“Rest is not idleness, and to lie sometimes on the grass under trees on a summer’s day, listening to the murmur of the water, or watching the clouds float across the sky, is by no means a waste of time.” John Lubbock, The Use Of Life (1896)
I’ve let my brain disconnect from the urgent events of the day (month, season, year …) a bit, and gave it rein to go where it wished on sultry summer afternoons. Bit and pieces of what it reported back to me follow!
Opting out of Options ETFs
Assets for options-based ETFs are growing fast. Innovation has come from new entrants as well as traditional ETF issuers. I’ve written two articles on options-based funds. Sometimes, I am afraid of opining too strongly and prefer to let the data talk between the lines. But I am going to pull the Band-Aid off: Don’t be caught up by the skin-deep beauty of these new products.
These products are complex, incur significant bid-offer costs for the ETF providers, and they are all passed on to the end buyer in one form or another. If you must own stocks and are afraid of a stock market crash, reduce your stock allocation.
Not into long bondage
I do not understand the fascination of owning longer-term bonds (10-year Treasuries at 4.1%). There is no desire to impose fiscal discipline at the Federal government level. The political dialogue is depressing from both parties.
I do understand owning T-Bills to balance out equity risk or owning short-duration credit funds which are proven to be well managed.
Celebrating exceptional fixed-income managers
One of the better-performing funds this year comes from the Holbrook families. I’ve looked into those funds, and they may be interesting for some investors. Scott Carmack is grateful to the Mutual Fund Observer for helping kick off his mutual fund AUM in 2017. We spent a lot of time talking two months ago to understand what they do in the Holbrook Income Fund (HOBIX) and Holbrook Structured Income Fund (HOSIX). My understanding of the credit bond universe is not deep enough for me to write with confidence and authenticity about these funds. For the smarter bond investors, they bear further investigation to make your own decisions.
I prefer the steady hand of Sherman and the crew at the CrossingBridge funds. For a little more duration, perhaps the Artisan High Income Fund and the Osterweis funds.
Not heading overseas this summer
At least not in my portfolio.
I also do not feel any need to increase allocation to international equities or emerging market equities. Both asset classes feel depressing. I travel a lot and try and observe business productivity and efficiency closely in foreign places. Despite all of America’s shortcomings, being a customer here is a pleasure once you’ve worked with the slow pokes elsewhere. Sure, there are good businesses abroad and one must own them through a few select active funds. Artisan International Value and Moerus Global Value make sense to me.
India still seems to be growing strong and is within hair’s distance of beng the biggest weight in MSCI Emerging Markets, taking over China. That will happen.
I wonder about Hong Kong Equities as an area to research further. iShares MSCI Hong Kong ETF (EWH) has a dividend yield of over 5%, trades 45% below its 2021 high, and has seen nothing but outflows. It’s interesting. Isn’t that a time to buy assets? Maybe early. I don’t know enough but I’ll be doing more work.
Wondering if the wheels are coming off, or if it’s just the sound of gears shifting
The US equity markets continue to be the only game in town worth watching and being involved in. But the wheels are turning here. I am not clued too deeply into growth companies or value companies and can’t recommend the twists and turns, but here’s Bill Gross on Value vs Growth suggesting value’s place in his portfolio and how value will probably outperform unless AI leads to a serious increase in productivity.
Celebrating lifelong learning, with a summer of podcasts
I liked listening to these podcasts moderated by Nicolai Tangen, CIO of Norges Bank Investment Management, the largest sovereign wealth fund with $1.5 Trillion in assets.
Dario Amodei CEO of Anthropic: Claude, new models, AI safety and economic impact
I would recommend spending time listening to these two. So much is changing in our world with AI. I don’t know anything about revenues or earnings from AI, but I know we are going to live differently in just ten years as AI makes its way through every single field of knowledge. Don’t write off AI as a blip. Listen to these participants.
I also listen to Columbia University’s Value Investing with Legends podcast.
Listening to a balance of people who represent growth companies as well as value Investors makes me slow down before I get too bullish or bearish. There is a lot happening we don’t understand and it’s better to listen to smart people than fondle my biases.
Wishing you a restful, languid end to summer!
A bet on Berkshire being more than Buffett
For my portfolio, I’ve felt most confident in sticking with Berkshire Hathaway. It’s not the fastest growing company in the world but I am a fan of the natural barbell exposure to T-Bills and American businesses. I’ve been warned that people die of old age. More than any one individual, I believe in institutional strength. Some organizations have it. Most don’t. Berkshire Hathaway does.
