Fadel Gheit, Oil Analyst, Oppenheimer & Co. speaks to BNN today on oil price speculation.
Great quotes in this piece: “where are the adults?” “its like we are allowing under age drinking.” “Pension funds are down 40% because they have been making bets and speculating in commodities. They were playing a game without rules. They were not investing.” “Investing starts with preservation of capital; where is the preservation of capital when assets are down 40%?”
Good stuff.
Follow
____________________________
;
Thank you for this link and the others you've posted in the last couple of weeks, going back to Gary Shilling on July 16. I did fairly well during the runup from March but am currently completely out of the market, having hit my stop losses on all my positions in late June.
I don't know how typical I am, but my “risk appetite” is just about gone for now. I have been feeling more and more conflicted by the gambling aspect of investing, or “underage drinking” as Mr. Gheit calls it. I sometimes feel that by investing I am engaging in questionable ethics, hoping that a greater fool will come along to buy when I sell.
As long as I feel this way, I think it's a good time to focus on fixed income, but even this seems difficult to figure out. Can you share anything of what you do with your clients for the fixed-income portion of their accounts?
Over the next year I'm dollar cost averaging back into the market but with perhaps only 10% of my overall money. I don't, however, trust this current flight back to risk. Like joshuatree, though, I'm trying to decide what to do with what will be the majority of my money in fixed income. Right now I'm just treading water in GIC's and “high interest” savings accounts trying to decide where I might be “safe” and at the same time earn a bit more than the pittance I currently earn.
The focus of investing, especially during secular bear markets, has to be on return of principal. Fixed income is the money you place with a high degree of safety in keeping with this premise. Right now rates are low, and high quality issues are priced above par unless they are super long. I would avoid super long, keep durations under 5 years at this point, on the notion that rates will eventually go up after the present period of deflation. For options I like high qulaity bond ETFs with durations of less than 6 years, also corporate bond ETFs are a good way to add higher risk debt to your portfolio. Always keep in mind that regular income is the best way to ensure that compounding works in your favour over time.
When you do add equities pick with a bias to high quality, diversity and dividend paying.
Keep away from exotic bonds that the dealers are issuing with hundred year terms, foreign currencies or other crazy features, this is just risk masquerading as fixed income.