Common Sense Investing
Plain spoken, informed view of the markets + a dash extra
March 25, 2017
by Andrew White, CFA
Click Published Article
Pending Article - The New World
Asset Allocation Return (+7.7% versus +7.0% traditional AA)
* My Current AA: 30% Stocks / 45% Bonds / 25% Hedge Funds
* Traditional AA: 60% Stocks / 40% Bonds / 0% Hedge Funds
A very good week. Asset allocation calls now ahead again versus Traditional AA, thanks to strong hedge fund recovery and slight reversal of post-election whipsaws in stocks and bonds. I maintain my belief in model / AA calls...for now. Watch for a sustained stock downturn to switch positioning.
Stocks - Underweight (+11.3% since May 27 publishing)
Can the Trump rally hold? I think it can (Trump tax cuts and regulatory burden lifting), BUT these things won't happen overnight and there remain real impediments: Federal Reserve rate hikes (going to be more than they let on), corporate earnings which continue to struggle (despite rosier 2017 earning outlooks being bandied about), EU break-up possibility, market now 30% overvalued, fiscal uncertainty, and still very low fear. Prefer SPY for low cost, liquid broad market exposure.
Bonds - Overweight (+0.4% since May 27 publishing)
Bonds have bounced off their post-election lows. Crunch time on the reflationary trade. I don't deny it; I just feel its premature. I continue to expect stock retrenchment before I change bond weighting position. So, if you still buy into the underweight stocks positioning then, you must be overweight US bonds. Investors flock to the "safety" of bonds during stock market downs/tests. Prefer BND for broad market, liquid exposure to bonds.
Alternatives - Overweight (+16.5% since May 27 publishing)
By alternatives, I do NOT mean commodities or private equity. I mean hedge fund strategies and encourage a permanent 25%+ asset allocation. Importantly, know what the strategy is, who is running it, and be able to verify without need of unknown auditor 15 months down the road.
Return shown above refers to a blend of leveraged market-neutral hedge fund average (HFRXEMN), my market-neutral strategy return and the results of the (3% stop loss) Focused Long-Short Portfolio ideas below. The unlucky streak of 2016 for the market-neutral approach is now officially over! The rebound is already proving tremendous. FYI - I have a bias (Timeous Market Neutral strategy).
Risk - Federal Reserve getting Hawkish BEFORE any Stimulus
Despite the rate rise, the Fed is still dovish (i.e. continued easy money), but wants to rebuild rate capacity in order to cut when the next recession hits (running contrary to 20+ nations with negative interest rates now). They slavishly follow the markets (incorrectly) and underestimate the impact of small - late alone catch up - rate hikes (i.e. high debt loads and REAL unemployment). In other words, the Fed could likely create a recession in 2018 all on its own. Change can and will be bumpy, as we are now seeing.
Long-Short Focused Weekly Portfolio - As of March 24, 2017 Close
New Week's Long 5 Names - MU, PHM, ESNT, RICE, HUN
New Week's Short 5 Names - VSAT, UAA, TDS, CF, FSLR
Long-Short Focused Performance +14.3% vs. +11.3% S&P500
Week of June 3, 2016 Close: +0.7% Portfolio vs. 0.0% S&P500
Week of June 10, 2016 Close: -0.7% Portfolio vs. 0.0% S&P500
Week of June 17, 2016 Close: +1.6% Portfolio vs. -1.5% S&P500
Week of June 24, 2016 Close: +0.6% Portfolio vs. -1.8% S&P500
Week of July 1, 2016 Close: +2.3% Portfolio vs. +0.1% S&P500
Week of July 8, 2016 Close: +2.2% Portfolio vs. +1.4% S&P500
Week of July 15, 2016 Close: -2.2% Portfolio vs. +1.5% S&P500
Week of July 22, 2016 Close: -0.6% Portfolio vs. +0.5% S&P500
Week of July 29, 2016 Close: +2.2% Portfolio vs. +0.1% S&P500
Week of August 5, 2016 Close: +1.4% Portfolio vs. +0.4% S&P500
Week of August 12, 2016 Close: -3.0% Portfolio vs. +0.1% S&P500
Week of August 19, 2016 Close: -3.0% Portfolio vs. +0.0% S&P500
Week of August 26, 2016 Close: +0.1% Portfolio vs. -1.0% S&P500
Week of September 2, 2016 Close: +2.3% Portfolio vs. +0.8% S&P500
Week of September 9, 2016 Close: -2.6% Portfolio vs. -2.4% S&P500
Week of September 16, 2016 Close: +4.4% Portfolio vs. +0.5% S&P500
Week of September 23, 2016 Close: +3.8% Portfolio vs. +1.2% S&P500
Week of September 30, 2016 Close: -3.0% Portfolio vs. +0.2% S&P500
Week of October 7, 2016 Close: +0.7% Portfolio vs. -0.7% S&P500
Week of October 14, 2016 Close: -3.0% Portfolio vs. -1.0% S&P500
Week of October 21, 2016 Close: 0.0% Portfolio vs. +0.4% S&P500
Week of October 28, 2016 Close: +0.6% Portfolio vs. -0.7% S&P500
Week of November 4, 2016 Close: -1.1% Portfolio vs. -1.9% S&P500
Week of November 11, 2016 Close: +1.7% Portfolio vs. +3.8% S&P500
Week of November 18, 2016 Close: 0.4% Portfolio vs. +0.8% S&P500
Week of November 25, 2016 Close: +0.2% Portfolio vs. +1.4% S&P500
Week of December 2, 2016 Close: +3.2% Portfolio vs. -1.0% S&P500
Week of December 9, 2016 Close: -0.4% Portfolio vs. +3.1% S&P500
Week of December 16, 2016 Close: -1.2% Portfolio vs. -0.1% S&P500
Week of December 23, 2016 Close: +1.8% Portfolio vs. +0.3% S&P500
Week of December 30, 2016 Close: No portfolio published due to holidays
Week of January 6, 2017 Close: +1.2% Portfolio vs. +1.8% S&P500
Week of January 13, 2017 Close: -2.2% Portfolio vs. -0.1% S&P500
Week of January 20, 2017 Close: +1.4% Portfolio vs. -0.1% S&P500
Week of January 27, 2017 Close: +1.1% Portfolio vs. +1.0% S&P500
Week of February 3, 2017 Close: +1.6% Portfolio vs. +0.1% S&P500
Week of February 10, 2017 Close: -1.8% Portfolio vs. +0.8% S&P500
Week of February 17, 2017 Close: -1.3% Portfolio vs. +1.5% S&P500
Week of February 24, 2017 Close: -2.7% Portfolio vs. +0.7% S&P500
Week of March 3, 2017 Close: +1.6% Portfolio vs. +0.7% S&P500
Week of March 10, 2017 Close: No portfolio published vs. -0.4% S&P500
Week of March 17, 2017 Close: +1.7% Portfolio vs. +0.2% S&P500
Week of March 24, 2017 Close: +4.1% Portfolio vs.-1.4% S&P500
Disclaimer: Not a recommendation to buy or sell securities. Invest at own risk.
Andrew G. White, CFA is President of Timeous , a hedge fund strategy (Timeous Market Neutral) and investment consultancy. Prior, he launched and profitably managed a predecessor hedge fund at Southridge LLC, resulting in being named one of HFM Week’s Top Fund Managers of 2008. Prior, Andrew was a global equity strategist at UBS in London amid a material turn-around in AUM growth. He has also invested for Citigroup (global quantitative) and Lloyds Banking Group(global sector) in London as well as Sumitomo Mitsui Bank Corporation (syndication loan) in San Francisco. Andrew has also served as a speaker, contributor to TheStreet.com and commentator on Bloomberg TV. He holds a Bachelor of Finance (summa cum laude) and a Master of Economics from The University of Alabama as well as a Chartered Financial Analyst designation ("CFA").
