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  • Rethinking Diversification
    On Dec 15 02:57 PM Jake2 wrote:

    > Am I stupid or do the components of this portfolio add up to more
    > than 100% Man, that's one spicy meatball!

    Maybe neither. It's a 120/20 portfolio; you're short Treasuries. It adds to 100% and you have plenty of room to accommodate volatility.
    Dec 16 04:18 am |Rating: 0 0 |Link to Comment |View article
  • Rethinking Diversification
    Owning great companies is a fine strategy, but it doesn't really help as far as diversification is concerned. The problem with your portfolio is that it's not diversified at all if everything in it is denominated in dollars and pays out income in dollars. With such a portfolio you are at the mercy of the volatile market for paper money. Right now, if you own stocks, or bonds from dubious issuers, you are taking it on the chin in a dollar short-squeeze. Later you will take another beating as hyperinflation cooks off your bonds and leaves your stocks mired in a growthless cost squeeze. I hope they pay dividends monthly.

    A diversified portfolio contains many assets that have nothing to do with the dollar, or act as hedges against its movements. Too many advisors recommend 5-10% in "commodities"... or real estate or other hard assets, which is not nearly enough unless you also have a very large and very poweful dollar hedge in your portfolio (like 5x leveraged gold futures).

    Better would be 10% mixed agricultural futures, 10% real estate, 10% oil and gas futures, 10% international hard asset producer stocks (miners, agriculturals), 30% gold and silver, 35% dividend-paying stocks with varied global market, industry, and currency exposure but biased toward the best balance sheets and management, 15% global bonds in mixed currencies, and a 20% short position in government bonds, especially Treasuries. Such a portfolio is far better diversified than any dollar-denominated ETF, especially one centered on a particular country or region. It's not nearly as good as a dynamic portfolio that takes advantage of opportunities to short or avoid bubbles and capture arbitrage spreads, but as a hold-and-forget mix it's hard to do better. If you owned this for only the last 6 months you are probably ready to commit suicide. If you owned it for only the 6 months before that, you were probably feeling like a genius. But if you owned it for the last 20 or 50 years you are probably feeling just fine, and have obtained a decent return when measured in terms of the goods and services you need to buy. And that's the point.
    Dec 14 16:10 pm |Rating: 0 0 |Link to Comment |View article
  • Report from the Bond War Frontlines
    The most interesting bond ETFs on the market are PST and TBT. They offer a convenient way to get long exposure to profligacy, pandering, fraud, political incompetence, and central bank indiscipline. That combination of exposure in a single product is hard to beat. Most of the ETFs you mention have short exposure to these. I do not understand why anyone would want them.
    Aug 30 14:12 pm |Rating: 0 0 |Link to Comment |View article
  • Today's Key ETF Performances: Financials Lead, Commodities Lag
    Let's see...investments banks need to raise capital. Those who choose to do this by issuing more shares will benefit most if their share prices are high. They can borrow at 2.5% against mortgages that in most cases have defaulted or soon will. Now, let's see, what should they do?

    I've got it: borrow heavily against worthless assets, buy futures in the morning market to put on a gap-open short squeeze, then buy each others' shares all day. Meanwhile, get the commodities exchanges to increase margin requirements and whisper to their desperate hedge fund clients that the Fed would really prefer their long positions there to be closed out so if they'd like to share in the benefits of access to the printing press then this would be a good time to do so. The hedgies dump hard assets and join the financials rally, the shorts get the shaft, the bankers go home winners, and the PPT get Black medals all 'round.

    Can't prove it but I'd be shocked if most of this isn't happening. There is simply no rational explanation for news of another $19b write-down and an ISM reading still indicating contraction to be greeted by a 4% rally. I could believe the commodities sell-off is a response to "deleveraging&quo... or recession fears, but then why such a large rally in equities, especially financials for which the fundamentals have not improved a whit? Nope, sorry. This is manipulation by the Fed, the Treasury, the PPT, and the banks. Simple as that.
    Apr 01 22:11 pm |Rating: 0 0 |Link to Comment |View article

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