Prediction Time!


This post is by from Random Roger


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My latest post for Alpha Baskets is up and includes the following;

The narrowing leadership and breadth indicators have been negative for quite a while as just a handful of stocks have done much of the lifting of the index this year. This is unquestionably a negative in my opinion but the predictive value for when the market will turn down isn’t very good. Bad breadth in this context could remain bad for quite a while longer. What if the same four or five mega cap tech stocks that have propped up the market in 2017 go on to all double in 2018? That’s not a prediction but if it were to happen, I would think the S&P 500 Index would be up a lot.

Please click through to read the entire post.

While your at it, please check out my page at TheMaven.net a new site I recently

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Take the under on this time being different


This post is by from Random Roger


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The weekly Market Update is posted at Alpha Baskets and includes the following;

The Chicago Mercantile Exchange will start trading bitcoin futures on December 18th. Aside from making a two way market more accessible, many believe it will pave the way for exchange traded funds to start trading, the idea being that ETFs would create the exposure with derivatives. The hope in some circles is that being able to short bitcoin might dampen volatility, this past week it moved 10% on three different days, two up and one down. During the financial crisis there were some stocks that were banned from short selling which arguably had the opposite effect of what was intended, those stocks kept going down. No one should be surprised if the adoption of a futures market does not result in reduced bitcoin volatility. More and more clients will likely start asking about bitcoin for their portfolios.

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TheMaven Weekly Roundup


This post is by from Random Roger


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Earlier this week announced my new blogging gig with TheMaven.net. With one week under my belt I wanted to give a recap of what I wrote and invite you to check it out and hope you’ll consider registering as a user (it’s free!)

  1. My first post is a welcome letter that summarizes the topics I will be covering at TheMaven.
  2. Essential retirement building blocks
  3. Alternatives are not toxic
  4. A look at infrastructure ETFs
  5. The pros and cons of paying off your mortgage
  6. Be very careful shorting volatility
  7. Why I sold bitcoin
  8. Leave your politics at the door

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Big News!


This post is by from Random Roger


Click here to view on the original site: Original Post




My latest post for Alpha Baskets is posted and includes the following;

I’ve disclosed many times that the portfolio I manage for clients is mostly a mix of individual issues and narrower ETFs. If you do anything remotely similar, how have you done this year? How have each of your holdings done? How has the overall equity portion of your portfolio done in relation to the roughly 16% gain for the S&P 500?

Please click through to read the entire post.

If you haven’t heard, I am also blogging at a relatively new site called TheMaven. I have quite a few posts up. This is my home page which is a good place to start. Please consider registering as a user and following my page. It is easy, doesn’t cost anything and can be done through Facebook if that is easier.

Last December in Malibu.

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Red Sox at the Mariners

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Bitcoin, To Infinity & Beyond!


This post is by from Random Roger


Click here to view on the original site: Original Post




The weekly Market Update is posted and includes the following;

A couple of days ago, Bespoke reported that the tech sector had grown to 24.7% of the S&P 500. Sector weightings can be very constructive for warning of trouble ahead. In 2000 of course tech grew to more than 30% of the index which preceded a 50% decline. Then in 2007 the financial sector grew to about 20% of the S&P 500 which preceded a 50% decline. Twenty-25% in tech might not be problematic the way 20% in some other sectors might be but growing to 30% would be very concerning as an expression of some form of excess in the market that is likely to be corrected. Last week we mentioned a reformulating of the telecom sector to take in media and entertainment companies which could easily result the tech sector dropping from 25% of the S&P 500

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A Financial Advisor Has Got To Know His Limitations


This post is by from Random Roger


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Lots to cover today with a hat tip to Abnormal Returns for these links.

First is an admonition to financial advisors to stay in their lane and not get into life coaching. After reading the article I concluded the article isn’t completely right, but it isn’t completely wrong either. What this really is about is knowing your own limitations and understanding when appropriately generic encouragement crosses the line to something that requires proper training and probably some form of licensure. The article looks at a couple of empty platitudes as being potentially harmful like “be the best you can be.” I would consider some more specific examples of veering out of your lane.

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An easy example is something dietary. “It’s usually a good idea to cut back on sugar” is one thing, having no medical training but advising someone start a ketogenic diet and creating a meal plan for

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A Lot of Market Stuff & the Maui Invitational!


This post is by from Random Roger


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This week’s Market Update is posted and includes the following;

The spread between two year and ten year treasuries narrowed to 63 basis points last week (61 basis points this morning), keeping fears alive that we are on the way to an inversion. T. Rowe Price made some noise last week calling for the spread to zero out in 2018 with most of the narrowing coming from increases in Fed policy. The FOMC obviously understands the implication of an inverted curve (it’s recessionary because lending is no longer profitable) so something may have to give in terms of the FOMC stopping short or allowing the curve to invert if the market doesn’t bail them out with higher long rates.

Please click through to read the entire update.

In honor of the Maui Invitational, a couple of pictures from when I went in 2008 and 2009.

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Shiller Is Wrong


This post is by from Random Roger


Click here to view on the original site: Original Post




My latest post for Alpha Baskets is published and includes the following;

According to ETF.com there are 58 ETFs focused on technology totaling about $70 billion. They all appear to be index funds or smart beta funds, but any use of these funds would clearly be part of an active strategy. Ditto any other sector funds or funds that are narrower than sectors. While someone might pushback on me that there is no passive strategy that uses tech sectors funds, what would be the passive use of a Chinese internet stock ETF be?

Please click through to read the entire post.

The Baja 1000 just ran and while I didn’t go, here are some the trucks that participated (my pictures are from the Mint 400 in March).

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Very Odd And Unfamiliar Crimson Hue On My Screens


This post is by from Random Roger


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The title for the weekly Market Update comes from a Tweet from Todd Harrison. The update also includes the following;

Gold hit an air pocket on Friday after a widely reported sale of futures that had a notional value of $4 billion. This equates to about 10% of average daily volume in one trade. Although we found nothing to support this, our first inclination is to think we might subsequently hear it was a fat finger situation, a trade error. Bitcoin also hit an air pocket on Friday dropping more than 7% at its low, continue to fall over the weekend. Zerohedge blamed comments from Dennis Gartman as being the catalyst for the drop. Maybe the 25% increase the week before might have contributed to some over exuberance leaving it ripe for some sort of decline or correction. The Wall Street Journal posited that Bitcoin might be the Most Dramatic

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Don’t Get Done In By Unintended Overweight Exposure


This post is by from Random Roger


Click here to view on the original site: Original Post




My latest post for Alpha Baskets covers a lot of ground and includes the following;

With a starting point being 60/40 equities/fixed income, the proposed (theoretical?) portfolio allocates 37% to fixed income so that’s not far from 40 but takes a lot from equities to put into diversifiers. Emerging market equity gets about 2/3rd of the overall equity allocation and using iShares funds as proxies, emerging market equity has a standard deviation of 15% compared to 10% for the S&P 500 so maybe the authors are viewing EM’s standard deviation as a form of leverage, more bang for the buck although to be clear the paper doesn’t say that.

Please click through to read the entire post.

Park Avenue in Arches National Park

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Virginia Lake (or Falls?) at Glacier National Park

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Mount Rainier National Park

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What Is Risk Allocation & Should You Invest In It?


This post is by from Random Roger


Click here to view on the original site: Original Post




My latest post for Alpha Baskets is posted and includes the following;

This topic is always interesting to ponder and fun to write about. As I have said many times before my introduction to the idea that allocations can go beyond 70/60/50 equity, the rest in fixed income goes back to the 90’s when I first read about Jack Meyer who was running the Harvard Management Company, the endowment, and he was talking about timberland as an alternative investment. This has long influenced how I manage portfolios, dynamically increasing or decreasing to alternatives or as I have called them before, diversifiers, based on where I thought we were in the market cycle.

Please click through to read the entire post.

Kenan Stadium at the University of North Carolina.

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Lisbon, Portugal

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Mint 400, Las Vegas

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Bitcoin Graduates From Mania To Hysteria


This post is by from Random Roger


Click here to view on the original site: Original Post




The weekly Market Update is posted and includes the following;

Last week was another strong one for mega cap tech with more strong earnings, a big product launch and news on Friday of what we will call (and trademark) a possible Quoadcom merger. We tend to believe that sector weightings are very important to monitor. Excessive weightings, relatively and nominally, have been harbingers of doom before and tech is now approach 25% of the S&P 500. Back in 2000 tech grew to about 30% and that of course became problematic. It would be productive to spend a little time taking inventory of the tech weighting you have in client portfolios and be cognizant of the potential need to scale back.

Please click through to read the entire update.

Grand Teton National Park a few years ago.

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It was National Bison Day on Saturday.

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Never seen this one before, Prescott Fire

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Ditch That Nine to Five Now, While You Still Can!


This post is by from Random Roger


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My latest post with a title inspired by James Altucher is up at Alpha Baskets and includes the following;

However, it feels like they are underestimating the impact of an unfortunately timed bear market. Coincidentally I just a conversation about this with a client. We’ve talked here before about sequence of returns and the luck of when your first post-retirement bear market comes along. Without attempting to predict anything, it would be prudent for anyone planning to retire in the next couple of years to prepare for a bear to come shortly thereafter both emotionally and from a planning and allocation stand point (maybe set aside a little more cash to draw from).

Please click through to read the entire post.

Monument Valley from about a year ago.

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Devil’s Tower from 2012

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One from Capitol Reef National Park from a year ago that I like a lot.

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Get Ready For #MACtion


This post is by from Random Roger


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The weekly Market Update is posted at Alpha Baskets and includes the following;

Another negative indicator is that mutual fund cash is at an all time low according to a chart citing ICI data that was Tweeted out all over the place this weekend. The reason this is a negative is that if there is no more cash in mutual funds then a potential source of demand is thought to be dried up. Again on its face, a negative but a negative without much predictive value and of course new cash comes from 401k contributions every pay day. Another thing to consider about mutual fund cash levels is that in most instances the fund manager is paid to invest in their specialty not make asset allocation decisions. When an investor (or their advisor) buys a fund they have already made the asset allocation decision.

Please click through to read the

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Retire On Less Than One Bitcoin A Month!


This post is by from Random Roger


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My latest post for Alpha Baskets takes a first (for me) look at cryptocurrencies and blockchain technology.

For the last month or so I’ve been geeking out on cryptocurrencies and blockchain. I’ve done a lot of reading and listening (podcasts) to try to learn more. I’ve become convinced that blockchain is the real deal in terms of how the financial system evolves and that the concept of cryptocurrencies is also the real deal. For many years I’ve said that the actual internet, not the stocks from the 1990’s but the promise of what it could become has wildly exceeded what was expected back then.

Please click through to read the entire post.

Navajo Bridge with Vermillion Cliffs National Monument in the background to the right.

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Progressive Field from 2014.

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Trophy truck at the Mint 400 back in March.

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Dow 23,000 Hats For Everyone!


This post is by from Random Roger


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The weekly Market Update is posted and includes the following;

The yield on the Ten Year US Treasury Note jumped on Friday to close at 2.38% which is as high as it has been since early July. Barron’s cited a strategist from JP Morgan who opined that based on this point in the cycle, yields should be higher. He noted distortions that have been created by QE and other extraordinary stimulative efforts as being a “weight” on yields. Another fund manager is worried about the flattening trend warning of a recession in the offing. Actually, in the last month the curve has steepened but of course the trend for 2017 has been to flatten as the FOMC has hiked rates. Should the yield curve actually invert we will certainly bang the recession drum here, it won’t be different this time, but until that time it is important to remember

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James Montier Is Still Bearish


This post is by from Random Roger


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James Montier from Grantham, Mayo van Otterloo was interviewed in Barron’s over the weekend. Montier seems to always be bearish, certainly almost always bearish. The obvious criticism of a perma bear is that they are wrong the vast majority of the time. I believe the utility to a smart perma bear is that they can articulate the prevailing bear base quite eloquently. There is always a bear case (there’s always a bull case) and taking the time to understand it can minimize the odds of getting blindsided.

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These days, Montier appears to be concerned about valuations and the heavy hand that central banks have played in the markets in recent years. He believes mean reversion is coming soon while his boss, Jeremy Grantham thinks it could take 20 years.

He also unloads on passive investing saying that with valuations so high it isn’t investing it is speculating.

When asked how

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VIX Below 9?


This post is by from Random Roger


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The weekly Market Update is posted and includes the following;

The Barron’s Striking Price column made a sort of tail wagging the dog argument about VIX-related exchange traded products causing a distortion in the market. The concern is that a large single day spike in the VIX (more specifically the futures that the funds use) could cause a repositioning on the funds’ part that would cause an “acceleration event” that pushes prices down even more and volatility higher. We would never underestimate the market’s ability to panic and while the scenario is of course plausible, it is not obvious that something that has never happened before be so easily predicted by one random article. The next panic will likely be caused by something else.

Please click through to read the entire update.

Diablo Lake in North Cascades National Park

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The Seattle skyline from West Seattle

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Neat apartment building in Seattle

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There’s A Storm A Comin’


This post is by from Random Roger


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Bloomberg interviewed Alicia Munnell from the Boston College Center for Retirement Research. She of course has come to be a thought leader for what ails the Social Security system. Shockingly it boils down to three things; cutting benefits, raising the cap one way or another or some combo of both. I’ve framed it numerous times by saying that something will have to give.

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Included in there is what I will bluntly call nonsense about replacement rates as in how much of someone’s income Social Security is intended to replace. There was talk in the interview about replacement rate dropping from 36% to 27% over some long period of time. It’s nonsense for a long list of reasons including people making well above the cap won’t get anywhere near that sort of replacement rate, replacing X% of your income focuses on the wrong thing, income versus spending. Many people plan to

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Markets Continue To Melt (higher!)


This post is by from Random Roger


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Macro

 

The Bank of Japan (the central bank) left rates on hold at -0.1% and also revised its timetable for achieving 2% inflation to 2020. There is a quote that goes something like “inflation is the easiest thing in the world to create, except when you need it.” Before the financial crisis, the only concern was that of inflation. The crisis was a deflationary event that fortunately did not create a deflationary debt spiral but global GDP has not really gotten going, for developed countries anyway, and countries are struggling to get inflation to levels that would go with healthy growth. The Great Depression from almost 90 years ago cast a pall over the country for decades and that appears to be a possibility with the Financial Crisis. One difference (there are many) is that developed countries have demographics working against them, moreso Japan and Europe. If

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