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