Model Portfolio ahknaten:KGLO

The Academic Frontline

Are you out on the west coast and interested in attending a 'Mortgage Meltdown Symposium'?
If so, check it out. Bernanke will share his thoughts as well at the UC Berkeley symposium.

In November, Haas also has a finance conference entitled, "Navigating Through Financial Turbulence"

The Ross School of Business has put together a neat video about the 'Ross Leadership Initiative', "a series of unique experiences designed to draw you into scenarios that will develop and test your leadership capabilities in real time." You can check out the video here.

Was I Right or Wrong?

This can be egotistical, or not. This week I'll tell you something about myself.

I was right:
Last year, I had predicted that there would be a slowdown in growth in the United States.

I was wrong:
As a result, I had alocated a large portion of my retirement in foreign equities (I'm willing to take the risk) -- but, it never occurred to me back then that the US market meltdown would have such a dramatic effect on the world market. Oops.

Also, I figured that a slowdown in growth would come naturally (as growth rates seemed rather high for some companies), but I hadn't forecasted that things would drop this far, this fast and through these crazy circumstances.

Quant of Life

THE LONG STORY

Here's my quant 'slice of life' with regards to Consumer Discretionary stocks.

I have an Consumer Discretionary sector portfolio and in the past 12 months it is down -47%. During the same time, the sector is down -43%. It’s not beating the index, so I am not happy. Since inception the fund is up 38% and the sector is down -12%. Although I’m sad about the recent year, overall I am happy.

In general, I am bearish on Discretionary. Although my portfolio has about 20-30 stocks, I have a list of 50 stocks that I like. This is a list of stocks that I may or may not put in my virtual portfolios. I'm not going to give the stocks on that list, but I'll show you an idea of what I like.

Here are a few notable stocks in my current Discretionary sector portfolio:

SCC 31% (I'm bearish on the sector, so I have an ultra short)
RCKY up 20%, HD up 12%

Here is the industry breakdown of that list:

This gives an idea of the market cap breakdown of that list:

Comparing the % weighting in the industries with the market, this graph shows which sectors I am overweighted in:

If I use a bit of qualitative analysis, what do I feel should be overweighted and underweighted in Industrials?

OVERWEIGHT

Auto components, Computers & Electronics Retail, Textiles Apparel & Luxury Goods, Apparel Retail, Automobiles

UNDERWEIGHT

Automotive Retail, Diversified Consumer Services, Homefurnishing Retail, Home Improvement Retail, Media, Multiline Retail, Hotels Restaurants & Leisure

My diversified fund list has 9 (18% of 50) Discretionary stocks in it. The fund is at 0% vs. the S&P 500 this year and up 113% since inception. In the long run I am happy, but in the short run returns I'm not happy.

Here are the stocks: ALOY ALV CFI DWRI EXPE GT HWK M TKTM

I bought:

ALV at $41 in Jan. '04. It's at $21. Ouch.
DWRI at $4 in Aug. '08. It's at $2. Ouch.

My global-non-US fund list has 4 (8% of 50) Discretionary stocks in it. The fund is down -9% vs. the S&P 500 this year and up 86% since inception. I am not happy about this year, but I am happy about the long run returns.

Here are the stocks:
DAI MC NED TMS

I bought:
- nothing notable at this moment.

THE SHORT STORY

I have a short fund that shorts Discretionary, Staples, Financials, Industrials and Materials. In that fund, Discretionary takes up 10% of the fund. The fund is up 708% vs. the S&P 500 this year and 544% vs. the S&P 500 since inception. I am happy.

Here are the stocks:
APEI CSTR KMX REVU UA

I shorted:
APEI at $40 in June '08. It's at $44.
CSTR at $24 in Feb. ‘05. It's at $22. Yay… it rose to $39 and dropped.
KMX at $21 in May '08. It's at $10. Yay.
UA at $30 in Feb. '06. It's at $23. Yay... it rose to $73 and dropped.

Here are some stock that I have yet to cover:
CHB -71%, WCIMQ -62%, NYNY -62%, DIET -42%, CPY -34%, MHGC -32%

My LTCM fund list has 4 (8% of 50) Discretionary stocks in it. The fund is up 444% this year vs. the S&P 500 and 261% vs. the S&P 500 since inception. I am happy.

Here are the stocks:
LNET LULU LVS MHGC

LNET at $11 in Feb. '08. It's at $1. Yay.
LULU at $29 in June '08. It's at $12. Yay.
LVS at $37 in Dec. '05. It's at $9. Yay… it rose to $149 and dropped.
MHGC at $14 in Apr. '08. It's at $4. Yay... it rose to $20 and dropped.

Here are some stocks that I have yet to cover:
DIET -41%, WALK -32%, GSIC -5%

Just the Bear News. Bear Attacks and Cave Bears

In case you missed it, cave bears have a genetic link to Polar and Brown bears.

Plus, there has been another bear attack. On Kodiak Island, a deer hunter was attacked while he was carrying his deer. He lived, the deer did not.

So there you go. Have fun!

-kai

If you get a chance, hike the Klondike Gold Rush / Chilkoot Trail -- risk and return baby. Risk and return.