Saturday, August 26, 2006

Portfolio Diving

Now that I have explained my asset allocation, I'll describe my investment holdings in more detail.

Where specifically is the money? My small cap equity portfolio (fully inside my 401(k)) is represented by The Ariel Fund and Columbia Acorn Fund. US fixed income is represented by Pimco's mammoth Total Return fund, also inside the 401(k). My inflation protected FI fund is Pimco's Real Return fund, again, inside the 401(k).

Moving on to the international small caps, Templeton Foreign Small Cap fund holds 10% of my portfolio. Yes, this too is in my old 401(k). I should be clear that I have two 401(k)s, the one abandoned after my company was bought by a much larger entity, and the new one with Fidelity whose fund choices leave a lot to be desired. Most of the diversification comes from the old 401(k), which is why that one will be rolled into a self-directed Roth IRA in the near future.

The international mid cap representation is courtesy of American Europacific Growth Fund and the SPARX Japan Fund. Europacific has the larger weighting. While the former is owned inside my 401(k), the latter is in a taxable account. I have owned it for almost 1 year and plan to continue holding it for a while.

The large cap international segment is owned by Fidelity's Diversified International Fund, which I think is the only fund in my new 401(k) that I am investing in currently. The emerging market equities fund I am looking at, but not yet invested in, is T. Rowe Price's Emerging Europe & Mediterranean Fund. That will be owned outside of either 401(k) as well. My RE exposure is in the Phoenix Dodge & Phelps RE Securities Fund.

As for the US large cap exposure, I own XLP, with 5% of my portfolio, alonside the American Growth Fund of America (redundant, dontcha think?), at 7.5%.

I do my commodities and forex trading through accounts with 2 brokers, 1 in Chicago and one in NJ. And the cash portion is money sitting on the sidelines in money market funds within the taxable account.

So that's the breakdown. I've totally forgotten the other topics I have previously said I would discuss in earlier posts, so if someone who has been keeping score wants to ping me with that info, that would be very helpful. Otherwise I'll be reading through my older posts to figure out the material for the next post. So until next time...

Go unleaded gasoline!

Wednesday, August 23, 2006

My Portfolio

I will quickly try to explain how I am positioned in the market. I need to get some sleep, because I work at night, and it is far too daytime for me to be awake. These will be broad brush strokes, but feel free to ask questions and I will answer as best I can.

As I said, I'm an asset allocator. I max out my 401(k) with a 50% match up to 6% of my salary from my employer in stock, IIRC. (Ugh!) Oh well, not gonna argue. Sure makes it harder to allocate assets though when I get a huge chunk of retirement funds defaulted into a Fortune 500 stock.

My target portfolio allocations are 20% small cap US equities, 8% US fixed income, 5% US inflation protected fixed income, 10% international small caps, 16% international mid caps, 5% international large caps, 6.25% emerging market equities, 6.25% international/emerging market fixed income, 5% commodities, 1% forex, 4% real estate, 12.5% US large caps, and 1% cash. MS Excel tells me that is 100%. Currently, I have nothing in the emerging market equities or fixed income, but I plan to handle the equity side in the next 1-2 months. Except for the commodities and forex, everything is in mutual funds and 1 ETF - XLP.

Right now, I am over-allocated in my commodity, US large caps, forex, mid cap international and fixed income accounts. I tend to rebalance the 401(k) monies regularly, about monthly. For the monies in my taxable account, I usually stop adding once I get over my target allocation. Then I focus on upping the amounts in the accounts that are short. I don't have a self-directed Roth IRA yet because my employer has changed recently and I was getting a feel for the new 401(k). Needless to say, I am disappointed. I have so little control over their "contributions" that I don't even count them in net worth or asset allocation. Its purely bonus money. By year end I will roll my old 401(k) into a self-directed Roth through which I definitely plan to do some more real estate investing.

So thats me in a nutshell. If you have any questions, you know what to do.


Monday, August 21, 2006

Apologies & Blog Recommendation

I apologize for being out of the loop for the last few days. I've had some thoughts about investing that I want to write up but they will have to wait. I've been working on moving out of my old apartment but I'm still in a transitional housing state. I may have some interesting news to report on my unleaded gasoline trade in the near future. We'll see how things develop on Monday. It looks promising right now.

Now I'm off to continue catching up on my Barron's, WSJ Online, and blog reading. If you don't already read The Big Picture, you should start. But then, I'm sure most of this audience probably reads the TBP daily. ;)


Thursday, August 17, 2006

The Future of the US Dollar

Personally, I think the Fed should have raised the Fed Funds rate last week. But what is done is done. I know there are a bunch of people who would disagree with that, but hey, we live where we do and you can believe what you want. Inflation, not the artificial and mass-produced hedonically generated numbers but real inflation, what we see and feel every day, has been around us for a while. How the Fed missed it is beyond me. I don't know about anyone else, but my inflation expectations are already shot to hell. Forget "its coming" - its already moved in and taken your side of the bed.

I foresee lowering of the FF rate in 6 - 9 months. That's just my own personal expectations. This is why I have rebalanced my portfolio to shift some money around into the generally weaker allocations. The 10 - 15% of my portfolio that is in bonds should experience a nice little boost once the cuts start.

But thinking a little further out, I can't help but see doom coming for the dollar. (Hell, its probably already here.) I won't belabor a point already made by many commentators but if you don't have a fair amount of money in non-dollar denominated assets, you're taking a huge risk with your portfolio. I think the dollar is on borrowed time overall. In the shorter term, grab your yield where you can. The big themes appear to be natural resources and foreign stocks, especially natural resource based economies.

Next time, I'll throw out my asset allocations and the logic behind them. Mind you, its not investment advice, just letting folks know what personally works for me. I have no problems sleeping with 30% of my funds in small caps. YMMV.

Sunday, August 13, 2006

Emerging Market Fund Recommendations?

This is a quick post to see if anyone has any recommendations for emerging market funds, both equities and fixed-income. A nice diversified international fund (either flavor) is welcome as well as long is there is non-trivial (10-30%) emerging market exposure. BRIC countries, other Latin American and Asian markets are tops. Eastern European markets are welcome too. As I mentioned in my first post, I am an asset allocator by nature. (All my esoteric alpha-seeking investments are a small but significant part of my portfolio.) This is the last big gap I have to fill in.

Miscellaneous Market Ramblings

So a well connected, slightly younger friend of mine, from now on to be referred to as "G", wants me to go down to TX with him to explore investing in the oil industry. I don't know where "G" gets these ideas, but I have to admit to being intrigued.

Man, the events of this past week were murder. Makes you wanna crawl up in a corner in the fetal position and suck your thumb all day. And damn if watching the front month long bond futures creep down steadily hasn't been annoying. Just get through to 108 already dammit! Just 9 more ticks to go.


And did you see unleaded gasoline? (As if there is a market for leaded gasoline still. WTF?) But you have to wonder - if there are so many daggone speculators in the market as OPEC would like us to believe, how come we didn't see a larger drop across the petroleum-based energy futures. Just a question I've been pondering for the last few days in the wake of the "foiled" terrorist plot.

Anyway, until next time, peace!

Wednesday, August 09, 2006

Reader Feedback

Being new to being on this side of the blogosphere, I'd like to find out what you, the readers of this site, would like to see. What topics are of interest to you? If you're reading a site called "Alpha Guy", I presume your interest is making better than market returns on securities. But what flavor of securities pique your interest? What types of things did you want to see before the change in management? What do you like about this blog? What don't you like? I just want to get a feel for the things that people want to see so I can shamelessly pander to my fans. :)

Tuesday, August 08, 2006

Apartment REITs

So I believe I mentioned that the declining housing market was creating some investment ideas. That sounds familiar. Of course, the most obvious opportunity would be apartment REITs the likes of Camden Property Trust (CPT), Archstone-Smith Trust (ASN), AvalonBay Communities (AVB) and Essex Property Trust (ESS).

I currently live in a Camden property in Rockville, MD. I've been here about 1 year. Real nice. And fairly reasonably priced for me. My rent was $1440 per month until I received notice of a change earlier this year. (I don't mind paying for things important to me, and this place has most if not all of them.) On top of all of that, the leasing agent was painfully attractive, I mean "staring directly into the sun without shades" beautiful...but I digress.

Now, the notice I received informed me that the rent would be increasing by $342 per month. WTF?!?!?! Some basic math shows that to be a 23.75% increase. Who ever heard of this kind of shite? I had to leave on general principal. It wasn't that I couldn't afford the new rent, I just didn't feel like paying it. At least have the decency to put a gun to my face and tell me "your money or your life".

A few weeks later I'm reading my favorite publication, The Wall Street Journal Online, and they have an article about resurgent apartment REITs as the housing market starts slowing. It features the CEO of CPT talking about how they have been able to raise rents as much as 25% in certain markets due to new rent optimization software they implemented within the last year. Conceptually, this software is similar to the yield management software most airlines use. So based on all the data, the software told these people to increase my rent 20%+ Y/Y. Riiiiight. Had I known about this, I would have picked up some CPT sooner. (I wasn't following the shares because I was beginning to have "issues" with the new management here, and the painfully cute assistant manager moved on to God knows where.)

Aside: The WSJ is, in my estimation, the best daily publication on the planet. If you don't subscribe, you should if you're at all serious about your money. Only in the WSJ will the CEO expose his strategy for increasing rents. I love it.

Now, as I prepared to write this post, I decided to do a bit of followup on the apartment REITs, to see if the thesis I originally formulated over 6 months ago still held up. Unsurprisingly, it does not. Why would I want to buy into a REIT on the tail end of their earnings yield curve? 4%? I get 5% at HSBC's online bank. I mean, the numbers work for Ken Heebner, but I just can't see it right now.

Anyway, I will continue to rent for the time being. I was hoping that this would be my last apartment but it was not meant to be. I have no problem with being able to save over 25% of my take home pay however. If I have to do that for another year, I guess I'll just suffer through.

So now I pose the question to you, gentle reader - what's your investment thesis for a slowing housing market?

Recommended Blog #1

Just because I'm bored at work (at 0241 EDT), I figure I'll post my first recommended reading blog. If you haven't been to Uncle Jack's, I suggest you do so now. No commenting allowed, but nice insightful, incisive commentary from a CFP in Florida. And he has a new book available that he self-published.

Sunday, August 06, 2006

Foreclosure Redux

Hopefully now I've got this font situation resolved. Please bear with me. The notion of using an online WYSIWYG editor to create HTML has thrown me for a loop. Time for the K to evolve. I'll get it right eventually.

Now then, continuing with that housing theme from last, I hate this market. Speaking as a buyer, anyway. Some people say you shouldn't try to time the market if you plan to live in that area for 5 or more years. Whatever. I say do you. And that's not me, not right now. Nevermind that I have my doubts about how long I'll be in the DC area. But the problem here folks is affordability, or more accurately, the lack of it.

Now, why did I back out of my foreclosure? I backed out b/c I thought the bank was getting greedy. (It was either Countrywide, led by Angelo Mozilo, whom I quoted in an earlier post, or Wells Fargo, who ironically was going to be MY lender on the purchase. Kooky.) I pulled the tax records for the property and they were looking for a 50K premium to the last sale in June of this year! (Still need to learn how to read those better in the case of a foreclosure.) I didn't feel like subsidizing that when I believe we are near the beginning of the "next time down" in real estate. No sense in being early to the feast. Not to mention the mortgage costs were going to be murder. (To be precise, I am primarily speaking of PITI in those "mortgage costs" as well as maintenance costs.) So this bank wanted me to pay 319K for a foreclosure that would need 10-15K of work before it was livable at the top of a declining market in an OK but far from ideal area (IMO). Uhhh, no. It helped that the guy at the bank took his sweet time reviewing the offer, allowing doubt to creep in. He could have locked in the sale and had the property off the books, but he slept.

So I decided to hold out and continue renting. Personally, it works for me right now. I still need to do the numbers to find my break-even point on renting vs. buying, but renting will wins right now. Had I purchased any of the properties I have made offers on in the last few months, I'd have doubled my already significant housing costs. Once I move in the next few weeks, my rent will drop by anywhere from 115-300 dollars per month.

That said, I'm enjoying watching the futures market for the time being. Go corn! More on that to come. Laterz.

Saturday, August 05, 2006

Real Estate Quickie

So I'll jump in real quick with interesting tidbit about everyone's favorite subject - real estate. I just cancelled an offer on a foreclosure that I was looking at renovating and buying with about 30K of equity built it, if all went as planned. Why I didn't go through with the deal is material for another post, but suffice to say the numbers didn't work as well as I would have liked.

Here's something picked up from the LA Times. (I still read them since I lived in Orange County, CA for 2 years until December 2002):

"But Angelo Mozilo, chief executive of Countrywide Financial Corp., the top U.S. mortgage lender, told analysts last week that 'I've never seen a soft landing in 53 years.' "

I don't know about you, but Mozilo has 22 years more in the business than I have in life. That is a very telling remark. The whys, hows, and possible investment ideas based on that are material for another day.

Friday, August 04, 2006

New on the Scene

Please allow me to introduce myself. I am Khyron. While not a blogger until now, I have been reading and contributing to selected blogs for a little over 1 year. If you look around, you'll find some things I've contributed to some personal finance blogs. I tend to deal with the writers more directly than publicly. As for my background, I studied electrical engineering in college but ended up crafting my own computer engineering curriculum until I took time off to explore the world of work. I did manage to slip in some business classes while in college, as well. I've been following investing and finance since I was 13, and investing on various levels since my last year interning for NASA in the early 90s. I tend to be an asset allocator, but I do believe in risk capital, because sometimes you just need some alpha.

Having followed this blog on and off for about the last 8 months or so, I am honored that I have the opportunity to be on the other side of the table. Hopefully, we'll learn some new stuff, look at things in some new ways, and if there's a money making idea in there somewhere, all the better. Feel free to let me know what works and what doesn't. That doesn't mean I'll act on your suggestions, but I will listen within reason. But please don't "play de ass", as my Trinidadian friends would say. I may just call you on it.