March 2, 2009

I B!#*$ For A Living

Not really, but I’d like to. The problem is I don’t search, or that is to say I don’t search for this blog. I do search, regularly so, with the same vigor that I flip though a newspaper. I have my pet subjects, finance, art, and sports, politics (not necessarily in that order) I never look at real estate and I rarely look at style articles. One of the reasons I don’t search for this blog is because there is a fine relationship between the price (the value of an asset) and time (the freshness of the analysis) that serve to form my views. That’s the only way I can assure that my posts are mine, grammatical blemishes and all. It also affords me the privilege of some license whereby I’m open to write about almost anything that strikes me as useful in the aim to inform. That’s one of the main reasons I choose to inhabit the space, which brings light to financial news, because it’s so reliant on nearly every other market, across all cultural and political spectrums and best of all it always comes up with something novel to keep it from being a “lay up”.

For example, I was wondering last night as I mulled over the current state of my investments that I need to reflect on the merits of my own advice. I own some 40% stocks (Tech, Healthcare) 30% Bonds (Treasuries, High Yield, TIPS) and 30% cash. Needless to say the stocks are giving me “agida” even with a healthy dose of bonds and cash, which is not a good thing. You see, I don’t hold cash because it’s a good investment I hold it because it is the measure of how lost I am in the markets (>50% = hopelessly). Forget asset allocation, and all that other stuff, it’s the creation of rocket scientists who want to make us feel smart. The fact is asset allocation is based on a tidy little theory that if you hold a diversified (compartmentalized) portfolio of investments that don’t correlate (move in opposite directions) such as stocks and bonds; you are protected by the unruliness of the market (often erroneously referred to as volatility). Trouble is, as we’ve all learned, that when the proverbial S!#*$ hits the fan everything has way of correlating.

So what’s the answer? Well has anyone noticed that the stimulus package offers a variety of characteristics that are of tremendous speculative value? It’s collateralized with our future taxes, guaranteed by the “full faith”, throws off an eye watering cash flow and best of all is in the mother of all bull market trends. Trouble is I think this one is nearing a bubble.

Rule: Sometimes the best investment is the one you’re not in.

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