For a smile…
If at first you don’t succeed, skydiving is not for you!
Things we are pondering…
The investment markets loved Fed Chair Yellen’s report this week, largely because there were no surprises in it. It does appear that the Fed does in fact see pressure on rates increasing and consensus, based on the polling of the Fed Governor’s, indicates a movement upward–not huge numbers but movement. The language used is in typical Fed fashion and leaving room for adjustments: for example, what specifically does “considerable time mean”? Clearly it means anything we want it to. Click on this link for more.
Other big news this week is the California Retirement Systems, commonly known as CALPERS, announced it was liquidating all its hedge fund positions totaling $4,000,000,000 over the next year. Citing the additional work and complexity of the hedge fund investments, it seems like a huge move. Yet, at the same time, four billion is only 1.3% of their portfolio of $298 billion. It was not a significant position for time as a percentage of total assets in the fund. Investing in alternatives requires much more effort than other investments. At 1.5% of the portfolio, I would not want to invest in the effort to be successful in that category. If you’re widely successful it won’t impact the portfolio in a meaningful way. We continue to see well-researched and selected hedge funds as a meaningful way to manage volatility…an interesting stat; since 1990, when the S&P 500 was up, it outperformed 63% of the years. In down years the hedge funds went down less on average. For total accumulated wealth the Hedge Fund Index was a winner. More importantly, if an investor were taking out 5% of their portfolio, adjusted for inflation each year, the Hedge Fund index would deliver even more wealth–at 1.3% of the portfolio, none of that matters. If you would like to see the actual stats shoot us an email.
Interesting Links…
My friend Gerri Detweiler wrote this piece on “thinking like a rich person”. Well done!!
Since I’ve become a condo person and have many things conveniently nearby I’ve often been curious about the effectiveness owning a car versus other options. This article using Über as an option was interesting.
I found this article amusing in how they compared the number of words in the Fed report to the level of assets the Fed has built up during its stimulus efforts.
The number of analysts who are bearish is very low. Oh My!