DWAMM’s Podcast 1 – The New Frontier in Asset Allocation: Mixing Strategies, Not Assets Mike Moody and Andy Hyer
Podcast #1 - The New Frontier in Asset Allocation
April 23, 2010
1 Comment | 
Podcasts, Relative Strength and Value | 
Permalink
Posted by: Andy Hyer
Sour Apples, Anyone?
April 23, 2010Articles like this one from the ROI column in the WSJ never cease to amaze me. In the column, the author makes a 7-point case for why Apple investors should take profits, or at least be wary of the future. I’ll use just one of his quotes to sum up the gist of his entire article. In Seven Reasons Apple Shareholders Should Be Cautious, Brett Arends writes:
And the more it rises, the less attractive it gets.
“Less attractive to whom?” I might ask. To investors participating in Apple’s profits, those higher prices mean more money. To those not participating, perhaps those higher prices are producing sour grapes.
In the capital markets, there are usually going to be two sides to every trade, so it’s a good idea to maintain a degree of respect and good faith for the other party. However, a quick Google search of the author’s name brings up an article dated July 22, 2009, entitled, Despite Profits, Apple Is No Investment Opportunity. Since that bearish article, Apple’s stock price has gained around +73%. What’s interesting is that the author argues many of the same points in both articles – Apple’s competitors dropped the ball, the share price is overvalued, and Steve Jobs has health problems. It’s nearly a reprint of today’s article, plus some iPad commentary and about 7,300 basis points.
My point isn’t to bash a market opinion writer whose unhappy job it is to make predictions. My point is that these predictions more often than not fail. And despite the common knowledge that market prediction is practically impossible, this new bearish Apple article is the 2nd most-read article on the entire WSJ website today–that’s a lot of readers.
Let’s hope all those readers have a systematic process in place to help guide their investment decisions. Because following newspaper opinions probably won’t cut it going forward.
Disclosure: Apple (AAPL) is currently included in the PowerShares DWA Technical Leaders Index (PDP).
1 Comment | Markets, Thought Process | Permalink
Posted by: JP Lee
Morningstar: What NOT to Do When Investing for Income
April 23, 2010Maybe Christine Benz, the personal finance specialist at Morningstar, is a regular reader of our blog. Or maybe she just gets it. She wrote a great piece on what income investors should avoid. Here’s a section of it:
Is it even healthy to focus on generating income, particularly if doing so comes at the expense of total return? Is generating a livable yield from a portfolio a vestige of a bygone era? No and yes, I’d say.
It’s easy to see the intuitive appeal of being able to live on the income you earn from clipping bond coupons, yet being too income-focused carries its own set of pitfalls. A key one in today’s low-yield environment is that you have to venture into very risky stuff to generate a livable yield, and that could erode your principal in the process. And by focusing unduly on investments that kick off income, you also risk starving your portfolio of the capital-appreciation potential that comes with stocks. True, stock returns have been no great shakes over the past decade, but bonds may well fight their own uphill battle over the next one.
The bottom line is that most people will have to tap their principal to fund living expenses in retirement, so the key aim for most retirees and pre-retirees should be to grow those retirement kitties as large as they can. If they have to tap their principal, they’ll be tapping a larger base than if they had focused on income without regard to total return. Investments that generate current income aren’t bad, but total return is your real bottom line.
[The emphasis is mine.] This is exactly what we wrote about on 4/16 in a post on investing for income. We made the added point that capital gains can be spent just as easily as income, so there is no reason not to focus on total return. We also had a suggestion for how an income-oriented investor might be persuaded to incorporate growth into the portfolio. I don’t always agree with Morningstar’s orientation on investing–they tend to think that value is the only way to go–but I think their take on investing for income and the dangers of only paying attention to the current yield are right on the money.
Leave a Comment » | Investor Behavior, Markets, Retirement/Saving, Thought Process | Permalink
Posted by: Mike Moody
Dorsey Wright Sentiment Survey - 4/23/10
April 23, 2010Here we have Round Four of the Dorsey, Wright Sentiment Survey, the first third-party sentiment poll. As you know, when individuals self-report, they are always taller and more beautiful than when outside observers report their perceptions! Instead of asking individual investors to self-report whether they are bullish or bearish, we’d like financial advisors to weigh in and report on the actual behavior of clients. It’s two simple questions and will take no more than 20 seconds of your time. We’ll construct indicators from the data and report the results regularly on our blog–but we need your help to get a large statistical sample!
Click here to take Dorsey Wright's Sentiment Survey.Contribute to the greater good! You WILL NOT be directed to another page by clicking the survey. It’s painless, we promise.
Leave a Comment » | Investor Behavior, Markets, Sentiment | Permalink
Posted by: JP Lee
Sector and Capitalization Performance
April 23, 2010The chart below shows performance of US sectors and capitalizations over the trailing 12, 6, and 1 month(s). Relative strength strategies buy securities that have strong intermediate-term relative strength and hold them as long as they remain strong. Performance updated through 4/22/2010.
Leave a Comment » | Markets | Permalink
Posted by: Andy Hyer
