Posts Tagged ‘diversification’

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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Is George Soros Long or Wrong on the Global Rebound?

Is George Soros Long or Wrong on the Global Rebound?

George SorosCourtesy of Keith Fitz-Gerald
Investment Director, Money Morning

Billionaire investor George Soros thinks the worst of the global financial crisis is behind us.

In a June 20 interview with Polish television, the Hungarian-born Soros acknowledged that this has been the most serious crisis he’s seen in his lifetime, but said, "Definitely, the worst is behind us."

For those that like to interpret "Soros-speak," that’s as powerful a sign as any that one of the world’s most successful investors is "going long."

But is he wrong?

On one hand, the World Bank is busy roiling the markets with recently updated figures that project a 2.9% decline in global economic activity this year. Then there are the signs that the "green shoots" (how I’ve come to detest that term) may be more like weeds. Debt is devastating the developed world and the once-mighty G-7 looks more like a G-1 every day.

On the other hand, I wouldn’t bet against him. When it comes to financial influence and acumen, Soros is about as powerful and prescient as they come. He’s made billions over the years speculating on things that others simply couldn’t see or, more often, didn’t want to believe. He’s as iconic as he is legendary for making big bets on market timing even if, by his own admission, he’s not always right.

For the millions of investors who are tempted to interpret Soros’s comments as bullish, that admission forces me to urge caution. In fact, my advice to proceed with caution extends to any comments that might be made by such other investment legends as Warren Buffett, or even Soros’ former investment partner, noted author and commentator Jim Rogers.

I preach caution for three reasons:

  • Despite the fact that each of these men is fabulously successful, the typical retail investor has no idea how much money they’re betting on the upside, or what percentage of their wealth is involved in any publicized position.
  • It’s not clear what – if any – protective stops are being used so you don’t know whether the positions they’ve taken represent core portfolio holdings or speculative trades.
  • These revelations – disclosures – are usually made after the fact, which means that investors who may want to tag along for

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Phil's Favorites

Undercover Video Captures Trump Campaign's Data Firm Discussing Entrapping Politicians With Sex


Undercover Video Captures Trump Campaign’s Data Firm Discussing Entrapping Politicians With Sex

Cambridge Analytica’s CEO also boasted of using other shady tactics.

By Andy Kroll, Mother Jones 

An undercover video report by Britain’s Channel 4 has captured footage of top executives at Cambridge Analytica, the controversial data-analytics firm that worked on Donald Trump’s 2016 presidential campaign, talking about sending U...

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Zero Hedge

Obama's Former Campaign Director Makes Bombshell Claim: Facebook Was "On Our Side"

Courtesy of ZeroHedge. View original post here.

The recent controversy and escalating scandal over Facebook's decision to ban Trump-linked political data firm Cambridge Analytica over the use of data harvested through a personality app under the guise of academic research has opened a veritable Pandora's box of scandal for the Silicon Valley social media giant. 

Carol Davidsen, who served as Obama's director of integration and media analytics during his 2012 campaign (in her ...

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Peter Thiel: Need To Rethink Tariffs In Light Of Trade Deficit With China; SF Sucks, Bitcoin Rocks

By VW Staff. Originally published at ValueWalk.

PayPal cofounder Peter Thiel in a wide-ranging interview on President Trump’s trade tariffs, China’s economy, technology regulations and his outlook for bitcoin.


Check out our H2 hedge fund letters here.

Peter Thiel: Need To Rethink Tariffs In Light Of Trade Deficit With China

Peter Thiel On Leaving Silicon Valley For Los Angeles

Billionaire investor Peter Thiel argues Silicon Valley is is a ‘totalitarian place’ where people are not allowed to have dissenting views.


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Insider Scoop

The Market In 5 Minutes: AT&T, Facebook Data, Apple Screens, Google Shopping And More

Courtesy of Benzinga.

Related SPY What You Need To Know About Larry Kudlow, Trump's New Economic Advisor Appeals Court Overturns Fiduciar... more from Insider

Digital Currencies

Bitcoin Soars $1000 Off The Lows After G-20 Rejects Crypto Crackdown

Courtesy of ZeroHedge. View original post here.

While advertising bans and Mt.Gox Trustee overhangs remain, the FUD of a possible global regulatory crackdown in the G-20 Communique was a major driver of this weekend's weakness... until Les Echos confirms FSB has rejected calls for regulation.

After headlines suggesting a global crackdown on cryptocurrencies spooked the markets on Friday, ...

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Chart School

Expiration Spikes Volume but Markets Flat

Courtesy of Declan.

There wasn't much to be said about the gains or losses from Friday but volume spiked which disguised the intention of either bulls or bears. Friday's flat action probably best suits bulls as it marks a stall in selling losses.

The S&P is resting on rising support with just On-Balance-Volume on a 'sell' trigger.

The Nasdaq is on a 'bull trap' but it's close enough to suggest it hasn't yet fully confirmed the 'bull trap'. Buyers have a decent opportunity with stops (risk measure) going ...

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Members' Corner

Cambridge Analytica and the 2016 Election: What you need to know (updated)


"If you want to fundamentally reshape society, you first have to break it." ~ Christopher Wylie

[Interview: Cambridge Analytica whistleblower: 'We spent $1m harvesting millions of Facebook profiles' – video]

"You’ve probably heard by now that Cambridge Analytica, which is backed by the borderline-psychotic Mercer family and was formerly chaired by Steve Bannon, had a decisive role in manipulating voters on a one-by-one basis – using their own personal data to push them toward voting ...

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How your brain is wired to just say 'yes' to opioids

Reminder: Pharmboy and Ilene are available to chat with Members, comments are found below each post.


How your brain is wired to just say ‘yes’ to opioids

A Philadelphia man, who struggles with opioid addiction, in 2017. AP Photo/Matt Rourke

Courtesy of Paul R. Sanberg, University of South Florida and Samantha Portis, University of South Florida


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Mapping The Market

The tricks propagandists use to beat science

Via Jean-Luc

How propagandist beat science – they did it for the tobacco industry and now it's in favor of the energy companies:

The tricks propagandists use to beat science

The original tobacco strategy involved several lines of attack. One of these was to fund research that supported the industry and then publish only the results that fit the required narrative. “For instance, in 1954 the TIRC distributed a pamphlet entitled ‘A Scientific Perspective on the Cigarette Controversy’ to nearly 200,000 doctors, journalists, and policy-makers, in which they emphasized favorable research and questioned results supporting the contrary view,” say Weatherall and co, who call this approach biased production.

A second approach promoted independent research that happened to support ...

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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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NewsWare: Watch Today's Webinar!


We have a great guest at today's webinar!

Bill Olsen from NewsWare will be giving us a fun and lively demonstration of the advantages that real-time news provides. NewsWare is a market intelligence tool for news. In today's data driven markets, it is truly beneficial to have a tool that delivers access to the professional sources where you can obtain the facts in real time.

Join our webinar, free, it's open to all. 

Just click here at 1 pm est and join in!

[For more information on NewsWare, click here. For a list of prices: NewsWar...

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Kimble Charting Solutions

Brazil; Waterfall in prices starting? Impact U.S.?

Courtesy of Chris Kimble.

Below looks at the Brazil ETF (EWZ) over the last decade. The rally over the past year has it facing a critical level, from a Power of the Pattern perspective.


EWZ is facing dual resistance at (1), while in a 9-year down trend of lower highs and lower lows. The counter trend rally over the past 17-months has it testing key falling resistance. Did the counter trend reflation rally just end at dual resistance???

If EWZ b...

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All About Trends

Mid-Day Update

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

Click here for the full report.

To learn more, sign up for David's free newsletter and receive the free report from All About Trends - "How To Outperform 90% Of Wall Street With Just $500 A Week." Tell David PSW sent you. - Ilene...

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About Phil:

Philip R. Davis is a founder Phil's Stock World, a stock and options trading site that teaches the art of options trading to newcomers and devises advanced strategies for expert traders...

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