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Long-term a diversified portfolio of stocks+bonds+gold+other assets (REITs, Corp bonds, etc). Is likely to produce something like 4-6% real with drawdowns of 20-30% max. I got a hypothesis, and it is that prime pieces of real estate (say good, well located/designed buildings in Manhattan...

With people worried about whether Trump got votes to do this or that, one has to remember that he is likely to pickup support in 2018 Lots of Democrats with their job on the line on states that Trump won. So I will let ZeroHedge cheerlead every 10 point drop in the ES, but long-term this...

I started to receive The Economist print edition. This thing is great, I should have subscribed years ago, I would be a lot better informed and probably would have made a lot more money from trade ideas coming from it. This week's edition has a great article on the Fed hikes. Also, pretty good...

When analyzing portfolios, things can get tricky when one adds trading/timing skills to the mix. Take my EWZ exposure, its high convexity/risk. But I do have a stop/exit plan, the 60/220 MA crossover I mentioned. So I will lose 20-30% at most but I can make an exponential amount. Therefore when...

I guess what I'm saying is that inherent in a 'risk-parity' 'all-weather' 'diverisified portfolio' is the tendency towards the barbell portfolio. They are pretty much the same even though it doesn't look like it. The all weather stuff sounds all fancy and deep, but all it does is to build a...

I suppose the 'futures of cash' are Eurodollars and Fed funds futures. They are the price of cash so they affect the supply and demand for short-term cash. I"m short Fed funds futures now, so I'm exposed to the return of cash dropping. When would the return of cash drop? If the economy started...

But this safe + lot of risk portfolio can get really fun if its build in a way that is so historically resilient that one can safely leverage it (up to a point) that it might actually beat the returns of the index guy, while still retaining the downside risk limitations. That's when you will...

And this even ignores that EM stocks are likely to return even more as its easier to have 1 huge gainer in there (as EMs improve and become developed) as compared to developed, since the benefits of those markets are already widely recognized (so there is likely to be more convexity there, over...

With a 60% safe (cash, bonds, gold) 40% risk (EM stocks) vs 100% SPY, what can you expect? As a very rough proxy, lets use the earnings yield as the expected return of stocks. So SPY has a 5.1% expected return (19.5 PE) VWO (EM stocks) have a 7.8% expected return (~12.8 PE) The safe...

By cash I mean, either ~1y US T-Bills, or cash USD balances held at IB (with pay now 0.41% a year, without the need to pay for the spread and commissions of T-bills)

Right now I'm unbalanced on my barbell, I had 55% in equities last week but today I bought another stock (will post about it soon). So its more like 60%, plus 5% in REITs (although that is extremely low risk since I'm not a homeowner). And of the 40% of my safe some of that is in cash being held...

So the way to produce great risk-adjusted returns is to have a 'drawdown anchor' in the form of safe assets and take a lot of risk in the non-safe allocation. A decent rule of thumb is 70% safe (diversified currencies, bonds and metals like gold) and 30% risk (high convexity ETFs like EM ETFs...

In fact, the perma 'buy index funds' guys would probably do a much better service to people by saying 'instead of 100% stocks, put 40% in bonds, 10% in gold and 50% in EM equities'. While the barbell will still be unbalanced with the latter (too much risk), its a lot better than 100% risk. There...

The best risk adjusted portfolio on earth is probably something extreme along these lines. Lets say 99% safety, with an expected long-term real return of 1% (developed market bonds with gold in it) and 1% in maximum risk equity (early FB type companies). Most years nothing will happen, the...

A smart cash, bond, gold mix would have to include certain amount of country/currency diversification for tail risk protection. Buffett loves to say "put all your money in low cost stock index funds" but I believe that is inferior to the alternative (at least for people who know what they are...

I was thinking about the Barbell strategy and my portfolio tests and I decided to do some other things. I run a computer simulation for almost every asset mix possible but limiting the computer choices to only 'stock+bills' 'stock+gold' 'stock+bonds' then 'stock+gold+bills(no bonds)' then...

El-Erian on the Fed. I agree with all of it. This Fed will lead the market rather than follow, March was the start of that process. By mid-year markets will find this out and they wont be pleased. Right now the Fed is being soft because it doesn't want a premature fight with Trump or to tank...

IB will now pay 0.41% on USD balances over $10,000. Pretty soon, cash rates will start to get decent and it might even make sense to park some there and not have to buy bonds instead

The 'hawkish' fed trade was crowded, lots of people were in it, when the Fed didn't surprise to the hawkish side (more or less coming in line or perhaps a bit dovish), lots of people headed to the exits.

Looking at my portfolio performance today (EWZ VWO and small caps up huge), I can't help to think that Fed futures are a cheap risk hedge. People are very skeptical about the Fed, into 2018. But I think they mean it and if they deliver on the promissed hikes, that part has value. If they do more...