TraderPlanet.com :: Commentaries tagged (value-investing)

Against Risk Parity, Redux

DavidMerkel, TraderPlanet.com — Tue, 07 Feb 2012 14:54:13 +0000

Here are two articles to read on risk parity:

Pro: Pick Your Poison

Con: The Hidden Risks of Risk Parity Portfolios

I'm on the "con" side of this argument, because I am a risk manager, and have traded a large portfolio of complex bonds. For additional support consider my article Risks, Not Risk. Or read the second half of my article, "The Education of a Corporate Bond Manager, Part X." There is no generic risk in the markets. There are many risks. Interest rate risk and credit risk are differ...

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Sorted Recent Tweets

DavidMerkel, TraderPlanet.com — Mon, 06 Feb 2012 21:27:33 +0000

Trying a new format here, I think readers will like it better. Most things are better after additional effort. Think of this as a news links by subject post.

Economics

If you look in the back, it seems that there were 58 respondents. From page 13: Methodology & Panel Selection Invi... http://t.co/p8sVZl9g Feb 06, 2012
Will the great interest rate gamble pay off? http://t.co/hgj5XSKc People want to believe that you can get something for nothing; ain't true. Feb 05, 2012
Central Planning at the Fed...

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Industry Ranks February 2012

DavidMerkel, TraderPlanet.com — Sat, 04 Feb 2012 14:49:53 +0000

Industry-Ranks-2-2012

I'm working on my quarterly reshaping -- where I choose new companies to enter my portfolio. The first part of this is industry analysis.

My main industry model is illustrated in the graphic. Green industries are cold. Red industries are hot. If you like to play momentum, look at the red zone, and ask the question, "Where are trends under-discounted?" Price momentum tends to persist, but look for areas where it might be even better in the near term...

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We Eat Dollar Weighted Returns — III

DavidMerkel, TraderPlanet.com — Thu, 02 Feb 2012 08:43:37 +0000

Somebody notify the Bogleheads, they will like this one, or at least Jack will. Yo, Jack, I met you over 15 years ago at a Philadelphia Financial Analysts Society meeting.

How bad are individual investors at investing? Bad, very bad. But what if we limit it to a passive vehicle like the Grandaddy of all ETFs, the S&P 500 Spider [SPY]? Should be better, right?

I remember a study done by Morningstar, where the difference between Time and Dollar-weighted returns was 3%/year on the S&P 500 open e...

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On Corporate Cash

DavidMerkel, TraderPlanet.com — Tue, 31 Jan 2012 10:24:33 +0000

In human terms, we are most often best off with the via media, that is, the middle way. So it is with corporate cash. The first article I wrote on the internet argued for the value of excess cash in the hands of intelligent management teams.

But there is a limit to that, and more so when many companies build up large slack cash balances. Think of the converse: only one really intelligent company has a lot of slack cash. That company starts buying up other companies like a clever private equit...

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Against Simple Valuation Metrics

DavidMerkel, TraderPlanet.com — Tue, 24 Jan 2012 08:47:48 +0000

There have been a lot of articles dealing with use of corporate free cash flow lately:

Dividends -- get them, are they sustainable?
Buybacks -- do they add value or not?
Acquisitions -- are they overpaying? What are the synergies?

But you never hear about the last one -- internal investment for organic growth. There is a simple reason why -- it is silent as night. No one makes announcements on it. If done properly, it is as quiet as a plant growing.

Dividends are simple -- is there enough free cap...

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The Rules, Part XXX (30)

DavidMerkel, TraderPlanet.com — Sun, 22 Jan 2012 06:04:43 +0000

In the recent run-up, there was talk of the infallibility of equities. This led to a higher level of variable compensation in the economy through option and share issuance and low pressure to raise fixed wages. This was yet another form of hidden leverage, which hid the unprofitability of enterprises through share dilution.

That was written in 2001, after the flop of the Nasdaq. I have sometimes said that bubbles are financing phenomena. That's true, but we can phrase it more generally: bubble...

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Whatâ€™s Up? Whatâ€™s Down?

DavidMerkel, TraderPlanet.com — Thu, 19 Jan 2012 06:06:41 +0000

I can't remember who gave me this idea, but sometimes I troll through the raw PPI data to get ideas on pricing power. Here's a list of the top 50 rising items in the PPI:

Code	2011 Px Increase	Commodity Name
WPU01130102	125.3%	Dry pinto beans
WPU01710802	109.8%	Checks and undergrades
WPU023307	90.7%	Liquid raw whey
WPU01130101	87.0%	Dry pea beans
WPU01130104	84.9%	Dry pink beans
WPU011301	84.1%	Dry vegetables
WPS017108	74.5%	Breaker stock and checks and undergrades
WPU01210105	71.3%	Hard amber durum wheat
WPU01710801	70....

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