if we go into a recession or bear market
 

will that bring down other global markets as well? im thinking of buying some kind of emerging market etf but is it dependent on the U.S. economy? should i wait or buy into this correction

Re: if we go into a recession or bear market
 

International equities are highly correlated to US markets. Small international/emerging are slightly less correlated.


The best diversifiers of an equity portfolio are:

CCFs (negative correlation to stocks with medium returns)
TIPS (negative correlation to stocks with low returns)
REITs (low to middling correlation with stocks with medium/high returns)

Re: if we go into a recession or bear market
 

Would you tell me before hand when the bear market is starting. Also tell me when before the recession starts too. At least tell me as early as possible. I mean if the market goes down 20% that would be too late.

Re: if we go into a recession or bear market
 

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Would you tell me before hand when the bear market is starting. Also tell me when before the recession starts too. At least tell me as early as possible. I mean if the market goes down 20% that would be too late.

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I want my email on this newsletter too, please.

Re: if we go into a recession or bear market
 

TIPS are treasury inflation protected securities; REITs are real estate trusts, but what are CCFs?

Re: if we go into a recession or bear market
 

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TIPS are treasury inflation protected securities; REITs are real estate trusts, but what are CCFs?

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collateralized commodity funds.

they are deleveraged (i.e. cash holding) futures investment vehicles that try to take advantage of the backwardation in commodity markets.

they have had very strong historical correlational benefits to typical asset classes (except TIPS where they are still not strongly postively correlated).

their future expected correlation also is likely negative to those same asset classes.

the deleveraging (holding cash as well as futures) reduces the overall volatilty since commodities are highly volatile.

Barron

Re: if we go into a recession or bear market
 

Thanks. What % would TIPS, REIITs and CCFs consitute of a traditional portfolio?

Re: if we go into a recession or bear market
 

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Thanks. What % would TIPS, REIITs and CCFs consitute of a traditional portfolio?

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depends on the goals of the portfolio and the time frame.

TIPS anywhere from 5%-20%, CCFs typically around 5-10%, REITs typically from 5-10%.

those are just off the top guesses and a more highly absolute return oriented portfolio would err towards the lower end whereas a more diversified higher sharpe ratio shorter time frame portfolio would err towards the higher end fo the range.

Barron

Re: if we go into a recession or bear market
 

Thanks, Barron; much appreciated.

Just to make sure I get it right - an example of TIPS would be "iShares Lehman TIPS Bond (ETF)" (TIP ), REITs would be like the ones here .

But and I haven't found CCF ETFs yet. Is that something like this: iShares S&P GSCI Commodity-Indexed (ETF) (GSG )?

Re: if we go into a recession or bear market
 

If I feel the dollar will fall further then TIPS would not be good as they are USD denominated? Or will devaluation usually involve inflation?

Also, is there some website where I can do what-if analysis e.g., "what if I had held the following portfolio for 3 years how would it have behaved"?

BTW here are the historic returns graph (I produced it for my interest and then I figured maybe somebody else finds it interesting).

http://img148.imageshack.us/img148/8...parisonkn4.png

Re: if we go into a recession or bear market
 

I just put all my money basically in one stock: ESV. I figure it really cant get any cheaper than it currently is or the company will issue a massive share buyback. Regardless of how the market does.

Re: if we go into a recession or bear market
 

TIPS are so nice right now.

Re: if we go into a recession or bear market
 

Just some quick T/A on ESV Spino1i:

Firts of all...any reason why you would put your WHOLE portfolio at risk in ONE stock?

From a T/A perspective.....I just took a quick look at some charts I am able to post...as MY trading software doesnt allow me to copy and paste links.I already knew it was in the oil drilling biz,but I am not up to date on its current fundamentals.it looks like its trying to TEST holding its recent lows.....but unless it HOLDS this recent test in the $52+ area....it looks like the next stop might/will be the $45 dollar range [img]/images/graemlins/frown.gif[/img]

http://finance.yahoo.com/charts#chart2:s...ource=undefined

However ...the 2 T/A positives ...are that "hanging man" candlestick LOW it made on August 16th that I treat as one of the more reliable candlestick patterns,and it is also currently EXTREMELY oversold on a S/T basis

Also from a PURE contrarian POV..it is also due for some sort of decent bounce...again S/T

http://www.traderslog.com/Hammer.htm

If it holds that LOW...you should be OK at least short term,but I would keep a TIGHT leash on this IMO
The market from the long side ....SUCKS right now.
I hope you havnt been caught in the ole' averaging DOWN mentality....or PLEASE explain your thought process here and maybe I can help you out?

GL,
Stephen [img]/images/graemlins/cool.gif[/img]

Disclaimer: I have currently been short MANY equities...LONG bonds....and also holding a large percentage of CASH on the sidelines at this time.I "think/hope" we are near at least a S/T bottom,and would like to see some sort of capitulation type sell-off before going LONG....as currently EVERY decent rally is being sold into,as we are CONSTANTLY making lower lows each day.
With market sentiment/bearishness at bigtime LOWS,as well as extreme PUT buying/short postions still being opened NOW..... a violent parabolic Santa Clause year end rally would not surprise me one bit either....esp for the various/obviously standard market manager related issues

Re: if we go into a recession or bear market
 

dcifer where do you have your money right now?

Re: if we go into a recession or bear market
 

fslr fslr fslr allllll in

Re: if we go into a recession or bear market
 

Also, an important distinction that no ones made, a recession and a bear market are 2 completely different things.

Re: if we go into a recession or bear market
 

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Also, an important distinction that no ones made, a recession and a bear market are 2 completely different thin

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Great point Art!

Re: if we go into a recession or bear market
 

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Also, an important distinction that no ones made, a recession and a bear market are 2 completely different things.

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Beat me to the punch.

Although I'll add, that stocks often do quite well during recession, IMO, because specialist can use a recession to move up prices without taking major hits to their inventories.

Re: if we go into a recession or bear market
 

[ QUOTE ]
[ QUOTE ]
Also, an important distinction that no ones made, a recession and a bear market are 2 completely different things.

[/ QUOTE ]

Beat me to the punch.

Although I'll add, that stocks often do quite well during recession, IMO, because specialist can use a recession to move up prices without taking major hits to their inventories.

[/ QUOTE ]

Huh? [img]/images/graemlins/confused.gif[/img]

I dont understand?

Stephen

Re: if we go into a recession or bear market
 

[ QUOTE ]
[ QUOTE ]
[ QUOTE ]
Also, an important distinction that no ones made, a recession and a bear market are 2 completely different things.

[/ QUOTE ]

Beat me to the punch.

Although I'll add, that stocks often do quite well during recession, IMO, because specialist can use a recession to move up prices without taking major hits to their inventories.

[/ QUOTE ]

Huh? [img]/images/graemlins/confused.gif[/img]

I dont understand?

Stephen

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In case you're not familiar with Richard Ney, he was a very successful investment advisor who wrote a few books in the '70s, in which he goes into great detail about the Specialist system.

He describes Specialists as merchants with a unique inventory problem: they have to get their product back from their customers.

He says that Specialists buy their product (stocks) at wholesale, then, CREATE demand by raising the price, selling and short selling at the top (retail), then, dropping the price to where they can buy and buy to cover at wholesale, then, repeat the process.

His investment approach is simple: Buy when the Specialists are buying and sell when they are selling. Of course, it's easier said than done.

But, the point is that a recession is a good opportunity for a Specialist to move his merch from wholesale to retail without too much of it getting picked off because the public is wary about getting into the market during bad economic times. When the recession ends, the optimistic public jumps back into the market just in time for the Specialists to pull the rug out.

I was recently on the NYSE page, they sell a service in which you can track Specialist sales. The service costs $3000 a month. So, chances are that Ney was on to something.

Re: if we go into a recession or bear market
 

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TIPS are so nice right now.

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Actually, the TIPS yields are quite low now.


If you guys want exposure to TIPS, CCFs, or REITs, here is what I would recommend:

TIPS: IPE

CCFs: PCRIX (this may not be available to you, my next choice would be DBC)

Domestic REITs: VNQ

Foreign REITs: WPS

Typically, these aren't very tax efficient and should be held in tax-advantaged accounts. The only exception is foreign REITs. The reason is that if you put it in an IRA to try and save on taxes, you actually lose the foreign tax credit.

Re: if we go into a recession or bear market
 

OK, so if I were to buy TIPS without exposure to the dollar are iShares Euro Inflation-Linked basically the ones to buy?

Also, am I supposed to buy them with leverage (e.g., their options or futures) or simply buy them without leverage if I want to hedge falling global stock markets?

Re: if we go into a recession or bear market
 

I did some work on this name (fslr) over the summer...how the hell did it breakout over 200? I haven't checked on it awhile. Couldn't have just been a simple top/bottom line beat in Q3 right?