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21 comments:
Roger,
The very first "benchmark" should be versus real inflation. According to the SGS site, 2007 CPI as per 1990 methodology was nearly 8% and per 1980 methodology was nearly 12%. So at 13.5%, you managed to keep your generic client ahead of inflation; even by the more stringent measure. That is a respectable accomplishment (seriously; not trying to be sarcastic here).
Thanks for sharing your portfolio results and the reasons behind the performance. Many blogs love to hype and pontificate but do not share the realities of their actual portfolio performance. I post my current portfolio and annual results in late December and usually feel as though I undressed in front of a mean and nasty woman (maybe that is not a bad scenario for some readers, but I digress).
Your clients should be both happy and lucky to have you at the helm of their financial boat.
hey why the sarcasm?
seriously the inflation issue has more than a couple of facets.
energy, healthcare, some food and education (for those who pay those costs) are unambiguously higher making CPI useless.
personally speaking my utility bills have not gone up since i don't know when, when I need to buy stuff i find it most of it to be very reasonable.
we just furnished a house in Hilo for less than $5000.
my point is not to quibble with the comment so much as to acknowledge a complexity that is lost by the Schiff-ians and the Kudlowites alike.
T, thank you for the kind word, the video hopefully conveys that you only need to be right a little more often than you are wrong in order to stay close to the market.
Good Morning,
For those that are residing in areas that requir heating oil at 3.15-3.35 a gal, and who's health care went up 11.5% (kaiser), and who are paying 78 cents more per gallon of gas per week(two cars)and whose food supplies are up a whopping 33% and last but not least, keeping four children dressed properly,,,,,, I just want you to know,,,,,there is no inflation,,,to speak of...
Mac
Thanks again for providing insight into your portfolio and performance. Good job once again! Btw, can you share any risk measures of this portfolio?
TomK,
I am a little hesitant to get too specific for compliance concerns and being too salesy.
We have 3 measures besides beta and alpha; r squared, sharpe and treynor.
I will say all three look pretty good but, big but, 2007 was the type of year where those numbers should be better. 2007 was not an easy year as evidenced by reutrns being below average. In a year like 2003 I would expect my risk adjusted numbers to come way off.
Congrats on your results, Roger. I hope all the hecklers are still lurking!
You may have mentioned this previously; if so, forgive me for asking--do you rebalance at the beginning of the year? My sense is that your rebalancing is ongoing as you adjust your segment weightings...
Thanks.
Rebalancing is not the best way to think of it at least not for me. Anytime a change needs to be made I make it.
I am quite certain I did not make this up, I must have read it somewhere...the market does not care what the date is.
Ideally a sale would just be a shaving down of a stock that has done well.
I should add that my decisions about overweight or underweight sectors, style, cap size and so on have more to do with market cycles.
I don't have a fixed 10% in something. Right now I might want 10% in a given sector, a year ago that sector might have been 13% and a year from now it might be 8%.
I've been reading you for awhile and enjoy your uncomplicated approach to portfolio construction. Thanks for being so open. As I try to apply your thinking, though, I find I'm afraid to pull the trigger. A number of segments have gone up so much that I'm afraid to overweight them, even though my analysis would suggest it's the right thing to do. Examples could be energy, gold, Brazil, maybe even utilities.
My question is how you cope with "fear of flying" when the stocks you want are trading at all time highs and Mr. Market is getting increasingly unforgiving? Do you adjust your category weights, pick different stocks, or just hold your nose and jump in?
Thank you for helping a neophyte.
OK, look at the four categories you listed. Energy, gold, brazil, and utilities.
The likelihood that all four do great or really crap out is pretty low.
maybe a mix of 2 and 2 or 3 and 1.
If you name four segments from 2007 that really did lousy I would say the same thing; the odds that all four do great is pretty low as is the odds that all four do crappy.
for me, I am going to own every sector and a lot of countries but in a way that is not too levered to relying on one outcome.
If you put 3-5% in something that is at its all time high and it does not work out the consequence should not be dire which hopefully mitigates the concern you express, at least it does for me.
That being said, in the video I disclosed buying MON in October, it is up so much that i doubt I will buy it for anyone new unless it trades sideways for a while.
Congratulations! You did a great job last year, but I expect you to do well.
Could you please comment on commodities. It looks like things are booming - look at gold. But if a recession is on the horizon, unemployment is increasing significantly, and house prices look like they will sink a lot (at least in some areas). This does not look like a good trend for commodities going forward.
What is your take on the subject?
global demand for all commodities plays a bigger role now than in past cycles, I don' think there is debate on that.
Where the debate starts is will that increased global demand matter for the prices of these commodities if there is a meaningful slowdown in the US.
My take is that the dollar would weaken in a recession (nothing unusual there) and that demand from the rest of the world for most commodities combined with dollar weakness would be enough to at least prevent commodity prices from dropping and that what would actually happen is that they go up in dollar terms but stay about the same when translated to other currencies. I don't think the gains would be as big as in recent years but would look compelling for US based investors confronting below average equity returns at home.
It is rather interesting that the Kirk report said that he got a dissapointing 13.6% return for 2007. It is possible that with the risk he is taking 13.6% is not enough. For your generic portfolio I assume it is 100% equity so the risk is probably the same as the S&P 500. Thus 13.5% return for the same risk as the S&P 500 is a very commendable number. Congradulations!
Roger,
You said in your video that the S&P 500 was up 5.2%, including dividends. But if you check out
http://www2.standardandpoors.com/portal/site/sp/en/us/page.topic/indices_500/2,3,2,2,11,31,2007,0,0,5,1,0,0,0,0,0.html
, you'll see that the S&P 500 Total Return Index (TR) was up 5.49% in 2007. Not a huge difference, just thought I'd mention it.
Charles, as a trader, lives in a much different world to be sure.
I think he sets high expectations for himself, nothing wrong with that, and so for someone who does trade full time I might think low double digits might be a disappointment versus a very high standard.
As far as 5.2% versus 5.49%, I generically assumed a 1.7% yield, which was laziness on my part.
A commodity article of some interest:
http://tinyurl.com/3ydt2j
Roger,
Just wanted to say congratulations on a strong year. Maybe those numbers will shut up some of the hecklers/idiots.
Your blog is excellent, and IMO different from many in the common sense perspective you bring to the investing process/portfolio management.
At least to me, one takeaway is that you absolutely do NOT have to get every single view, call, or thesis 100% correct to generate very strong absolute and relative performance. This is something many novices do not fully understand.
My own results back this up as well. I've been cautious on the overall market for quite awhile yet my results for 2005, 2006, and 2007 are all very good because of asset class diversification (REITs and commodities), some good individual stock-picking (Berkshire), and avoiding big bets like 100% cash despite my somewhat bearish outlook on the overall stock market.
Roger,
I've recently become a regular reader of your blog and find it like a " breath of fresh air." Yours (blog) is one of the few that I read on a regular basis. Thanks for your work and dedication to helping amateur investors like myself.
jb
Thanks for the link Jack, a little long for 630 on a sunday but i'll get to it today.
Mike C, thanks for the kind word. Your results back it up because its true.
From a practical standpoint the likelihood of getting 20 things right, is vastly remote and having only 20 things going in a portfolio seems like a very small number.
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