Two Good Links from The Big Picture

Two good links/readings from one of my favorite blogs, The Big Picture

Quote of the Day

Floyd Norris mentions a wild data point:

“Over the last four years, since the buyback boom began, from the fourth quarter of 2004 through the third quarter of 2008, companies in the S.&P. 500 showed:

Reported earnings: $2.42 trillion
Stock buybacks: $1.73 trillion
Dividends: $0.91 trillion”

Geez, did these guys really spend every dime they made in profits on stock buybacks and divvies? That doesn’t really leave a lot of money to go back into R&D, new product development, are anything else innovative

So Again — How Did It Happen?

The world seems to be heading for a deflationary abyss with governments around the world flinging money at the problem with no worries about sowing the seeds of inflation later. The entire process is totally out of control, like an airplane spiraling towards the ground, the pilot desperately applying countermeasures. Zero short term interest rates incentivize investors to reach out for higher yields. But the huge growth in money supplies flash a warning signal that hyperinflation could come later and obliterate the value of all fixed income investments.

I subscribe to a number of investment letters. I have never seen such confusion. Some are predicting continued massive deflation. Others massive inflation. Some are urging Buy, Buy, Buy for the stock market. Others are suggesting the worst is yet to come. Stay in cash or buy gold.

Economic recovery, Great Depression style deflation or Weimar Republic hyperinflation? Take your choice.

So how did we get in this fix?

[click the link for the full article]

Hedging Bets by Going Long and Short

Hedging Bets by Going Long and Short, a brief article/interview on Seeking Alpha with Jerry Miccolis, senior advisor and co-owner of Brinton Eaton Wealth Advisors. The important investment ideas discussed are non-correlated commodity/futures funds, LSC, RYMFX, and DXCTX:

HardAssetsInvestor.com (HAI): Are you reducing positions in commodities at this point?

Jerry Miccolis, Brinton Eaton Wealth Advisors [Miccolis]: We’re shifting more than reducing. That means we’re going from a long-only play to more of a managed futures play that can go long as well as short. For example, historically we’d been in a long-only ETN, the GSP. We’d also held positions in a mutual fund that tracked the same index – the QRAAX. Through our own research and modeling, we had taken anywhere from a 10-15% position in client portfolios in the S&P GSCI.

HAI: How did you change those positions?

Miccolis: This is a change, literally, as we speak. We made this decision earlier in the week to take about half of those positions and move them into a fund that tracks the commodities trends indicator. It’s basically an index published by Standard & Poor’s. We have, for over a year now, been investing in the diversified trends indicator published by S&P through a mutual fund, the Rydex Managed Futures Strategy [RYMFX].

A component of that indicator is the commodities trends indicator. We liked that better because it has performed better than the broader indicator over the last several years. That has especially been the case during the more recent turmoil in the market.

Two investment vehicles have come online this summer tracking the CTI. One is the ELEMENTS S&P CTI ETN (NYSEArca: LSC). The other is a mutual fund, the Direxion Commodity Trends Fund [DXCTX]. We’ve taken half of our previous positions in commodities and put those assets into DXCTX.

More on this topic (What's this?)
Commodity Snapshot
Bespoke's Commodity Snapshot
The Cost of Rising Commodities
Read more on Mutual Funds, Commodities at Wikinvest

Resources for DIY Investors