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Board's market sentiment


valuecfa
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Say you couldn't invest in a stock specific, non-diversified portfolio.

 

Say you are forced to choose the best investment category for the right now given all the current market valuations, interest rates, expectations, etc.

 

Assume you could only invest either 100% in a single category, or 50% in one category and 50% in another. Further, assume a 2 yr lockup.

 

I'm curious what the general sentiment is right now on more of a macro level for this board.

 

Which category(ies) would you choose:

 

A)Treasuries (10 yr)

B)Cash

C)Corporate Bonds (b/t BBB - AAA) (2-4 yr maturity)

D)S&P500 fund

E)Diversified Real Estate fund

F)Emerging Markets

G)Commodities

 

Which would you choose?

 

Remember, you have to invest in a diversified index type fund in either of the above categories (no other choices). What's your call?

 

 

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Say you couldn't invest in a stock specific, non-diversified portfolio.

 

Say you are forced to choose the best investment category for the right now given all the current market valuations, interest rates, expectations, etc.

 

Assume you could only invest either 100% in a single category, or 50% in one category and 50% in another.

 

I'm curious what the general sentiment is right now on more of a macro level for this board.

 

Which category(ies) would you choose:

 

A)Treasuries (10 yr)

B)Cash

C)Corporate Bonds (b/t BBB - AAA)

D)S&P500 fund

E)Diversified Real Estate fund

F)Emerging Markets

 

Which would you choose?

 

Remember, you have to invest in a diversified index type fund in either of the above categories (no other choices). What's your call?

 

 

 

You forgot about commodities.  :)

 

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edit: Commodities added.

 

 

Assume futures (other than commodities), call/put options, shorting, CDS, other derivatives, sovereign debt, junk bonds, other country specific investments, etc... are not options. Impractical as it may seem. There are plenty of other categories deliberately left out.

 

Just the ones listed above in the original post.

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Relatively easy decison for me... I would chose cash. No other asset class gives me the margin of safety I need right now. I would be happy to sit in cash and wait for some asset class to melt down and then I would get greedy.

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Say you couldn't invest in a stock specific, non-diversified portfolio.

 

Say you are forced to choose the best investment category for the right now given all the current market valuations, interest rates, expectations, etc.

 

Assume you could only invest either 100% in a single category, or 50% in one category and 50% in another.

 

I'm curious what the general sentiment is right now on more of a macro level for this board.

 

Which category(ies) would you choose:

 

A)Treasuries (10 yr)

B)Cash

C)Corporate Bonds (b/t BBB - AAA)

D)S&P500 fund

E)Diversified Real Estate fund

F)Emerging Markets

 

Which would you choose?

 

Remember, you have to invest in a diversified index type fund in either of the above categories (no other choices). What's your call?

 

I understand "WHY" you are asking the question, but I believe the "WHY" would lead to the wrong conclusion.  You are not boxed into any one category, nor do you ever have to classify yourself into one category based on economic conditions.  If you are 100% cash right now, there is nothing wrong with that, as long as your end goal is to find the most undervalued assets with the largest margin of safety.  If you are fully invested in the market, utilizing that same philsophy, then you are also not doing anything wrong.  

 

The only time you need to box yourself into a specific classification like that is if your time horizon or economic circumstances dictate it...you need the money in the near future (or at present) and cannot suffer any decrease in your capital base.  Otherwise, don't worry...find what is cheap and buy it...or if you don't see anything, feel free to invest in short-term fixed income instruments that won't move significantly with changes in interest rates.  Ideas always come and the ensuing returns will preserve your capital.  Cheers!

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You are not boxed into any one category, nor do you ever have to classify yourself into one category based on economic conditions.  

 

Right. This is contrary to a normal investment approach or strategy. Say your investment strategy is not long-term based, or bottom up. Assume you are forced to be boxed in. Say it is based on a 1 to 2 yr investment time horizon, and no further. Think of this as more of a short term prediction, and not necessarily a real life strategy.

 

I'm trying to get a little more sentiment then: equities are going higher or lower. Or expectations of inflation or deflation. Some might predict inflation and not necessarily invest in commodities, for example. Think macro prediction with a little meat behind it. What's that guy's name from Euro Pacific that predicted the US crash, yet still lost a fortune during the crash, b/c emerging markets fell along with it, and dollar rose. I realize it is not in the vast majority of the boardmembers' (or any sane person's) DNA to invest in this top down, all in approach.

 

Example:

 

Someone might say Commodities (b/c they believe an inflationary environment is imminent)

 

or Emerging Markets (b/c they have further to go)

 

or Real estate (b/c it has supposedly bottomed)

 

or corporate bonds (b/c you expect flat yields and are willing to take a bit of risk to get some yield over cash)

 

Someone might say Equities b/c they are undervalued

 

or Treasuries (b/c of deflationary expectations or a highly overvalued equity market)

 

or Cash (b/c every market level appears fairly valued or they want ultimate margin of safety with no bet necessarily on interest rates)

 

etc.

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Right. This is contrary to a normal investment approach or strategy. Say your investment strategy is not long-term based, or bottom up. Say it is based on a 1 to 2 yr investment time horizon, and no further. Think of this as more of a short term prediction, and not necessarily a real life strategy.

 

For most investors, I would suggest short-term treasuries, or if they are a bit more comfortable, then cheap, solid dividend paying stocks in a portion of the portfolio. 

 

Frankly, we don't change our own behavior even if the duration is one or two years.  We still invest the same way, be it our corporate or personal portfolios, or our funds.  We may keep a modest amount more in cash in the corporate portfolios, since we have operating expenses, but for the most part...they follow the same philosophy...albeit even more concentrated than our funds.  Cheers!

 

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50/50, cash + commodities.

 

Expect near term cash being safest, longer term commodities being safest.

 

Cannot predict when might see the transition, and suggested alternatives are

so general, hands-off / locked-in, so go 50/50.  Not same as real life of course.

There, can target particular commodities, go for good cash/commodity managers

by choosing appropriate companies as intermediaries to hold cash/commodity.

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Personally, out of the limited, diversified options listed i would choose to be in short term corporate debt (instead of a broad market equity fund or treasuries), if i were forced on a macro call that would be locked in for 2 years from today's date.

 

I believe the general equity market to be overvalued by approx. 15%-20% (That's not to say i expect a correction of that magnitude to occur. Time could very well make up my perceived valuation gap.). I believe emerging markets in general to be a bit more overvalued than the US. And i don't feel comfortable or smart enough to make an interest rate call over the next few years.

 

Of course in real life i am mostly invested in a non-diversified basket of equities, about 40% cash (and currently having difficulty finding more than a few places to deploy it), and 20% in short term corporate debt.

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Purely academic, but go the 100% commodity route (oil/gas).

 

The reality of a 'lock-up' is that you can always sell your original allocation for cash; you just cant reinvest it in anything else. Cash is effectively the 'default' option; with a holding period from date of sale to the end of the lock-up. Therefore havent you really got a call option with a variable maturity up to the term of the lock-up.

 

Starting TODAY, which is likely to have the highest relative run-up? A 'hedged' commodity position has to be pretty high on the list 

 

SD

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