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    • Mon Aug 18th 19:28 PM
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      Commented on:
      5 Potential Buyout Targets in Biotech - Barron's
      Years ago, I thought that I could divine the future of the biotech companies. Account damaging stock gaps from failed “sure thing” phase–three studies and unexpected drug side-effects required a reassessment of how to successfully invest in the sector. Fortunately, before long I realized that foretelling a novel compound’s efficacy and long term safety was beyond my prophetic ability.

      Most industry group sub-sectors have a high price change correlation among component companies; however this is not the case with biotechnology. This characteristic suggests that a shotgun approach will be a logical path to success.

      The biotech industry in aggregate creates many successful marketable compounds, with ensuing product profits much greater than the sum of cash burn, and long safety issues with resultant litigation expenses, etc. Thus, a more effective way to gain exposure is by using an eight stock or greater basket, or an ETF; select an ETF carefully though, as company weighting methodologies can vary greatly among ETF managers. For example, currently BBH has a huge 39.5% allocation to DNA, whereas XBI has a maximum of 6.1% in any one company. Also, as you would expect, with diversification we can expect a less-wild ride; using daily closing price, the sixty-day standard deviation of XBI is 25.7%, whereas the same for BIIB is 83%, and for ELN a gut-wrenching 209.2%.
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    • Fri May 23rd 11:23 AM
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      Commented on:
      Choosing Your Portfolio Risk Tolerance
      Geoff,

      Do you use adjusted historic prices when calculating asset correlation?

      RAJ
      View article »
    • Thu May 22nd 16:10 PM
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      Commented on:
      Choosing Your Portfolio Risk Tolerance
      Geoff,

      Thanks for the reply. Perhaps 'sum of all intra-portfolio correlations' is a better definition.

      RAJ
      View article »
    • Wed May 21st 16:05 PM
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      Commented on:
      Choosing Your Portfolio Risk Tolerance
      Exceptional article, one of the most thorough I’ve seen on this site. Within the scope of your analysis, do you have data on weighted correlations of the portfolios, and various rebalancing methodologies?
      View article »
    • Sun May 18th 11:29 AM
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      Commented on:
      How to Default on Your Mortgage and Stay in Your House
      User 194013, after reading your truly sad real estate story, and as insensitive as this may read, I must ask; why did you over-pay for a new house, in an obviously inflated market. And why didn’t you have insurance on your MIL? And why did you have an invalid living in the basement? And why didn't you install a lift (if absolutly necessary) in your existing house? It seems like poor decision-making on your part has led to your financial woes.
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    • Fri May 16th 20:46 PM
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      Commented on:
      How to Default on Your Mortgage and Stay in Your House
      Personal responsibility is a moral choice, just like honesty, keeping your word, etc. People have a choice, and someone that uses a technicality to steal is the same as a common thief to me, whether it is a corporation or an individual that gets victimized. It's simple amoral greed; no one twisted the borrowers arm to sign the loan contract.
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    • Fri May 16th 14:55 PM
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      Commented on:
      How to Default on Your Mortgage and Stay in Your House
      Mr. Salmon is this article’s title unfortunate or are you advocating this despicable behavior?
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    • Fri May 16th 12:48 PM
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      How to Default on Your Mortgage and Stay in Your House
      What has happened to personal responsibility, it shouldn’t be strategized or legislated away. If don’t pay your debts then pay the piper.
      View article »
    • Sun May 11th 18:47 PM
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      Commented on:
      Baltic Dry Index Almost Back to Record Highs
      Is there an ETF or Mutual fund that tracks the Baltic Dry Index, and if not what stocks have a high correlation to it?
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    • Fri May 9th 10:15 AM
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      Commented on:
      Country Funds En Masse Could Be the Answer
      I regularly look at alternative ETFs to further diversify my portfolio. I often wonder whether country funds or regional funds offer better results when viewed from a practical sense. The 1 year daily correlation is over 80% between most country indices and their respective regional and/or type indices. Shorter term correlations can diverge significantly however, during brief spurts of country specific event driven volatility. These correlation characteristics imply that a short term rebalancing regime would be needed to capture relative price dislocations among similar country funds found within a broader index. Longer term, these price disparities should be arbitraged away thus providing little if any additional return. Thus, I believe country specific funds are only beneficial to portfolio methodologies that are short term oriented.

      As an aside, what should be the goal when constructing a diversified portfolio; should it be a weighted net correlation of 0% (based desired investment timeframe), or maybe + or – 10% or something completely different?
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    • Wed Apr 30th 12:46 PM
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      Commented on:
      Defining Alternative Asset Classes
      I find the 90 day correlation of DBU to SPY is 59.32% and DUB to IEF is (-39.29)% . That is ok but not low enough for significant diversication benifits.
      View article »