Monthly Archives: September 2010

On A Long Enough Timeline…

The problem with hedging longevity risk is that it requires a significant time period to play out. Things change during the course of that time. Life expectancies change. Population dynamics change. Knowledge and science changes. To “hedge” for the next 78 years—the current life expectancy in the United States—is not hedging, its speculation. Continue reading

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Equities with a Volatility Hedge: VQT

For the individual investor, I generally like strategic/dynamic funds whose weightings adapt—it alleviates a lot of the due diligence burden. Target date funds are probably the most widely known example, although VQT might hold the honor of most unique.

Barclays Capital recently launched an exchange traded note: Barclays ETN+S&P VEQTOR (Symbol: VQT). The index underlying this note is a great concept. The S&P 500 Dynamic VEQTOR Index allocates between equity and volatility based on the combination of realized and implied volatility trend decision variables. Continue reading

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The Positive Effects of Consistent Returns

What I am about to suggest could very well revolutionize portfolio management. In the current market environment—an environment in which one needs to prepare for both the journey and the destination—portfolio strategy and structuring needs to be addressed from a different perspective. The essence of portfolio strategy, for the time being, is this: allow yourself room for error while outperforming absolute and relative benchmarks. Continue reading

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The Yen’s Meteoric Rise: The Case for Intervention

Central Bank policy makers seemed to be engaged in a race to the bottom, each seeking to depress their currency in order to hike exports and increase the attractiveness of their labor force in the international market.

The Japanese have long advocated for a weaker Yen, particularly since China’s rise to prominence on the back of an artificially low Yuan, and have become alarmed at the rapid increase in their currency relative to major trading partners. Despite the fact that top policy makers expressed a commitment to open markets, the tide has rapidly turned and now these same individuals are openly speaking about market intervention. The probability of the BoJ taking steps to increase competitiveness via a Yen depreciation was greatly magnified by the recent announcement that China had surpassed Japan as the world’s second largest economy.

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