A few items on this holiday morning.Happy Thanksgiving!
I have trouble seeing people driving less in any meaningful way because of higher prices at the pump.
There is supposed to be a point where behavior is altered and for now I think it would be other activities, if any, that are impacted. We'll see.
One reader pointed out that S&P is creating a 130/30 index that will presumably become an investment product at some point.
The index is a little more complicated that you might think. As I read the post it seems that the 500 stocks in SPX is the starting point. Then they will overweight 30 top names (based on S&P's stars system) by 1% and underweight 30 of the weakest names by 1%.
A stock with a 2% weight in SPX, if overweighted would then be 3% or if underweighted it would only have a 1% weight in the index. So where's the short? My understanding is that a stock that has a 0.50% weight in SPX but was an underweight per the model would end up short 0.50%, a swing of 1%. Read the link above if this is confusing and you care.
First things first this really isn't an absolute strategy. It could at times have some of the characteristics but at times it won't. The index, as S&P is constructing it, is obviously vulnerable to periods of time when low quality leads which does happen periodically.
My initial reaction would be to say I would not be a huge fan a product indexed to this index. Thirty overweights and 30 underweights makes for a busy strategy and it seems that the strategy relies on a type of analysis that "should work because..."
I am not a fan of buying a stock solely because its valuation measures are cheap. It relies on what is supposed to happen but the market does the exact opposite of what it is supposed to all the time.
The S&P is in the red for the year, for now. May not stay there, but wow.
From the money never sleeps category; Shanghai was down 4.4% on Thursday.
Now a very bothersome compliance issue. This site is governed by rules involving advertising, testimonials, recommendations or anything that can be perceived as such. The rules were created before the Internet was a household utility and are very much behind the technology but nonetheless.
From this point forward I will need to delete certain types of comments from readers that might fall under any of these categories. A comment from a reader such as "I have 10% in XYZ, 12% in ABC..." can be construed as my making a recommendation (while this is ludicrous to me this is how it is). TomK I need to ask that you no longer post your allocation on the weekends.
My understanding of what is a problem is quite limited so a comment may stay up for a few days until noticed by someone else or may be deleted very quickly if it is one that I can recognize as being either advertising, a testimonial or a recommendation.
As best as I can tell the word "unsolicited" does not exist in any of the paperwork on this matter. There is nothing that you can think of in response to this where I would say anything other than preaching to the choir but this is how it has to be until the rules catch up to the technology.
19 comments:
100% Nonsense
Does TomK have a blog so that we can continue to see his numbers?
Roger,
You're going to end up doing more babysitting then its worth.
maybe so, or it will be a headache for my co-workers instead.
the writing i do is very important to me so i'll figure a way.
Well, it's about time you did some dog blogging again!
I think blogger allows for turning comments on/off for particular posts. Does that help?
I don't particularly care if I see tomk's numbers.
Roger,
This was from ML. If this is a possibility, aren't bonds, short and intermediate, maybe long still a great buy NOW? You mentioned yesterday they are overpriced.
NEW YORK -(Dow Jones)- Reflecting growing concerns about the impact of the credit crunch on the economy, Merrill Lynch on Tuesday said it expects the U.S. Federal Reserve to cut its target interest rate to 2% by the second quarter of 2009, with growth falling significantly next year.
In a research note from their economists, the bank said, "We continue to believe that the Fed eases more than market players expect. Market participants are now realizing that the significant credit market adjustment will likely be protracted."
Merrill sees growth reaching 1.4% next year with the U.S. economy on a "very slow road to recovery" the following year with an expansion of 2% in 2009.
The bank sees the Fed cutting the target rate to 3.50% by mid-2008, from the current 4.50%. The rate will be at 2.50% by the end of next year and two further eases will take it to 2% in the first half of 2009.
Merrill said that in this context it is "unambiguously bullish" on Treasurys and expects a further steepening of the yield curve. The bank sees the two-year yield falling to 2.45% at the end of 2008 and the 10 -year yield dropping to 3.70% at the same point.
Merrill's forecasts came after the Fed earlier Tuesday downgraded its economic forecasts for 2008, with the bank seeing a 2008 expansion of 1.8%-2.5% from 2.5%-2.75% previously. The Fed also forecast core inflation to fall slightly.
The Fed has cut its target rate by 75 basis points since its Sept. 18 policy meeting. Markets strongly expect another ease will come in December, though Fed officials have signaled it would take a significant deterioration in economic conditions for that to happen.
-By Laurence Norman, Dow Jones Newswires; 201 -938 -2096; laurence.norman@dowjones.com
2% by Q2 09?
The average bear market (i have never thought we were in for any thing more than a normal bear) lasts 18 months.
Pretend it started this summer.
By Q2 09 my guess is that the capital markets would be on the way to pricing in the next expansion. If that is correct the curve would start steepening.
Look, you could be exactly right but I am hard pressed to think locking in yields at 3.40% and lower is a "great buy."
You may be more inclined to trade than me but I still think right here right now these are very high prices but again I could be 180 degrees wrong.
one more thing, buying short term paper for a trade is risky because paper maturing in Nov 09, for example, may not stray very far from its par value
Thanks for your perspective on the new S&P index. I was and still am confused about their short positions, which seem to be nothing more than underweights.
Happy Thanksgiving. 100%.
re "rules"....Iwill miss tomk's post...and if taken literally...i would say that someone wants you to close up shop. The heckler might be behind this as he may have initiated something with your front office. One can not avoid using position names and outcomes in order to talk about the specifics of process. Most of the other blogging sites that many of us visit are constantly in a state of violation per the way your front office is interpreting rules.
As an example, this morning I was looking at the ipath etn commodities and would love to hear you review these asset choices and to get feedback from others. But would not mere mention of someone saying something favorable be a violation?
the only ones wanting the blogging to end are the lawyers we pay to advise us on these matters.
i answer questions on specific funds in such a manner where I point out what I see as favorable and negative and do in such a away that is not a problem.
Readers should ask whatever and not worry about it. If i can't answer for whatever reason I will say but for the most part most things are ok.
the problem is specific names paired with specific percentages like
bcd 8%
wxy 15%
jklmx 20%
For any compliance wonk who is not that smart those are fake symbols
Happy Thanksgiving Roger. I suppose you will need an extra long hike tomorrow to work off the pie. ;)
About the 130/30 index overweighting the top 30 names. Are the 'top 30 names' chosen as 'top' by their perceived performance looking forward or are they chosen by cap weight? The same with the 30 'weakest' stocks.
Most of these sort of funds are cap weighed as it is. Why overweight them even more?
Thanks for the info on other world markets today. It looks like Friday will only be black for the retailers. (They hope)
JackS
Ok...wink winkk...i cracked the code...i see what "bcd" et al really stand for...that three some looks like a great lazy portfolio. Tomorrow I'm going to make that my investment.
!!!
A suggestion for TomK if he wants the hazzle is to post sentiment numbers that are coded elsewhere for degree of cash vs equities.
Your "other" blog could be called "Risky Roger" and have no tie ins to the real you or other responsible parties.
charlie
How about starting a second blog, call Roger’s Rangers, or Regor’s Rangers.
Well, I’d like to thank TomK for sharing his methodology for the past year. It was TomK who directed me towards the use of the “query” function in excel. That got me automated and motivated to learn how to really use the excel program. And it was because of TomK that I decided to pursue an old idea I had gotten from the newsletter “No Load Fund X”, to find my own ETF/Mutual Fund groupings, and rank them in relative position.
Over the coarse of the year, I’ve learned that I’ve got to deal with the raw data, myself, and not depend on magazines and newsletters for organizing how I look at the market. I’ve gone from being a excel novice, to at least being moderately excel savvy. I can now download and chart/analyze about 200 ETFs in less than a hour. It took up a lot of my free time, this year, using the Microsoft excel online tutorial, learning a bit about macros and other automation wizards, it can be done.
It is possible to group, slice/dice, organize, add/lower volatility, outperform/under perform the market, with a fuller understanding of what it’s all about. By grouping things intelligently and then following the momentum inside the group, it can add value to a portfolio. Money does “flow” (or more correctly valuations lean) from one part of the investment world to another. Knowing/following this is important. Doing the data oneself, is vital.
If anyone wants to see this in action, I would recommend “The Moose” and/or “The Rempel Report.” Here are the links:
The Moose:
http://tinyurl.com/2t4d8d
The Rempel Report:
http://billrempel.com/
And anyone who has “Stock Market Logic” by Norman Fosback on their bookshelf, as I remember (I think?) TomK has, is going to be a very good investor.
Roger, how strange that IF I were to say that I had 100% of my net worth in CFC waiting for a bounce (and offering a bonanza of a opportunity to be called a fool and providing some heuristic value for offering that opportunity)--I don't hence the subjunctive--that it could be construed as anything having to do with YOU.
If this is indeed the case--that third party comments from commenters is considered a recommendation--then it would seem that the advertising--would also fall under the auspices of this rule. What about this current advertisement? "Inside China Dispatch readers are on their way to doubling their money in the China boom. Read it FREE–download a copy"
More alarmingly....why is this only NOW becoming an issue?
---------------------------
Sigh--
And does this mean that if someone were to say I'm not in the market now or I have 25% cash (or insert whatever) or that folks should consider real estate in addition to stock, insert similar comments here, that those get deleted.
Sounds like it is best to turn the comments off. I enjoy the contributions of others, and it seems like this rule is limiting what folks can talk about.
The China ad links out to someone else.
I think if TomK, for example, linked out to another site with his post that would be fine.
This whole thing is largely ludicrous.
No worries - I'll set up a blog just to post weekly updates.
Roger, is it okay to link from your blog?
you can definitely leave a link to any post you put up.
I am quite certain any commentary you leave would be fine too.
The issue, apparently, is percentages.
If you proceed with your thought I can teach you how to embed a link into your text which makes clicking through easier for readers.
Just lemme know via email.
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