I’ve been listening to Bruce Springsteen since he looked like that and while in all those years (more than 30) I have never burned out on his music it has only taken a couple of days for me to burn out on all the bailout coverage and analysis.
The importance and many questions notwithstanding it is wearying. OK, rant over.
One little nugget you may have heard yesterday after the close; a guest on CNBC said the bailout plan is too small. He said that Wamu alone has $100 billion in bad debt making $700 billion, in his estimation, too small.
Marc Faber was on CNBC Asia for 90 minutes last night saying something very similar.
I continue to marvel at how unimportant everything else is in light of the bailout story.
Yesterday I spent a little time trying to wrap my hands around an OEF from Index IQ which tries to blend together six different hedge funds strategies to deliver an absolute return.
I really had some trouble understanding this and still don’t fully get it. The fund owns 13 ETFs. It replicates and blends the six hedge fund strategies using those 13 ETF. I could not glean how it weights the six strategies or how 13 ETFs can actually replicate even one hedge fund.
I will say that based on the holdings as of June 30 the fund has probably done very well. It was heavy in fixed income ETFs, close to flat commodities and short equities. I say probably done well because I don’t know, the fund does not have a ticker symbol yet and is only available through eTrade and perhaps one other brokerage (not Schwab).
I don’t think I ever said anything about the ETF conference I just attended. The mood was not particularly heavy in light of what the stock market is doing. I’m not sure whether there is a contrarian nugget there or not. The panelists ranged from rocket scientists to guys with almost nothing to say, I’d like to think I was somewhere in the middle (nervous chuckle).
One thing I have noticed at these conferences is the swag giveaways in the exhibition room is getting less and less. The first one of these I went to I could barely carry it all. On this go around there was almost nothing. Is this a barometer of economic health of the industry? I don’t know the answer but I do wonder.
My presentation was about portfolio construction. What I tried to do was go sector by sector and get as close as I could to the portfolio that I use for clients (which is mostly individual stocks). This is getting easier and easier to do as more products come out.
The advantage to this would be you avoid single stock risk but still create some very specific effects. The down side is that the dividend yield is likely to be lower and I tend to believe that you can build a portfolio of 40 stocks (or whatever your number might be), have a couple that go up a lot and have none that go to zero. If you can do that, and get the sector decisions mostly right, you have a good chance of adding some outperformance.
That product innovation is making sophisticated portfolio construction more accessible is a great thing for anyone able to spend the time.
If you look at what is in registration but not yet listed (IndexUniverse is the best resource for this) there are all sorts of potentially interesting things. Two that seem to be missing are the CBOE Put Write Index and something tied to the Baltic Dry Index.
I hope that WisdomTree follows through on their currency filings. I think it would open the door to a lot possibilities; either casting your lot with one or two currencies based on their fundamentals or constructing a combo of currencies with different characteristics that collectively might not move much in price but could generate quite a bit of yield (this would be rather research intensive).
One thing that I have no interest in is 130/30.