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    • Thu May 29th 16:13 PM
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      Sowing Profits with the Claymore/Clear Global Timber ETF
      The problems I have with CUT are that it is not a pure-play on trees and timberland. There are a lot of companies in there who generate a lot of their revenue from downstream processing and marketing of wood and paper products. These have different economic characteristics than pure timberland. CUT also tries to get global exposure - which has pros and cons. If you want an easy pure play on North American timber, just buy PCL, RYN and PCH. Weight according to your own preference (business fundamentals, acreage, market cap), and be patient. This basket has been much better performing than CUT, and it's a purer play from an asset allocation perspective.
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    • Tue May 27th 16:14 PM
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      Brian Orol Uses Inverse ETFs to Smooth Returns
      I don't get why one would buy a short index while, I presume, holding a long position in the same or a highly correlated index elsewhere in the portfolio. Is that what's going on? If one fears downside risk in equities, just hold more cash. Or am I missing something? This approach seems to have higher costs and complexity.
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    • Fri May 23rd 13:52 PM
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      When Hedges Fail
      An offsetting hedge, even if it's expensive and imperfect, is still your best alternative if you're stuck holding a huge stinky diaper bag of CDOs. For the rest of us, it generally makes sense to manage risk by diversifying. If you believe, for example, that US stocks are too high, don't start trying to do a bunch of offsetting short trades - just move long stock money to the sidelines or into other asset classes. Diversification is still the only free lunch out there. Hedges are not free, and they often don't "work" as planned.
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    • Fri May 23rd 13:38 PM
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      The ETF-Squared: It Reallocates For You
      My experience is that one should re-allocate whenever an asset class moves out of a targeted allocation collar. That can happen any time. A collar of around 1% in either direction has worked well for me, though, as always, do your own research. Though this collar might seem narrow, I don't actually need to touch my allocations that often - every couple months or so. Also, if I add or remove funds to my portfolio, I use those opportunities to buy the most underweight (when adding funds) and sell the most overweight (when removing), whether or not the class is outside the collar. This helps keep things in line too.
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    • Thu May 15th 13:52 PM
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      Commented on:
      Publicly Traded Airports: A Useful Benchmark?
      I would worry about being a shareholder in this type of enterprise that is so subject to government interference. Shareholders would likely become bagholders as soon as it becomes politically expedient.
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    • Fri May 2nd 13:20 PM
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      Defining Alternative Asset Classes
      I go:
      15% US stock market - mostly index, plus some value-oriented no-load managers (FAIRX, UMBIX)
      19% Alpha-seeking (brilliant mutual fund managers who pursue non-correlated strategies)
      14% International developed market (mostly EFA, plus some WGRNX)
      5% Emerging markets (VWO)
      5% US REITs (VNQ)
      5% International REITs
      7% Natural resources/commodities
      15% US Government bonds/insured munis/money market funds (mix depends on yield curve and spread of taxable vs tax free yields)
      15% TIPS
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    • Thu May 1st 17:00 PM
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      Commented on:
      Defining Alternative Asset Classes
      My investable "alternative"... asset classes are:

      International REITs - WPS (I have an equal allocation of domestic REITs via VNQ)

      Natural Resources - PCL, RYN, PCH (timberland), PRFE (energy), GLD and GDX (gold)

      Great Fund Managers who are not closet indexers: PRPFX - (excellent inflation hedge with high Sharpe Ratio - heavy in commodities, currencies, and small-caps) and Ken Heebner's CGMFX and CGMRX.

      TIPS. David Swensen strongly makes the case for TIPS as an asset class, which I buy into. Academic research indicates their powerful diversification effect.

      I like Granger's ideas above, though one I've already passed on. ARBFX has nearly 2% fees, low net returns and a negative Sharpe Ratio. With five year CAGR of just 5%, it's too volatile for me to hold. I want to get paid for risk. Low correlation isn't enough.

      I think a very important question we need to answer is, how much exposure is meaningful? How thin do we slice the pie? How big should our "alternative"... category (or any category) be? How big should any sub-slice within it be to be helpful in moving us toward diversified returns?
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    • Tue Jul 3rd 14:38 PM
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      More Support For Disciplined ETF Strategy
      I don't get it. If you had sold SPY back in July of 2006, you would have missed out on a 24% gain since then (adj close of 122.44 on 7/13/06). The chart is pretty clear and it suggests the opposite of what you recommend in your article. The chart clearly shows that the smart thing to do in July of 2006 would have been to BUY MORE! Or are you suggesting you would have sold SPY in July 06 anyway, and put that money to work in some other asset that was primed to deliver better than 24%? As it is, the data you present in "support" of your recommendation regarding SPY clearly argues AGAINST your recommendation...
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    • Wed Jun 13th 17:32 PM
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      A World Market Cap Approach to Allocation
      I think using market cap is a risky way to allocate. As Robert Arnott has shown with his "fundamentally&qu... weighted indexes, cap weighting tends to overweight what's overvalued and underweight what is undervalued. How about looking at the fundamentals in the markets in question? GDP, or, the cumulative value of revenues, and/or dividends, of the public companies in those markets, might give a more realistic weighting criteria (Robert Arnott's other factors, book value and earnings, may be too difficult to compare from country to country due to varying financial reporting standards. Even revenue is probably not strictly comparable, but it is probably more comparable that earnings or book value). With the recent run-up in non-US stocks, particularly "emerging markets", a cap weighting is probably taking on excessive risk (despite the obvious attraction of being relatively easy to calculate).
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    • Wed May 30th 16:17 PM
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      ETFs vs. Individual Stocks: Capturing the Desired Effect
      I use three US timber companies, PCL, PCH and RYN (fundamental weighting across the three) to get liquid exposure to timber land as a (nearly) pure-play asset class. I leave out WY, IP and MYS because their business results are driven by more downstream activities, and DEL and POPEZ were too small to meaningfully move the portfolio based on their appropriate fundamental weights. Timberland is very difficult to own directly without a lot of capital, and returns from direct holdings cannot be well diversified unless major-endowment-sized allocations are made. Timberland is also very illiquid if held directly. My simple approach gives geographic diversification and high liquidity with pure-play exposure to this attractive asset class, which has: 1) a low correlation to US equities (PCL had just a .39 correlation, .15 R squared, to SPY weekly returns since 1999), 2) a good track record - 13% nominal returns since 1999, and 3) good inflation-hedging qualities. The rest of my portfolio is made up of ETFs, but this is one asset class I couldn't get exposure to without holding individual stocks.
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