Disqus - Latest Comments for macclary

Re: Uncle Sam’s Mysterious Hoard - Magazine - The Atlantic

macclary — Thu, 14 Oct 2010 01:17:54 -0000

Remember all those countries that want to end the dominance of the US Dollar? The only thing standing in the way of a move away from the dollar as reserve currency is the appearance of having more gold than anyone else.

Selling US gold would collapse the dollar, and then we would have nothing to use in trade. So we finance social security for 6 months and then.... every citizens' life savings collapses. What an outstanding idea ;->

Re: Hedge Fund Transparency and Moving Averages: An Ancient Tale With No Empirical Support

macclary — Wed, 13 Oct 2010 00:18:56 -0000

That French Fama quote is great. Notice that it reads "no empirical support", but since empirical support is plentiful, they actually must have meant to say "no theoretical support which cites our key publications".

Re: Book in Chinese

macclary — Fri, 03 Sep 2010 10:44:18 -0000

That's wild! Did your publisher do the translation, or did they have an agreement with some Chinese publisher... I wonder if they inserted something about gold for ya??

Re: Too Big to Succeed – Stocks to Avoid (MON, JNJ, PG, MCD, XOM, JPM, GE, MSFT, EXC)

macclary — Fri, 13 Aug 2010 12:09:11 -0000

How about an index of "Leading companies in leading industries" anyone?

Re: Reading & Traveling

macclary — Tue, 29 Jun 2010 21:07:32 -0000

A biz dev guy I know says that a I blog with the comments off is like old-school newspaper advertising instead of social media. If turning the comments off makes your life better though you should definitely go for it. As a compromise you could turn off comments for old posts, and require login for new comments.

Re: Cambria Global Tactical ETF

macclary — Tue, 29 Jun 2010 10:42:05 -0000

Interesting! Is this product going to have a projected return and MAR ratio similar to the tactical asset allocation paper?

Re: Yale’s Endowment Returns: Manager Skill or Risk Exposure?

macclary — Wed, 26 May 2010 20:41:25 -0000

That's interesting since Swensen in "Unconventional Success" basically said 'individuals can't invest like Yale because they don't have access to our skilled managers'...

(I think that the Russell 3000 Value is not a great proxy for Absolute Return ;-> maybe a copy/paste issue in the first table.)

Re: The Reign and Romance of Risk

macclary — Thu, 20 May 2010 18:32:14 -0000

Too true. Many people think than increasing portfolio returns MUST come with more risk, but this conventional wisdom is just false. The only time that increasing returns must coincide with more risk is if, having knowledge of the future, you already own a portfolio that is on the thin optimally "efficient frontier" by some measure of future risk/reward.

Re: Mutual Fund Fees

macclary — Tue, 11 May 2010 20:18:00 -0000

I think PRPFX lowered expenses at the same time assets were growing.

Re: What Worked Last Week

macclary — Tue, 11 May 2010 20:11:43 -0000

Gold was positive last week.

Re: New Books on the Way

macclary — Wed, 05 May 2010 16:44:40 -0000

"Enhanced Cash" ;) Take a look at this: 44% long bonds, 32% bills, 24% commodities http://www.riskcog.com/port...

Also, I know one guy who comments here occasionally uses the Permanent Portfolio as a cash equivalent. I personally use an approach that goes short instead of flat if the market heads down.

Re: New Books on the Way

macclary — Mon, 03 May 2010 18:30:47 -0000

Thanks for the review. Out of curiosity do agree or disagree with the statement that 'a system with 8 indicators is likely to be more brittle than a system with 4 indicators'?

Re: New Books on the Way

macclary — Mon, 03 May 2010 18:29:19 -0000

I just started "The Hedge Fund Edge" by Boucher, it looks promising so far. Overviews many indicators that have been used over the years, and gives a big table with backtests. I suspect not many other books that talked about risk management and asset diversification slipped out of publishers in 1999!

Re: Outsourced Back Office – kaChing Pro

macclary — Sat, 24 Apr 2010 01:34:11 -0000

C2 has a payment scheme where followers only pay for profitable trades. Kind of a weird compensation scheme if you ask me...

Re: Mauldin

macclary — Fri, 16 Apr 2010 00:01:36 -0000

Teun Draaisma and Soros are seeing corrections too.
http://pragcap.com/morgan-s...
http://www.zerohedge.com/ar...

My models are still long though...

Re: I Think This Would Have Been Funnier If Announced on April 1st

macclary — Wed, 14 Apr 2010 14:30:18 -0000

I think the "Old Trader and the Yen" from Vic's book is good creative literature, but as I was reading that and other chapters I kept thinking "there is no possible way I would ever give this person my money"...

Re: Three New Papers in the Journal of Investing

macclary — Wed, 31 Mar 2010 10:19:27 -0000

Here is another interesting Ibbotson paper "The Importance of Asset Allocation".
http://www.cfapubs.org/doi/...

He shows that active management and asset allocation play about equal roles in determining return variations if you net the overwhelming variation do to the market out.

Re: Influential Books Game & Survivor Bias

macclary — Tue, 30 Mar 2010 12:48:10 -0000

Interesting crop of links. I think ruminating along the lines of 'seven reasons why people hate me' is an incredibly counter-productive way to spend your mental energy ;)

Re: Harvard & Yale Asset Allocations

macclary — Fri, 19 Mar 2010 11:54:41 -0000

Here are some ideas for retail Absolute Return options: QAI, PDMAX, PRPFX. Does anyone have any other suggestions?

Re: Two

macclary — Fri, 12 Mar 2010 14:16:09 -0000

Hedging takes effort and market timing takes effort. Like Rsmlp suggests, I personally don't put my effort into hedging retirement accounts, I instead put my effort into timing the long side only. If you can go short that is a different story, then long/short makes much more sense.

At the extreme, if you are willing to re-calculate your hedge strategy every day or intra-day then you may be able to effect a hedge in your 401k using options on triple etfs and tie up little capital. This assumes your custodian is amenable and you want to do this much work. If you would rather recalculate your hedges weekly then straight triple or double short etfs may be fine. If you only re-hedge monthly then sh might be the way to go.

Hedging with ETFs, or any other financial product, is never 100% successful. Go ahead and investigate, but also investigate the option of 1) taking a smaller equity allocation 2) tactically closing equity positions out during extreme downside volatility.

Re: Three Must Reads

macclary — Mon, 08 Mar 2010 12:02:14 -0000

Here is another link to the GMO paper: http://www.scribd.com/doc/2...

I think their critique of risk-parity is off-target and a bit scattered. Balancing volatility, instead of a better measure of risk, is a weak spot in risk-parity and GMO should have used their graphs to show this very real problem. Instead they used their figures to prognosticate about future roll-yield and bond real returns. Those are not un-important to risk-parity portfolios, but negative returns would hurt conventional portfolios as well.

Basically the paper implies "buy equities (rah rah rah), and don't set a policy portfolio allocation for your manager(s)". This actually sounds like a step backward in portfolio management.

As I see it, in order to critique the core idea of using leverage to reduce risk you have to attack one or more of 3 scenarios. Consider this proposition: "Holding a $100 portfolio with $80 exposure to bonds and $40 exposure to stocks will under-perform a like portfolio with $60 in bonds and $40 in stocks."

There are three ways this prop can come true: 1) Stocks and bonds together both return negative or close to zero over the entire trial period, so as to not cover the cost of leverage on $20. 2) The act of buying the extra bonds causes the bond asset class to more closely correlate with the stock asset class (this could happen e.g. if all the money in the world followed risk-parity). 3) The act of buying the extra bonds causes the stock or bond asset classes to perform worse than they would have (see note on #2).

The paper talked about the possibility that bond and commodity returns could be negative, but they needed to argue that the entire portfolio would return less than the cost of leverage - including their baby the "equity risk premium".

Re: I Spent My Weekend

macclary — Sun, 07 Mar 2010 02:40:56 -0000

http://www.informationarbit...

Ehrenberg's deadly sin 4 of 7 is "Too much money"!

Re: Links and a Long Short ETN Launch

macclary — Wed, 03 Mar 2010 15:30:26 -0000

Do you want web2.0 survivorship bias, or penstripe suit survivorship bias ;->

Re: Links and a Long Short ETN Launch

macclary — Tue, 02 Mar 2010 20:39:50 -0000

That long-short product looks pretty horrible. Why would they even try to release something with a historical equity curve like that? I would think that people would look at L/S to avoid big draw-downs and long flat spots. The sales proposition is "most of the draw-downs of the equity market and some of the upside." ;->

A L/S market neutral strategy I think has merit is long the companies underlying FDV and short the S&P, or better short the worst tranche from the CROCI ranking process. Lever that 2x and it should look way way better than the Credit Suisse offering. If you look at rolling 12mo periods for FDV and SPY, you see continuous un-relenting "alpha"... Also good point on the ETN risk: it would be farcical for Switzerland to try to bail-out CS if/when it needs it.

Is kaChing your pick to revolutionize the client/advisor model? Collective2 seems to be trying the opposite strategy from kaChing and Covestor. I put an end-of-week type system up there on a lark recently. They say:

"You must simply restrict your activity to publishing non-personalized advice which your clients can choose to act upon or not. (Note that using Collective2 to disseminate your trading advice via a Web site and email is considered publishing.) Remember that our right to publish and say what we like is protected by the First Amendment, a right that our citizens fight for, to this day. No small matter, that."

Re: The Folly of Forecasting

macclary — Tue, 02 Mar 2010 19:57:44 -0000

Meb for Fed chairman!!

I don't think forecasting should be dismissed altogether. There are two completely different approaches to forecasting: one is a gut-feel prognostication type forecasting and then there is forecasting based on quantitative models. I just started reading "Super Crunchers" which is all about drawing a distinction between "expert opinion" and data backed models. One key difference is that the quantitative modelers know the error bars on their estimates, but "experts" never seem to review history to see if their guesses are worth anything!

One reason to forecast is to make money. But, an interesting "feature" of investing is that you can easily go broke with a sound forecasting model by over-betting as a result of over-confidence. If you bet on a system with a 0.7 win rate with the assumption that it has a 0.8 win rate you go broke. But if you only count on winning at 60% of the time then you make money.