Re: The Case for Going Global with both Equities and Bonds.......
Interesting article reviews Bill Gross' recent speech.....
advisorperspectives.com
I understand what he's suggesting. I remember only too well being "punished" for being both a saver and an investor around three decades ago. Garnering a real rate of return better than inflation proved very challenging. National emphasis turned to "Spend now, tomorrow everything will cost more."
Starting around 1990 through recent times, having an emphasis of saving and investing gave us a very high level of returns compared to inflation. Mr. Gross suggests that era has come to a close.
Now, I didn't start my AIM usage until later in the '80s, but I've watched Japan struggle with its internal policy of attempting to bury their own real estate bubble corpse. It's not been pretty. Every time I asked a friend of mine in Japan whether it was yet time to be an investor there, I got the same reply. "No, not yet." Now his answer was predicated on the fact the he saw a stagnant economy in his country. He was not thinking in Lichello's terms, however.
(complements of forecastchart.com )
Since the early '90s when I started to ask this periodic question of Japan being a place to invest, there have been plenty of cycles but also a series of lower "new highs" and "new lows." After the worst of their asset bubble had deflated, the lows seem to be a bit more stable.
As we've learned, it's pretty hard for AIM to handle an 80% decline. However, it can handle a market that has become cyclical, flat sloped, and range bound. Plus, as we also know, even when the "Market" is range bound, individual company stocks can still beat the "Market."
So, is Mr. Gross also suggesting it is becoming a stock picker's market rather than an "indexer's market?" AIM should help in either case. Inside of AIM we have the ability to adjust the SAFE settings to build in some bias for Accumulation or Distribution. If our total SAFE range is 20% it can be divided between the buy and sell side as we see fit for the investment, and investment climate.
Starting back at the beginning of the New Millennium I suggested in my old AIM Newsletter that people start shifting their SAFE emphasis from being biased for Accumulation to that of Distribution. Essentially I suggested that we drop the Sell SAFE to zero and shift all of it to the Buy side. Throughout the period since I've kept most of my AIM engines so tuned. So, if they were formerly 0% Buy and 20% Sell SAFE they shifted to 20% buy and zero percent Sell SAFE.
Under such adjustments, we sell as soon as our minimum trade is satisfied (above the Portfolio Control amount) but need the 20% discount plus the min. trade to initiate a buy. While the overall size of the Lichello Band doesn't change much, the consequences of feedback through the buys does.
One can also drop the feedback loop to Portfolio Control from its standard 50% addition to a smaller amount or even zero. I chose not to tinker with that end of Lichello's model, but it could be shown on many "deep divers" to have been a prudent way to have conserved the precious Cash Reserves during declines.
For me, Mr. Gross' message of diversification globally rings true. My retirement account, which I based on the Ultimate Buy Hold Strategy's components but manage with AIM, is an example of my feelings on this subject.
I've come to believe that we as investors aren't running a sprint race, but a very long endurance event. We could turn a faster lap if it were a sprint race, but take the chance of running out of gas or damaging our vehicle at that pace for a longer event. Tortoise and Hare? That's my impression. Sometimes getting 10/10ths is okay for a lap or two, but consistent 9/10ths laps will increase our chances of finishing and finishing strongly in an endurance race.
Best regards, Tom |
