Fascinating stuff, as usual. How do these findings interact (if at all) with the small-value performance premium in your view?
In terms of Beta, what this may suggest is that beta has been largely misconstrued in its ability to explain long-term returns, not that beta (in a reversal of what has previously been assumed by CAPM) can now be used to gain a performance premium in the reverse (as you point out, "Second, the author's backtested results that show that actual realized returns from lower volatility stocks can not necessarily be inferred to portend higher future expected returns for this strategy.") Perhaps Beta is not the clear-cut risk factor it was once imagined to be and so investors don't receive a premium for holding it at increased levels.
Will The Nasdaq-100 Water Down Its Apple Juice? [View article]
I think the rebalance makes perfect sense. People wanting more Apple exposure should buy... AAPL. People buying an index usually want broad, diversified exposure. Having one stock equal 20% is the opposite of that.
"Although I agree that Amazon's P/E ratio is a bit much and that the company is not undervalued, I do not think it is overvalued either."
AMZN's forward PE is 74, yet you feel it's not 'overvalued'.
Apple's forward PE is 10.95, yet you feel it's in a bubble.
The forward PE of the Nasdaq 100 is currently 12.2.
Please explain the discrepancy in your logic here?
FYI, I am neither long or short Apple so I have no skin in this game. I am just trying to understand such seemingly contradictory statements from the perspective of pure logic.
Can you please send a screencap to contact-editorial @ seekingalpha.com . The charts/graphs look fine on my end here. Also, please include which browser you're using as well as OS. Thanks!
The Emerging Market Bond Trade Is Getting Very Crowded [View article]
Nice piece Larry. Couple of crucial points you failed to address though imho. You don't discuss the underlying fundamentals of EM sovereign debt at all except to point out that those issuing it are in a seemingly much better monetary and fiscal position than the developed world. With U.S. Treasury yields at all-time lows and European sovereign debt's highly uncertain future due to the situation in the EU, where do you expect investors will turn? Also, the risk/reward of EMB has been much better than HYG so this asset class seems like a reasonable alternative to corporate high yield debt as well. So beyond corporate investment grade U.S. debt, EM debt may actually offer the best risk/reward on a forward basis for investors interested in having real diversification in their bond portfolios - and not owning a single, albeit seemingly 'safe' asset class.
The points you raise about this market being overcrowded are fair enough - they're a perfectly reasonable reminder why not to overweight this asset class. However, ignoring it completely seems like an uncompensated, idiosyncratic risk to me.
I don;'t disagree - anyone who claims any asset class can't fall 50 or 60% in a fairly short period is being willfully ignorant. That was my gripe. Saying $1300 gold is 'impossible'. That's a very dangerous attitude to have.
The ETF version of Pimco's Total Return Fund (TRXT) will cost just 0.55% - 35 basis points lower than its nearly $250B mutual fund counterpart [PTTAX]. Some are taking the release of specific expense data as a sign TRXT's launch is imminent. [View news story]
Yep - one of the biggest ETF launches in as long as I can remember!
How did gold do from 1980 through 2003 guys? Just saying... For all those that think gold can't drop 65% or 70% over a prolonged period, history is not your friend. Not saying it will drop in the near future but saying it's not possible is simply not prudent.
Emerging Market Bonds Not Worth The Risk; Watch The Spreads [View article]
Sorry Larry, I have to say Gogu's arguments are more compelling here. All the risks you mention are a two-way street as he notes. The best way to diversify is to hold as many non-correlated asset classes as possible. Otherwise you are forced to make market calls. I assume the market is more or less able to sort pricing out and that the chances of successfully uncovering mispricing across an entire asset class are as likely to be wrong as right (your basic EMH stuff). Therefore, I prefer to remain asset class agnostic, perhaps just readjusting my target allocations as my risk profile changes. Short of acquiring a crystal ball, I am leaving my position in ELD at roughly 4%. I hold corporates (inv. grade and junk), Treasuries and TIPS too via ETFs and munis via both ETFs and a specific CEF which makes sense. Everything else is just 'noise'
James Kostohryz Positions For 2012: 100% Cash The Only Way To Play This Market [View article]
Gold was down 70% from 1981 to 2004 - while price inflation averaged 4% a year. So if you think gold is some sort of panacea you're mistaken. Gold can be the right play in the right circumstances. but to go all in with it is no 'smarter' than going all in with any asset class. As always, diversification reigns supreme.
Do Lower Risk Stocks Outperform? [View article]
Fascinating stuff, as usual. How do these findings interact (if at all) with the small-value performance premium in your view?
In terms of Beta, what this may suggest is that beta has been largely misconstrued in its ability to explain long-term returns, not that beta (in a reversal of what has previously been assumed by CAPM) can now be used to gain a performance premium in the reverse (as you point out, "Second, the author's backtested results that show that actual realized returns from lower volatility stocks can not necessarily be inferred to portend higher future expected returns for this strategy.") Perhaps Beta is not the clear-cut risk factor it was once imagined to be and so investors don't receive a premium for holding it at increased levels.
Will The Nasdaq-100 Water Down Its Apple Juice? [View article]
Is The Apple Bubble Popping? [View article]
AMZN's forward PE is 74, yet you feel it's not 'overvalued'.
Apple's forward PE is 10.95, yet you feel it's in a bubble.
The forward PE of the Nasdaq 100 is currently 12.2.
Please explain the discrepancy in your logic here?
FYI, I am neither long or short Apple so I have no skin in this game. I am just trying to understand such seemingly contradictory statements from the perspective of pure logic.
There's A Place For Bond ETFs With A Defined Maturity [View article]
Are Pharmaceuticals Set For A Run? [View article]
Emerging Market Bonds Not Worth The Risk; Watch The Spreads [View article]
The Emerging Market Bond Trade Is Getting Very Crowded [View article]
The points you raise about this market being overcrowded are fair enough - they're a perfectly reasonable reminder why not to overweight this asset class. However, ignoring it completely seems like an uncompensated, idiosyncratic risk to me.
Setting Up The Big Gold Short [View article]
The ETF version of Pimco's Total Return Fund (TRXT) will cost just 0.55% - 35 basis points lower than its nearly $250B mutual fund counterpart [PTTAX]. Some are taking the release of specific expense data as a sign TRXT's launch is imminent. [View news story]
Setting Up The Big Gold Short [View article]
Setting Up The Big Gold Short [View article]
Emerging Market Bonds Not Worth The Risk; Watch The Spreads [View article]
Emerging Market Bonds Not Worth The Risk; Watch The Spreads [View article]
iShares Plans To Add High Yield ETFs, Global X Files For 'Super Income' Funds [View article]
James Kostohryz Positions For 2012: 100% Cash The Only Way To Play This Market [View article]