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

Did negative-yielding debt peak?

 

Did negative-yielding debt peak?

Courtesy of 

My Chart o’ the Day comes from LPL Research chief strategist John Lynch and it looks at the phenomenon of negative-yielding debt. Lynch notes that “Unfortunately, the global search for yield has now morphed into a scenario in which fixed income investors, or lenders, attempt to ‘potentially lose less’ rather than ‘earn slightly more’ than the value of the loan extended.”

...



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Zero Hedge

Despite Central Bank Cuts, UK Credit Card Rates Hit Highest Levels In 13 Years

Courtesy of ZeroHedge View original post here.

Credit card interest rates in the UK have hit the highest level in 13 years, according to the Financial Times

Per the report, the average annual percentage rate (APR) reached 24.7% in September - the highest since financial website Moneyfacts.co.uk began recording data. The average APR was 23.4% this time last year. 

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The Technical Traders

SAFE ASSETS - A TRADING STRATEGY FOR UTILITIES, GOLD, AND BONDS

Courtesy of Technical Traders

Chris Vermeulen, Founder of The Technical Traders shares his trading strategy for safer assets. While precious metals and bonds had a great run, the charts are showing the utilities could be the place to be in the short term. It’s important to note we are not saying the other safe havens are going to crash but it’s all about the time frame and playing the sector that could pop first.

LISTEN HERE NOW

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Kimble Charting Solutions

Stocks, Oil, and Bond Yields At Critical Bullish Breakout Tests!

Courtesy of Chris Kimble

It’s not often that three asset classes reach similar important trading points all at once.

But that’s exactly what’s happening right now with stocks, crude oil, and treasury bond yields.

And this is occurring on Federal Reserve day no less! Something has got to give.

In the chart above y...



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Insider Scoop

Economic Data Scheduled For Wednesday

Courtesy of Benzinga

  • The MBA's index of mortgage application activity for the latest week is schedule for release at 7:00 a.m. ET.
  • Data on housing starts and permits for August will be released at 8:30 a.m. ET.
  • The Energy Information Administration’s weekly report on petroleum inventories in the U.S. is schedule for release at 10:30 a.m. ET.
  • The Federal Open Market Committee will announce its policy decision at 2:00 p.m. ET.
  • The Fed Chairman Jerome Powell will hold a press conference at 2:30 p.m. ET.

Posted-In: Economic Data...



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Lee's Free Thinking

Is The Drone Strike a Black Swan?

Courtesy of Lee Adler

Pundits are calling yesterday’s drone strke a “black swan.” Can a drone strike on a Saudi oil facility, be a “black swan.”

According to Investopedia:

A black swan is an unpredictable event that is beyond what is normally expected of a situation and has potentially severe consequences. Black swan events are characterized by their extreme rarity, their severe impact, and the practice of explaining widespread failure to predict them as simple folly in hindsight.

I seriously doubt that no one expected or could have predicted a drone strike on a Saudi oil facility.

Call Me A B...

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Chart School

Crude Oil Cycle Bottom aligns with Saudi Oil Attack

Courtesy of Read the Ticker

Do the cycles know? Funny how cycle lows attract the need for higher prices, no matter what the news is!

These are the questions before markets on on Monday 16th Aug 2019:

1) A much higher oil price in quick time can not be tolerated by the consumer, as it gives birth to much higher inflation and a tax on the average Joe disposable income. This is recessionary pressure.

2) With (1) above the real issue will be the higher interest rate and US dollar effect on the SP500 near all time highs.

3) A moderately higher oil price is likely to be absorbed and be bullish as it creates income for struggling energy companies and the inflation shock may be muted. 

We shall see. 

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Digital Currencies

China Crypto Miners Wiped Out By Flood; Bitcoin Hash Rate Hits ATHs

Courtesy of ZeroHedge View original post here.

Last week, a devastating rainstorm in China's Sichuan province triggered mudslides, forcing local hydropower plants and cryptocurrency miners to halt operations, reported CoinDesk.

Torrential rains flooded some parts of Sichuan's mountainous Aba prefecture last Monday, with mudslides seen across 17 counties in the area, according to local government posts on Weibo. 

One of the worst-hit areas was Wenchuan county, ...



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Biotech

The Big Pharma Takeover of Medical Cannabis

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

 

The Big Pharma Takeover of Medical Cannabis

Courtesy of  , Visual Capitalist

The Big Pharma Takeover of Medical Cannabis

As evidence of cannabis’ many benefits mounts, so does the interest from the global pharmaceutical industry, known as Big Pharma. The entrance of such behemoths will radically transform the cannabis industry—once heavily stigmatized, it is now a potentially game-changing source of growth for countless co...



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Mapping The Market

How IPOs Are Priced

Via Jean Luc 

Funny but probably true:

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Members' Corner

Despacito - How to Make Money the Old-Fashioned Way - SLOWLY!

Are you ready to retire?  

For most people, the purpose of investing is to build up enough wealth to allow you to retire.  In general, that's usually enough money to reliably generate a year's worth of your average income, each year into your retirement so that that, plus you Social Security, should be enough to pay your bills without having to draw down on your principle.

Unfortunately, as the last decade has shown us, we can't count on bonds to pay us more than 3% and the average return from the stock market over the past 20 years has been erratic - to say the least - with 4 negative years (2000, 2001, 2002 and 2008) and 14 positives, though mostly in the 10% range on the positives.  A string of losses like we had from 2000-02 could easily wipe out a decades worth of gains.

Still, the stock market has been better over the last 10 (7%) an...



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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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