me of an FAJ article I did back in the 1980s with pension actuary Jeremy Gold entitled “In Search of the Liability Asset”.

Diversification works well, except when it really matters
We all know the argument from Finance 101: If you hold 16 uncorrelated assets, your risk will drop by a factor of four. Well good luck with that.

During a crisis, when diversification really matters, correlations aren’t near zero (as if they ever are). All that people care about is risk and liquidity. All assets that are highly risky drop, all assets that are less liquid drop. No one cares about the subtlety of earnings streams. It is like high energy physics. When the heat gets turned up high enough, matter is just matter, the distinctions between the elements is blurred away.

This is not to say


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Phil's Favorites

Facebook needs regulation - here's why it should be done by algorithms

 

Facebook needs regulation – here's why it should be done by algorithms

Shutterstock

Courtesy of Emanuele Giovannetti, Anglia Ruskin University

Facebook has been likened to a “digital gangster” by a critical parliamentary report into disinformation and fake news. One witness in the 18-month inquiry into the way digital platforms have transformed the flow of information describes the current use of t...



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Zero Hedge

US Demanding China Keep Value Of Yuan Stable, Halt Devaluations

Courtesy of ZeroHedge. View original post here.

In the latest sign that at least some progress might be made this week toward a US-China trade accord as the seventh round of talks gets underway in Washington, Bloomberg just reported that the US - in addition to its other demands - also been pressing China to "stabilize" the yuan, a move aimed to neutralize efforts by Beijing to devalue its currency to counter American tariffs.

According to sources close to the talks, the two sides are discussing how to codify language prohibiting currency manipulation in a memorandum of understanding that would form the ...



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ValueWalk

Current Quarterly Earnings Forecasts Accentuate The Negative

By Jacob Wolinsky. Originally published at ValueWalk.

In revising their forecasts of companies’ current quarterly earnings, analysts accentuate the negative, new research finds

3844328 / PixabayWidely available earnings forecasts not as informative as many think

It may be the most persistent criticism leveled against stock analysts – excessive optimism, what is widely perceived to be a tendency to be more upbeat about the companies they cover than the facts...



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Kimble Charting Solutions

Doc Copper About To Hurdle Important Breakout Level?

Courtesy of Chris Kimble.

Doc Copper often times sends important messages, to the global economy, reflecting growth or lack thereof. An important price test is currently in play for Ole Doc Copper!

The long-term trend for Copper remains up, as it has created a series of higher lows for the past 18-years along line (1). Over the past few months, Copper could be creating a double bottom just above this long-term rising support line at (2).

The small rally of late has Doc Copper testing the top of its 6-month trading range at (3).

Can ole Doc Copper hurdle this important breakout leve...



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Insider Scoop

The Street's Early Reaction To Walmart's Q4 Beat

Courtesy of Benzinga.

Related WMT Mid-Morning Market Update: Markets Edge Higher; Walmart Tops Q4 Expectations Walmart Brings Bright Spot T...

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Digital Currencies

Cryptos Are Surging: Bitcoin, Ethereum Hit One-Month Highs As Institutions Dip Toes

Courtesy of Zero Hedge

Cryptocurrencies are surging while the US equity markets take the day off. Ethereum is up over 18% from Friday's 'close' and the rest of the crypto space is a sea of green. While no immediate catalyst (headline or technical level) is clear, increasing chatter over institutional investors dipping their toes in the space have prompted an extension of the positive trend.

A sea of green...

Source: Coin360

Ethereum is leading the charge follow...



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Chart School

Weekly Market Recap Feb 17, 2019

Courtesy of Blain.

The “V” shape bounce continues in unrelenting fashion as bulls are stampeding bears in 2019!  All due to a little “patience” from the Federal Reserve.  It is really quite breathtaking but we have seen it repeatedly the past decade as the Federal Reserve pours gas on the market.  Hopes for a deal with China also spurred the action upward.  Rallies (both with gap ups) on Tuesday and Friday provided the juice this week.   The S&P 500 is back over its 200 day moving average after being below for 46 days – it’s longest period of time below that level since March 2016.

Mat Klody, chief investment officer at Keebeck Wealth Management, told MarketWatch that the major benchmarks’ steady march higher since the beginning of the year is being driven &#x...



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Biotech

Cancer: new DNA sequencing technique analyses tumours cell by cell to fight disease

Reminder: We are available to chat with Members, comments are found below each post.

 

Cancer: new DNA sequencing technique analyses tumours cell by cell to fight disease

Illustration of acute lymphoblastic leukaemia, showing lymphoblasts in blood. Kateryna Kon/Shutterstock

Courtesy of Alba Rodriguez-Meira, University of Oxford and Adam Mead, University of Oxford

...

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Members' Corner

Why Trump Can't Learn

 

Bill Eddy (lawyer, therapist, author) predicted Trump's chaotic presidency based on his high-conflict personality, which was evident years ago. This post, written in 2017, references a prescient article Bill wrote before Trump even became president, 5 Reasons Trump Can’t Learn. ~ Ilene 

Why Trump Can’t Learn

Donald Trump by Gage Skidmore (...



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Mapping The Market

Trump: "I Won't Be Here" When It Blows Up

By Jean-Luc

Maybe we should simply try him for treason right now:

Trump on Coming Debt Crisis: ‘I Won’t Be Here’ When It Blows Up

The president thinks the balancing of the nation’s books is going to, ultimately, be a future president’s problem.

By Asawin Suebsaeng and Lachlan Markay, Daily Beast

The friction came to a head in early 2017 when senior officials offered Trump charts and graphics laying out the numbers and showing a “hockey stick” spike in the nationa...



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OpTrader

Swing trading portfolio - week of September 11th, 2017

Reminder: OpTrader is available to chat with Members, comments are found below each post.

 

This post is for all our live virtual trade ideas and daily comments. Please click on "comments" below to follow our live discussion. All of our current  trades are listed in the spreadsheet below, with entry price (1/2 in and All in), and exit prices (1/3 out, 2/3 out, and All out).

We also indicate our stop, which is most of the time the "5 day moving average". All trades, unless indicated, are front-month ATM options. 

Please feel free to participate in the discussion and ask any questions you might have about this virtual portfolio, by clicking on the "comments" link right below.

To learn more about the swing trading virtual portfolio (strategy, performance, FAQ, etc.), please click here ...



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Promotions

Free eBook - "My Top Strategies for 2017"

 

 

Here's a free ebook for you to check out! 

Phil has a chapter in a newly-released eBook that we think you’ll enjoy.

In My Top Strategies for 2017, Phil's chapter is Secret Santa’s Inflation Hedges for 2017.

This chapter isn’t about risk or leverage. Phil present a few smart, practical ideas you can use as a hedge against inflation as well as hedging strategies designed to assist you in staying ahead of the markets.

Some other great content in this free eBook includes:

 

·       How 2017 Will Affect Oil, the US Dollar and the European Union

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