Still riding on the stock market bull

-

The poolside - where I am writing from right now. No typo here. 2017 delivered strong investment returns for my core model portfolios covering stocks, ETFs, mutual funds and anchor alternatives. Even the most conservative portfolio on my radar screen with a much lesser degree of risk delivered slightly above 10%. The worst performing funds still reported double-digit returns. The larger contributions to these returns came from global stock market positions.

Meanwhile, my brokers are reminding me that as US stocks trade at all-time highs, the price tag on bearish options has dropped to a trough relative to bullish contracts. The spread between the price of one-month, 25-delta puts and calls for the S&P 500 is roughly two standard deviations below its five-year mean, data compiled by Bloomberg show. It is an indication of the greed or lack of fear in the market suppressing the CBOE’s volatility gauge. 

I know, I know. US equity risk-adjusted returns are now touching 17-year highs. A 60/40 portfolio (60% equity 40% government bonds) has an even higher risk adjusted return ratio of 1.8.

So what am I doing now? I am making changes to all the portfolios at this stage. I am cutting down the risk exposure and leverage although short-term momentum has turned decidedly positive for risk assets. Great opportunities still exist but are a little harder to find on the ground.

Yikes! I expect rising volatility and more difficult market conditions in the second half of year. I am looking to protect the value and am always looking for interesting strategies with strong long-term performance records.

One of my global partners offers several diversified portfolios that are dialed up or down for risk, offer good diversification across different asset classes. Got to go now for a meeting with several investors.

Popular posts from this blog

Same old same old

-
Image
It is easy to get sucked into anything. Who cares? After a long time in the markets, it really does not matter to me whether this is a bubble or not or a new crash will come tomorrow. Forget about the sales pitches, it is more important whether I make money or not in any situation. I can be a bull or bear running different strategies at the same time. Outlook or opinion pieces that we hear out there everyday provide a framework to view and guide things. It is important to have a disciplined system with cookie cutters and work within it and continue to adjust the portfolio if necessary as market conditions evolve. Volatile assets can produce above-average returns, but often expose the investor to deep and sometimes frequent drawdowns. That creates more opportunities to sell the investment and miss out on the gains. What about Bitcoin or whatever? I read articles about Bitcoin on both ends every single day. The claims of a Bitcoin and cryptocurrency bubble are nothing new....
Read more

The US dollar comedy

-
Image
As I scan the news articles everywhere, I have noticed almost everyone and his dog is becoming increasingly bearish on the US dollar. The US Dollar Index was one of the major disappointments of 2017, depreciating by 9.0% and putting in its worst performance since 2003. Effectively, the dollar will get thrashed again in 2018 is the popular view.  Some of the analysts argued that all good news is already priced in the US dollar. It makes sense from the fundamental perspective. However, lots of things make sense in the investing world until Mr. Market decides to prove rationales flawed. Just ask the old timers who have seen enough in the markets. According to the latest Commitment of Traders report, released on December 29 by the Chicago Futures Trading Commission, large speculators reduced their net short positions on the US dollar. I do care about fundamentals. Over time, the macroeconomic fundamentals will reassert themselves. The key is interest rate different...
Read more

Investing in Hedge Funds

-
Image
The fears of hedge fund troubles will never go away. Most experts agree that hedge funds are part of the solution for any well-diversified portfolio. But still, some local private and other institutional investors are reluctant to use them, even if their regulations allow. For some, hedge funds are synonymous with “risk”. Indeed, hedge funds have been featured regularly in the mainstream news, and not surprisingly much of the reporting in the media has been negative or rather sensational in my view. Of course, a few investors from my meetings are ahead of others that they have already gained some real investment experience with hedge funds. Hedge funds may invest and trade in many different markets, strategies and instruments with various risk characteristics. Hedge funds employ innovative trading strategies. Their strategies can include taking both long and short positions, using leverage and derivatives. Some may only consist of a small investment team or may depend on...
Read more