The Inherent Contradictions of My Portfolio (or Who’s The Greater Fool..?) (Part IV)

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asset allocation, bubbles, bullish, developed markets, don't fight the Fed, emerging markets, frontier markets, macro investment thesis, Nifty Fifty, wall of money

Continued from Part III.

OK, so here’s an end-June snapshot of my current portfolio allocation:

[NB: And here’s my portfolio a year ago (from this post) – the majority of subsequent changes are obviously due to sales/purchases & the share price appreciation/depreciation of (mostly disclosed) holdings. Notably, my minor Hedge & Nat Resources allocations are now eliminated on sales of holdings, while my new US & Undisclosed (a new asset class I’m still working on) allocations reflect undisclosed new holdings. I’ll also highlight my Cash allocation’s pretty minimal, with the priority on Fixed Income (which is how I basically consider my Alternative Asset Opportunities (TLI:LN) holding) & Event-Driven (essentially, my NTR plc holding…noting, in particular, last week’s announcement of a return of capital/wind-down) 🙂 ]

Some big & small changes, obviously – but in the scheme of things, it certainly isn’t a radically different portfolio. But what were you expecting…did you really think I’d turn on a dime & completely transform my portfolio? Um, maybe if I was some hard-charging hedge fundie. But for the average investor, the more rapidly & radically one’s portfolio changes, the more likely it’s the result of poor/faulty decision-making! And I suspect this is even more true of thesis-driven investing – the biggest & most rewarding theses tend to develop/evolve over a long period of time, and likewise so should your portfolio…

Now, let’s consider some potential portfolio allocation implications, in terms of my current macro investment thesis. [Keeping in mind my recent Four Feds commentary]:

Emerging/Frontier Markets:  My underlying emerging/frontier markets thesis hasn’t changed a jot since I wrote this post (& its follow-up). But sentiment remains negative, with investors/commentators focusing on specific country surprises & disappointments, and the narrowing growth gap between developed & emerging/frontier markets. Currency weakness, esp. against the dollar, hasn’t helped either. But emerging/frontier markets are still the world’s growth engine, and will continue to trounce developed markets in terms of absolute growth. And the narrowing growth gap’s mostly due to starkly differing fiscal/monetary policies…investors might well ask themselves which policies are more sustainable? As for currency weakness – yes, it’s a short term hit, but it also improves their terms of trade substantially.

But doubters question whether a new export-led growth surge is even possible, citing lower developed market growth/demand. Which strikes me as a remarkably stupid argument…if you expect lower Western growth, surely it strengthens the case for high growth emerging/frontier markets investment?! Many which now appear to be reaching an inflection point, where domestic middle class/consumer demand’s emerging as a new growth driver, reinforcing or even supplanting existing export-led growth.

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Mea Culpa…

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alternative assets, blogging, developed markets, diversification, emerging markets, frontier markets, growth investing, portfolio allocation, technical analysis, value investing

Surely about time I address this post to readers – the majority of these mea culpas are genuine apologies, the rest are probably just a little cranky:

i) ‘Sorry I didn’t get to your email/comment sooner…’

I like to think I’m fairly good at keeping up with your emails & comments – well, most of the time! As I’m sure you know, if you neglect to answer an email immediately, it’s all too easy to lose track of it. There’s also a daily mountain of spam I have to traverse – at this rate, I should be ditching the investing lark, ‘cos apparently I could be making an easy million squid a day instead… [I must applaud the sheer persistence & inventiveness of the Nigerian people – so definitely an economy worth considering! Guaranty Trust Bank (GRTB:LI), anyone?] But hopefully I get to (almost) every email in the end, even if it takes a week or three – if I don’t respond in a timely manner, just ping me again.

Unfortunately, I tend to suffer from a ridiculously compulsive version of ‘If you don’t do it well, why bother doing it at all?!’ So emails invariably seem to demand a specific & in-depth reply – um, which I often have to get ’round to completing… Might be a good idea to keep track of some of my recurring reader dialogue(s), and summarize/respond to them more systematically here instead – we’ll see, perhaps it might offer up a couple of interesting insights for readers.

But please, keep ’em coming, they’re much appreciated. Investing’s ultimately a pretty solitary activity, so ‘work’ socializing tends to be a more deliberate affair – emails/comments are a great opportunity each day to just hang out at the ‘water-cooler’ & shoot the breeze with fellow investors!

ii) ‘Sorry, yeah…actually, I did see that headline’

There’s obviously blogs out there providing excellent daily/weekly updates of the latest & most relevant news, weekly reading links, company & valuation updates, plus other interesting snippets & topics. Clearly, this blog isn’t one of them…

I’m definitely grateful for & awed by their industrious contribution, but personally I’m more than happy to rely on the fact you’re all reading & analyzing the same headlines as me! 😉 And from my perspective, individual headlines usually only add very incrementally to the mosaic of knowledge I already have about the markets, sectors & stocks I’m interested in. And in my defence, I also fall back on my Twitter account – I’ve somehow managed to accumulate an horrific 8,000+ tweets at this point, so surely there’s some interesting & contemporary tweets among them!?

iii) ‘Sorry I poured cold water on your favourite stock’

Portfolio Allocation (XV – Emerging & Frontier Markets)

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asset managers, BRICS, closed-end funds, developed markets, dollar-cost averaging, emerging markets, frontier markets, Hong Kong, Howard Marks, NAV discount, NAV premium, portfolio allocation, reductio ad absurdum, Trading Economics

Continued from here. [And most definitely, this is the last post in the series!]

This might actually be the perfect time to write about emerging markets – the developed market douche-bags (DMDs) are out in force again, warning us emerging markets are tanking… It’s a common refrain: a) developed markets are in recession, emerging markets must tank, b) developed markets are showing zero growth, emerging markets must tank, c) developed market growth’s bouncing back & rates are rising, emerging markets must tank, and d) well…emerging markets simply must tank!

2013 may turn out to be even sillier. So far, most of the year’s been spent denigrating – nay, reviling – emerging markets, simply because developed stock markets have done so well. Of course, the sub-text here is ‘why don’t you just forget/sell emerging markets (forever) & just stick to developed markets?!‘ Christ on a rope, that’s like handing out bloody gold medals to whoever took the most steroids… And now developed markets have caught a dose of the colly-wobbles in the past week or two – again, DMDs would have you believe it’s another good reason to sell emerging markets. Yes folks, we’ve finally reached the point of reductio ad absurdum:

i) Developed markets go up – sell emerging markets,

ii) Developed markets go down – sell emerging markets, and

iii) Don’t forget i) & ii).

Portfolio Allocation (XIV – Emerging & Frontier Markets)

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agri-business, correlation, corruption, developed markets, Donegal Creameries, emerging markets, Europe, financial crisis, frontier markets, German property, Japan, portfolio allocation, portfolio performance, QE, US, volatility

Continued from here. Wow, it’s been a leisurely journey – spanning a full year – is this really my last post of the series?! Hmmm, we’ll see… Here’s my portfolio allocation pie chart one more time:

[NB: This is from Jun-2012, but since then the only major changes (funded mostly from my Hedge Fund allocation) are: a) an increase in Property from 10% to 13%, as I continue to scale up my German property exposure (see Parts I to V – also here), and b) a large jump in Agri from 5% to 11%, due to my purchase of Donegal Creameries (DCP:ID) & its subsequent hefty appreciation. Note I don’t classify DCP as an Irish stock – after all, the company feeds people (potatoes, mushrooms & yogurt) and animals, what could offer a more ideal uncorrelated exposure?!]

German Residential Property (Part I)

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commercial property, developed markets, Europe, Eurozone, German bunds, German property, home ownership, Margin of Safety, real estate agents, residential property, safe-havens, stock tips

German residential property’s been described (particularly recently) as:

‘Perhaps one of the safest & most attractive asset classes in Europe, or even the world‘.

OK, seems like typical talking-head hyperbole! But in this instance, I’d really have to agree… In fact, I’ve agreed with that thesis for the last couple of years now, and v profitably too! Whenever somebody I meet tugs my sleeve for an investment tip, that’s exactly what I offer up (in all good conscience): German residential property is a safe & compelling long term investment. Hmm…it’s amusing, and extraordinary, how rapidly most people lose interest in such a dull recommendation! Which just goes to show:

i) I guess most people are truly just looking for a tip…in the v worst sense of the word. Perplexing..!? Do they have some bizarre faith I can conjure up, at will, a stock that’s sure to double for them within a week!? Is this really how some people think investing works? In the end, it illustrates how few people walk the talk – they just don’t apply themselves & follow through consistently with their investing. Often, when they actually decide to invest, it seems like their decision may just boil down to the persuasiveness of the ‘tipper’, rather than the merits of the actual stock thesis!

Hitting The Century: It’s Pretty Panties Time..! (I)

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alpha, catalyst, developed markets, emerging markets, EUR/USD, European sovereign debt crisis, foreign exchange trading, foreign stock listings, frontier markets, FX rates, Human Capital, macro perspectives, Margin of Safety, portfolio allocation, portfolio performance, stock screener, value investing, value investing bloggers

Oh Gawd, when will I learn..?! Last time ’round, the ‘pretty panties‘ phrase grabbed a whole new wave of (doubly) frustrated web searchers & readers. Who knew? But perverts¹ are people too! A majority even have jobs, I suspect. And many of these hand shandy artists are probably good savers (limited range of interests, they stay home a lot…). They might just appreciate some investing insight! In fact, gentlemen, we can rebuild them. With their powers of concentration, and attention to detail, surely they’d make excellent value investors?! My dear mother would be so proud if I converted even one of these bishop buffers…

So we’ve reached Post 100 – time to show off my pretty panties a little?! This blog’s mostly been about my stock picks and, more recently, I’ve stepped back to write more about macro perspectives. What’s perhaps been missing, as I’ve noticed with many other blogs, is a closer look at portfolio construction, allocation and metrics. This is a big oversight on my part – if you’re a regular reader, you already know this aspect of investing is actually v important to me!

Asset Managers – A First Look at the Alternatives

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% of AUM, 3i Group, alternative assets, Apollo Global, Argo Group, Blackstone, Carlyle Group, Cowen, developed markets, distressed assets, emerging markets, Fortress, Janus Capital, KKR, Mr. Market, Oaktree Capital, Och-Ziff, Record plc, special situations, Tetragon Financial

We’ve just witnessed the rather limp launches of Oaktree Capital & Carlyle Group (reflecting the current malaise in asset manager valuations), so it’s a good time to look more closely at the asset manager universe. But where to start? Well, the boring end of the spectrum, I guess:

Traditional managers are dime a dozen, with little to distinguish them. Most focus on developed markets (reflecting a rather timid clientele), and demonstrate no particular ability to outperform the market over time. They now face relentless competition from an ever-expanding ETF universe which, on average, easily matches them on performance and wallops them on fees.