Wednesday, May 25, 2011

Mark Haines

Veteran journalist Mark Haines, a fixture on CNBC for 22 years, died unexpectedly Tuesday evening. He was 65 years old.

Haines, founding anchor of CNBC's morning show "Squawk Box," was co-anchor of the network's "Squawk on the Street" program, providing insight and commentary sometimes humorous and occasionally acerbic.

CNBC President Mark Hoffman called Haines a "building block" of the financial networks' programming. Hoffman said Haines died at his home.

"With his searing wit, profound insight and piercing interview style, he was a constant and trusted presence in business news for more than 20 years," Hoffman said in a statement to CNBC employees. "From the dotcom bubble to the tragic events of 9/11 to the depths of the financial crisis, Mark was always the unflappable pro.

Haines was well-known around the newsroom for giving his colleagues on-air nicknames. He was responsible for calling David Faber "The Brain," Joe Kernen "The Kahuna" and Steve Liesman "The Professor." If a colleague every complained about it, he would respond, "What's worth more, your name or the nickname?"

Haines held a law degree from the University of Pennsylvania Law School and was a member of the New Jersey State Bar. In 2000, he was named to Brill’s Content’s "Influence List."

Haines we known for a lawyer-like determination to get at the truth, pressing guests for answers if they tried to avoid his questions. CNBC reporters and anchors remembered Haines holding them up to the same standard.

***

Not surprisingly, all of the regulars are recalling Mark this morning.

Thursday, May 05, 2011

silver selling off (oil too)

Silver's decline this week reached an unprecedented 25.4%. Silver for July delivery settled down 8% to $36.24 an ounce today and was off an additional $1.70 an ounce to $34.54 in electronic trading after New York trading closed. From Wednesday's settlement price, silver is off 12.3%.

The price plunge wasn't unexpected. Silver had jumped 57% between Dec. 31 and Friday and 28.3% in April alone.

Thursday's fall was largely in reaction to a fourth margin increase in a bit more than week, and there were reports of new margin increases Friday and Monday. iShares Silver Trust

Margins have increased 84% in less than two weeks. Rarely does anyone pay full price for a commodities contract. The only question is how much of the price one must put up to take a position.

Some of the selling was in response to reports that big investors in gold and silver, such as George Soros, have been reducing their positions.

Gold, meanwhile, settled down $40.80 to $1,481.40 and was trading at $1,472 in electronic trading. That's a total loss of some 2.8%.

The selling in gold and silver also hit exchange-traded funds that buy silver.

The iShares Silver Trust (SLV) plunged 11.9% to $33.72. Based on the close, it's off 27.5% this week. The ETF rose 25 cents after hours to $33.96. Trading volume today was an astounding 294 million shares -- 30% higher than the volume in the SPDR S&P 500 (SPY) ETF, which tracks the entire S&P 500.

The SPDR Gold (GLD) ETF fell 2.9% to $143.47, a 5.8% decline on the week. Like the silver ETF, it was higher after hours at $143.67.

***

Crude settled down $9.44 to $99.80. It had dropped to as low as $98.25 around 12:30 p.m. ET. It was off an additional 28 cents to $99.52 in electronic trading.

If the oil sell-off holds or continues in the days ahead, motorists may get a small break at the gas pump. Gasoline was averaging $3.985 a gallon today, according to AAA's Daily Fuel Gauge Report. It takes a week or so before lower prices turn up at gas stations.

Energy stocks plunged on the oil sell-off. Chevron (CVX) was off 2.6% to $101.94; Exxon Mobil (XOM) dropped 3% to $82.26. Those declines subtracted more than 40 points from the Dow.

Eighteen of the 20 stocks in the Dow Jones Transportation Average ($DJT) were higher, led by Delta Air Lines (DAL), up 7% to $11.20. The index was up 53 points to 5,445.

Munger on Trump

At an event this afternoon, the Buffett right-hand man was asked about the possible GOP Presidential candidate.

According to Andrew Ross Sorkin his simple response was "Obviously I think he's a jerk."

Buffett's comment was a little bit more reserved: "He will not be president."

***

Munger interview

Wednesday, May 04, 2011

How often should you rebalance your portfolio?

Rebalancing is a way to maintain the risk/reward ratio that you have chosen for your investments.

In addition, rebalancing also forces you to buy temporarily under-performing assets and sell over-performing assets (buy low, sell high). This is the exact opposite behavior of what is shown by many investors, which is to buy in when something is hot and over-performing, only to sell when the same investment becomes out of style (buy high, sell low).

However, in taxable accounts, rebalancing will create capital gains/losses and therefore tax consequences. In some brokerage accounts, rebalancing will incur commission costs or trading fees.

Some people rebalance on a certain time-based schedule – for example, once every 6-months, every year, or every 2 years. Others wait until certain asset classes shift a certain amount away from their desired targets before taking any action. A good source of research articles about which method is optimal can be found at the AltruistFA Reading Room. I’ve been reading through them the past few days, and I’ll try to provide a very general overview of the articles here.

So what is best? You may be surprised by the fact that not only is there no clear agreement on the answer to this question, but many of the articles actually contradict each other!

*** [now searching with google instead of bing, which was linked from moneycentral]

the correct question may not be “How often should I rebalance?”, but rather “How far should I allow my asset classes to stray from their target allocations before I rebalance?”. Rebalancing only when an asset class reaches 150% of the target allocation, for example, will perhaps result in a more tax efficient and more profitable portfolio.

***

there are two common methods when it comes to rebalance frequency. First, you can use a time-based interval. What this means is you rebalance on a regular schedule, regardless of what the market has done. Some people do this quarterly, while others semi-annually or annually. Basically, you set a date and a frequency and rebalance like clockwork.

While that will work, it is still fairly arbitrary and a lot can happen in the markets between your rebalance intervals. In my opinion, a better way is to set thresholds for your investment mix and rebalance based on when an investment crosses the threshold. For instance, if you set a threshold of 5% that would mean that any time one of your asset classes exceeds 5% of your target one way or the other, it’s time to rebalance back to your target. The key with this method is to set a threshold that isn’t so low that you’re rebalancing every month, but not so high that it takes five years before you exceed a threshold. Either way, the benefit of this method is that you’re rebalancing based on actual market conditions, not just an arbitrary timeline you set.

Monday, May 02, 2011

10 Tenets of Value Investing

In “Value Investing: Tools and Techniques for Intelligent Investment” (in my opinion, one of the best books ever written on the merits of value investing), James Montier outlines a list of 10 tenets that represent his investment philosophy.