rebalancer system: Bar Bell for the ready too too

[bimetalaupt]

With Copper at 9,000 and bond yield to 4.5% THE 30 Year T-Bond could be a real buy with German bonds going for 2%.. Japan Rate 1.75%.. Carry trade could .. it is a Rebalanced system thing.. Risk is not acting . We are over weight on Stocks.. lack cash!! Risk is we need large Capital added to banking capital...TIER1!! Now is austerity the answer?? We need savings!!!It is all about income assets!!! LIKE MY MBA!!

With a Sharpe index greater then 1: Return of about 8.78% with the re-balancer system it is quite interesting to note the amount of gains picked up with re-balancer action. How?? Bonds and Stocks have an almost -1 correlation. This is part of my answer to V.L...FLOW5 SHOULD HAVE A BETTER WAY OF TALKING ABOUT Wm SHARPE AND CAPM.. NOW IT IS EVERYONE TURN TO ANSWER THE QUESTION, WHAT IS RISK TO DO WITH VOLATILITY.. GS WAS BETTING THE VOLATILITY WAS GOING TO GO DOWN FOR THE DULL SUMMER AND LOST A HUGE SUM OF MONEY!!

Just a thought,
Bruce
The Sharpe Ratio
William F. Sharpe
Stanford University
Reprinted fromThe Journal of Portfolio Management, Fall 1994

This copyrighted material has been reprinted with permission from The Journal of Portfolio Management.
Copyright © Institutional Investor, Inc., 488 Madison Avenue, New York, N.Y. 10022,
a Capital Cities/ABC, Inc. Company. Phone [phone].



. Over 25 years ago, in Sharpe [1966], I introduced a measure for the performance of mutual funds and proposed the term reward-to-variability ratio to describe it (the measure is also described in Sharpe [1975] ). While the measure has gained considerable popularity, the name has not. Other authors have termed the original version the Sharpe Index (Radcliff [1990, p. 286] and Haugen [1993, p. 315]), the Sharpe Measure (Bodie, Kane and Marcus [1993, p. 804], Elton and Gruber [1991, p. 652], and Reilly [1989, p.803]), or the Sharpe Ratio (Morningstar [1993, p. 24]). Generalized versions have also appeared under various names (see. for example, BARRA [1992, p. 21] and Capaul, Rowley and Sharpe [1993, p. 33]).

Bowing to increasingly common usage, this article refers to both the original measure and more generalized versions as the Sharpe Ratio. My goal here is to go well beyond the discussion of the original measure in Sharpe [1966] and Sharpe [1975], providing more generality and covering a broader range of applications.
THE RATIO

Most performance measures are computed using historic data but justified on the basis of predicted relationships. Practical implementations use ex post results while theoretical discussions focus on ex ante values. Implicitly or explicitly, it is assumed that historic results have at least some predictive ability.

For some applications, it suffices for future values of a measure to be related monotonically to past values -- that is, if fund X had a higher historic measure than fund Y, it is assumed that it will have a higher future measure. For other applications the relationship must be proportional - - that is, it is assumed that the future measure will equal some constant (typically less than 1.0) times the historic measure.

To avoid ambiguity, we define here both ex ante and ex post versions of the Sharpe Ratio, beginning with the former. With the exception of this section, however, we focus on the use of the ratio for making decisions, and hence are concerned with the ex ante version. The important issues associated with the relationships (if any) between historic Sharpe Ratios and unbiased forecasts of the ratio are left for other expositions.

Throughout, we build on Markowitz' mean-variance paradigm, which assumes that the mean and standard deviation of the distribution of one-period return are sufficient statistics for evaluating the prospects of an investment portfolio. Clearly, comparisons based on the first two moments of a distribution do not take into account possible differences among portfolios in other moments or in distributions of outcomes across states of nature that may be associated with different levels of investor utility.

[bimetalaupt]

Frank the Impaler,
Well, you are correct that Efficient Frontier is the better of the two systems.. You almost said it .. You risk a lot of return to get that last 0.1 SD out of volatility. It is not worth the cost in terms of return... Great Job!!

Ahamberger,
Thank-you for the kind words.. I sure liked the way Frank's explanation Efficient Frontier.. 100 years of data.. My point was you have less total risk with the Efficient Frontier then 100% bond funds due to inflation.. you do have to have a large dose of "Brave" to make some of the trades needed when needed!!!! Frank made a great point!!

Thank-you to both of you,
Bi Metal Au Pt ( Bruce the)

[bimetalaupt]

THE RE-BALANCER SYSTEM IS ALSO KNOW AS THE BARBELL SYSTEM.IT IS ALL ABOUT A++ ON BOTH ENDS OF RISK
Barbell investing is the new normal
12:01 am ET 08/02/2010 - MarketWatch Databased News

BOULDER, Colo. (MarketWatch) -- The way you have been told to structure your portfolio and manage your risk is wrong.

You were told to think of your portfolio as a pyramid. At the base are low-risk, low-return assets like bonds, preferably governments. Then a smaller layer of blue-chip, dividend-paying stocks, or an index fund or global equities fund in the middle.

Near the top of the pyramid are small-cap stocks, development-stage biotech, junior gold miners and the like. At the very top, the tiniest point, are options. Many financial advisers will tell you to ignore both of these two top layers.

But there are two big problems with this advice. The first is that it's hard to control your absolute risk this way. Sure, you can control your relative risk by shifting some money at the margin back and forth, such as from bonds to stocks. But then along comes a black swan event like 2008, and your retirement portfolio gets killed anyway.

The second problem is that the pyramid isn't likely to generate enough returns to make up for those losses and give you a comfortable retirement.

To put it another way, an investor goes from $500,000 in their retirement plans in 2007 down to $150,000 at the present time. Compounded at 5% a year (a typical "pyramid" return rate), it will take 26 years to get back up to $500,000. That's a long time to wait just to be made whole. Worse still is that the remaining $150,000 could as easily turn into $50,000 over the next 26 years if the market has another black swan fit.

So if using pyramid advice to manage your portfolio going forward can't get you to where you want to be, why do it?

Be a barbell investor, not a dumbbell investor

Your only defense is to view your portfolio as a barbell. On one end should be extremely safe investments that will give you a fighting chance against inflation, deflation or whatever comes -- with very little risk of blowing up. That might be 80% to 95% of your whole portfolio, depending on where you are in your investment life cycle. So one end of your portfolio has very low or no risk, with high yields. Read about how to choose the best online stock broker.

At the other end should be high-risk investments that will pay off huge if they work out. Not too many of them, with not much money invested in each one.

And nothing in the middle.
That's right, no index funds, no blue-c

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BiMetalAUPT
Message #15
08/02/10 01:33 AM

Answer

That's right, no index funds, no blue-chip mutual funds, no junk bond funds, no diversified funds...nothing. You'll know the risk in the safe end of your portfolio is very, very low. You'll know the risk in the other end of your portfolio is very, very high. You'll control your overall risk by moving a little money from one end of the barbell to the other, because when you don't own anything in the middle, it only takes a small shift between the two ends of the barbell to make a big difference in your overall risk.

On balance, most investors will wind up with a medium-risk portfolio. But unlike the other guy's collection of mutual funds, blue-chip stocks and ETFs, you will actually know how much risk you are taking, and where. That is about 90% of the battle for investment survival. Read about five reasons to buy Sirius XM stock.

The safe investments
Cash in the form of U.S. dollars in Citigroup Inc. is not a safe investment. U.S. 30-year bonds are not a safe investment. They would both be hurt badly by high inflation. You have to "stress test" your portfolio under a wide variety of possible scenarios, including the extreme possibilities of hyperinflation or Great Depression deflation. The world's current economic systems are still fragile, if not unstable, and probably will be for the next few years. So the likelihood of another black swan event is higher than usual.

What's safe in this environment is a small number of deep-value and/or high-yield securities of global multinationals, a few trust and royalty companies that pay out 90% of their income, and a small number of mispriced corporate bonds. In the mortgage REIT sector, I like Annaly Capital Management with a15.4% yield and Walter Investment Management paying 11.7%. In energy, take a look at Teekay Tankers, the shipping company paying 11.6%. There are several business development companies to choose from, including BlackRock Kelso Capital paying 12.4%. Read about nine small-cap stocks with better-than-9% dividend yields.

The 'pay off huge' investments

The idea here is to take a lot of risk with a small amount of money on an improbable event that, if it does occur, will make you a large amount of money.

For example, you could buy far out of the money two-year puts on the euro, betting that the euro zone will break up over the next two years as Spain, Italy, Belgium and Ireland follow Greece down the tubes. Or you could buy far out of the money calls on hyperinflation by using silver or gold.

Using options, you could short the S&P 500 Index and go long gold, or short the 30-year U.S. Treasury bond, and stay short as long as Larry Summers and Ben Bernanke have a government job.

My favorite places for the "pay off huge" portion of a portfolio are development-stage biotech and medtech companies, underfollowed (often completely unfollowed) technology stocks and junior gold miners. The stocks I recommend usually are so depressed, sometimes by naked short selling, that I'm not likely to lose any money. My risk is more that nothing happens for a long time.

Right now, I recommend investors get heavily into Antares Pharma for a new product roll-out by partner Teva Pharmaceuticals , Arena Pharmaceuticals for an FDA advisory panel recommendation for approval of their weight loss drug on Sept. 16, Biocryst Pharmaceuticals Inc. for a Japanese stockpile order for their seasonal flu antiviral, and CombinatoRx for a successful roll-out of Exalgo, their controlled-release analgesic marketed by Covidien. Read about 11 famous health-care stocks to sell.

Investors damaged by the various bear markets over the past decade need to get to safe ground with most of their assets. Nobody knows what's coming next. But those same investors need to deploy a small amount of money into a few potentially high return situations if they are to have any hope of recovering their losses and moving on to acquire enough assets to hit their targeted needs.

That's the barbell strategy, and it is the best way I see to control your risk while getting to your object

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[Aman A.K.A. Ahamburger]

Right on brother!!

[bimetalaupt]

THE REASON FOR THE STUDY IS HIS SYSTEM IS 180 DEGREES FROM THE 50/50 RE-BALANCER SYSTEM.. HE IS BUYING WHEN THE RE-BALANCER IS RE-BALANCING.. WE HAD A FLAT 10 YEARS IN STOCK NOT BONDS!! EMAILED DATE WAS 2008

It’s hard to believe that the S&P 500 Index has been flatter than a pancake for the past nine years. It’s had its ups and downs, but when you connect the dots, it went virtually nowhere.

It’s even harder for index investors who relied on this large-cap benchmark to grow their retirement savings. To think, a portfolio with $100,000 allocated to the S&P 500 hardly budged at all. That’s a lot of wasted time and missed opportunity.

That’s why we advocate following trends and actively managing our portfolios using exchange traded funds (ETFs). Whether the broad market travels sideways or falls, a trend is always in the making.

Actually, the term “sideways market” is somewhat misleading. There’s plenty of market activity, but it’s in the form of a sharp downward move, and then a slow recovery period back to its original price level. Only the best and luckiest of timers can get in at the lows and exit at the highs. Otherwise, it can be a very frustrating experience, even for seasoned investors. THIS IS THE REASON THE 50/50 RE-BALANCER SYSTEM BEAT THE AVERAGE!!BI METAL AU PT.. ALSO GOLD DID VERY WELL

[bimetalaupt]

HE RULE BASED TRADING IS MORE COMPLEX THE THE 50/50 REBANCER SYSTEM.. YOU HAVE TO DO YOUR DD NOMATER WITCH SYSTEM ( OR ANY) YOU CHOSE. EXPECT TO SPEND TIME READING AND REAL HEAVY NUMBER CRUNCHING HERE.. NO SHORTS, YET. WE ARE TRYING TO REDUCE RISK WITH BALANCE COULD BE A CUT IN YOUR RETURN. SELLING SHORT WILL INCREASE YOUR RISK. MOST TRADERS ARE BOTH LONG AND SHORT TO GIVE YOU A BALANCE WITH STOCKS ONLY..

YOU MAY take advantage of trends that have developed in asset classes, sectors and global regions. Increasing allocation to these areas work well as long as the trend remains intact.


With the growing list of available ETFs and ever-changing trends, we are convinced more than ever that a disciplined investment strategy is required to enhance portfolio returns, diversify and reduce downside risk.AS ABOVE I DISAGREE.. SELLING SHORT CAN BE COSTLY VERY QUICK BUT MOST TRADERS WILL TELL YOU DOWN MOVEMENT ARE FASTER THEN LONG. BI METAL AU PT.


Your strategy, like ours, should be to stick to a plan and not let emotions get involved. Once you start thinking with your heart or gut, it can be hard to kick-start your logic. Even neutralizing emotions will serve any trader well.

You need to know what to buy, when to buy and, as importantly, w

YOU MAYtake advantage of trends that have developed in asset classes, sectors and global regions. Increasing allocation to these areas work well as long as the trend remains intact.

With the growing list of available ETFs and ever-changing trends, we are convinced more than ever that a disciplined investment strategy is required to enhance portfolio returns, diversify and reduce downside risk.

Your strategy, like ours, should be to stick to a plan and not let emotions get involved. Once you start thinking with your heart or gut, it can be hard to kick-start your logic. Even neutralizing emotions will serve any trader well.

You need to know what to buy, when to buy and, as importantly, when to sell.

Three Main Rules

Here are three rules that should help keep most ETF investors out of trouble:

1.

Maintain an 8% stop-loss on your ETFs.

2.

Keep an eye on the trend. If your ETF declines below its 50-day average, that’s not a good sign. If the same ETF declines below its 200-day average, sell.

3.

Don’t chase markets that are too hot. The last time many world markets and industry groups collectively hit new highs was in 2000. You know what happened then – the boom went bust. Keep your emotions in check.

hen to sell.

Three Main Rules

Here are three rules that should help keep most ETF investors out of trouble:

1.

Maintain an 8% stop-loss on your ETFs. NEVER USE STOP-LOSS.. THIS BECAMES A SELL AT ANY PRICE DEAL FOR THE MARKET MAKER.. HE WILL KILL YOU.. MY THOUGHTS..

2.

Keep an eye on the trend. If your ETF declines below its 50-day average, that’s not a good sign. If the same ETF declines below its 200-day average, sell. THIS IS 180 DEGREES FROM THE 50/50 SYSTEM AT TIMES. Bi Metal AuPt

3.

Don’t chase markets that are too hot. The last time many world markets and industry groups collectively hit new highs was in 2000. You know what happened then – the boom went bust. Keep your emotions in check.PER E.P.C. COPPICK.. DO NOT CHASE THE TRAIN YOU MISSED, THERE WILL BE A NEW ONE READY REAL SOON. YOU NEED TO WAIT AND NOT LOSE YOU CAPITAL ON BAD TRADES, BI METAL AU PT

4.

[bimetalaupt]

LAST PART: REVIEW OF THE SYSTEM...FROM A DAY TRADERS LIVE LIVINGSTON.. LIVE AND DIE ON ACTION.. IT IS AN ADRENALY THING.. I LIKE THE RELAXED 50/50 SYSTEM BUT YOU HAVE 5 TO 10% CASH AND IF YOU DARE THERE IS MONEY. ONLY 1 OR 2 % PER TRADE AND YOU SHOULD BE OUT BY 3pm.. THE LAST HOUR IS A KILLER..

Momentum can certainly turn on a dime. Just look at the health care sector in 1991 as an example. It was up 50% for that year, but the following year it was down 19%.

Whatever trend you’re following, just be sure to take a disciplined approach and remember to follow through with your strategy.

*

Resolve to stick to your discipline. We know the past year has been rocky, and it is hard not to get emotional. We can’t predict the future, so we don’t know what’s in store for the rest of 2008. One way to avoid pulling every last hair out of your head in frustration over the uncertainty is to have a plan and adhere to it no matter what.

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Resolve to pay attention to the news. Political upheaval, major weather events and leadership changes are among the things that can indirectly affect your holdings. Don’t just isolate yourself to the business section.

*

Resolve to pay attention to your investments. Are you coming up on a major life change, such as having children or entering the homestretch before retirement? Look at your portfolio and make sure it’s still working for you.

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Resolve not to invest in something simply because it’s “hot.” That’s the best way to get burned. Invest because it fits your needs, interests and your portfolio. THIS IS THE ONE I AGREE WITH.. THE STOCK MARKET HAS BEEN HOT FOR 52 WEEK ( AS OF MARCH 20,2010).. THIS TRAIN HAS LEFT THE STATION.. THIS IS WHY YOU DO YOUR OWN DD...Bi Metal Au Pt

n ETF falls below its 200-day moving average, or if it drops 8% off its high without going below its 200-day average, sell it. It’s a rigorous discipline and is applied to all asset classes, sectors and global regions where there is ETF representation. It’s clear-cut, and you know exactly what your risk is.

However, if you don’t have an exit strategy, then your risk tolerance may not be as well-defined. It takes a high tolerance and lots of patience to suffer 20% or more in losses that some sectors and regions have experienced a few times over the last several years.

While we are clear proponents of having an exit strategy, we understand that there can be some confusion when certain ETFs drop quickly and then climb sharply. There’s a chance you might have sold a position that declined further after you sold it but then rebounded.

In this case, don’t beat yourself up over lost opportunity. Just stick to your plan, have no regrets, never look back and keep moving forward.

When this happens, remember that you can treat the cash you have from previously selling an ETF as a “free agent.” This means that there’s no rule that says you must buy back the same ETF you sold if it’s performing well now. Shop around; see where new trends are developing. There might be a different ETF that’s even better for your portfolio now.

Sharp market movements and subsequent ETF declines can unsettle many investors. However, with an exit strategy and specific stop-loss points, the drops can be less stressful for you as it prevents small losses from turning into there-goes-my-house losses.

There have always been and will always be bubbles, and the only sure way you can protect yourself is to have an exit strategy always at the ready.

If an ETF you’re holding – whether it’s commodities or something else – drops below its trend line or falls 8% off its high, let it go, no questions asked.

A lesser stop-loss, such as 5%, could be too low since markets often have a 3% to 5% correction before they move on and hit new highs. If your stop loss is too low, for example, at 3%, you’re going to be buying and selling more frequently, racking up fees in the process.

Ultimately, that eats up you

[bimetalaupt]

There are a number of reasons that a financial conditions framework is likely to be useful when evaluating the economic outlook and the conduct of monetary policy. Most important, monetary policy works its magic through its effect on financial conditions; it does not operate directly on real economic variables. That is because the level of the federal funds rate influences other financial market variables such as money market rates, long-term interest rates, credit spreads, stock prices and the value of the dollar, and it is these variables that influence real economic activity.1 This means that if the linkage between the fed funds rate and this broader constellation of financial indicators is not stable or completely predictable, then knowing what is happening to the fed funds rate is not sufficient to predict economic activity. The instability of the linkage between the fed funds rate and financial conditions indicators means that these indicators provide additional information about real activity and also are relevant in deciding the appropriate fed funds rate target. In contrast, if the transmission mechanism from the fed funds rate to financial conditions and onward to real economic activity were completely predictable, then there would be no need to focus on financial conditions as an intermediate target variable. The level and path of the fed funds rate matters, but it also matters how this gets transmitted to the real economy through the financial sector.

Over the past 15 years, there have been two important instances in which the relationship between the fed funds rate and financial conditions have diverged significantly. The first was the late 1990s technology stock market bubble and its aftermath. The second was the mid-2000s credit market bubble that culminated in the recent financial crisis. During these episodes, the relationship between the fed funds rate and financial conditions was particularly unstable. As a result, developments in the financial markets became very important in the conduct of monetary policy.

In this respect, I would note that financial conditions indicators have implications for “Taylor Rule” formulations for monetary policy. As you all know, Taylor-type rules provide a short-hand metric for the appropriate stance of monetary policy. In such rules, the fed funds rate is set at a level equal to the equilibrium real fed funds rate, plus the inflation objective, plus the weighted deviation of output from its potential and of the inflation objective from actual or, if forward looking, expected inflation. Often, analysts and economists assume that the equilibrium real fed funds rate is equal to 2 percent, its long-term historical value. Although, in principle, such rules allow the equilibrium rate to be time varying, it typically is assumed to be constant.
I have always been uncomfortable with this usage of a 2 percent equilibrium real rate assumption because it ignores the possibility that the equilibrium rate changes in response to technology shocks or in response to changes in how monetary policy is transmitted via the financial system to the real economy. For example, in the late 1990s, when trend productivity growth shifted upward, it seemed logical that this would also push up the equilibrium short-term real interest rate. That is because higher productivity growth, by raising the return on capital, spurs greater investment, thereby driving the equilibrium rate higher. Similarly, if stock prices rose sharply in response to higher productivity growth,her this should also lead to a higher equilibrium real rate through the effect of greater stock market wealth on consumer spending. Hig stock prices meant that financial conditions were easier. This needed to be offset by a somewhat higher fed funds rate target.

[vl]

Hi, welcome BiMetal! Here is my question... I understand the idea of a barbell effect. What I contend is-- the fundamentals of integrity in assets no longer exists. Nothing associated with housing is a solid Risk. How does that play into your A++ rating aspect when at best we can only expect to repeat the ball-dropping by Moody's, etc?

[bimetalaupt]

Pablo... It is only a math model...


Imagine a car school that specialised in teaching how to build Toyotas. Following the manufacturer’s recall of thousands of malfunctioning vehicles, should the school rethink its curriculum or should it trot along unperturbed, delivering the same lectures as before, as if nothing had happened?
MMXI V2.0.0 has yet to produce evidence of serious malfunctions .. all procuced run are within normal limits.. general correlations proved the 9/15/2008 run correct.. banking was in crisis/// the model worked and flashed the banking crisis ahead of the real crisis in December...
A similar conundrum is faced today by those universities that offer graduate programmes in what we could generally label quantitative finance. The credit crisis that
started in mid-2007 has brought to the surface serious malfunctions in some glorified financial mathematical models as well as the tendency of finance theory’s most sacred tenets to calamitously break down. The models did not just fail, they contributed, decisively in my opinion, to the unleashing of the mayhem.

This comes on the heels of other monstrous quantitative disappointments, such as the stock market crash of October 1987 and the September 1998 failure of Long-Term Capital Management; in fact, it is reasonable to argue that the worst market crises since 1929 were all aided, abetted and directly caused by flawed analytical concoctions.

In all those cases, the system’s very viability was threatened. Improper maths came close to sinking us for good. IT IS ALL ABOUT RISK.. BELL-BAR SYSTEMS ALSO WORKED WELL

So, what should the many schools worldwide, including several leading business schools, hosting quant finance programmes do? Should they remain unperturbed and not change a thing or should they learn from the lessons of real life and adapt? Should they doubt themselves in the face of math-fuelled chaos?...Expert System worked fine.. Too!!!

Needless to say, the most intelligent and pro-social step would be to engage immediately in curricula reform. What many already strongly suspected has been proclaimed true by events: quantifying in finance may be an oxymoron.

Painful or not, profound change is needed and should be delivered. To act otherwise would be tantamount to declaring yourself impervious to
real-life developments. Schools should consider the following steps:
● Quant finance programmes must start focusing on why and how financial modelling can be useless and dangerous.
● The demonstrably broken and troubling models must be presented as failures of the discipline, not, as has often been the case, symbols of triumph. When teaching derivatives or risk management courses, ensure that the models’ flaws are emphasised and highlight the potentially negative real consequences of such defects.
● Hire faculty that is not analytically dogmatic and openly sceptical to the value to be derived from financial modelling and quantitative finance. At the very least, students need to be exposed to both sides of the debate.
● Question the wisdom of having key (and deeply influential) aspects of financial regulation based on theoretical models.
● Encourage critical thinking among your students; intellectualise the programmes by emphasising history and big-picture ideas.
● Investigate how things were done in the markets before quantification became prevalent and analyse without bias whether the models truly represented valuable improvements and whether market crashes became more likely than before.
● Look at how models are used as alibis by otherwise no-nonsense operators in order to engage in reckless actions.
● Consider whether
so-called quant funds (among the most profitable investment managers yet) truly employ financial theory when making their decisions. If they do not, ask why.
● Run mandatory courses on ethics for students; make them take an oath agreeing not to promote the use of knowingly erroneous and lethal mathematical :-Xconcoctions that can lead to social unrest.
● Overall, the notion that finance can be quantified needs to be questioned at every turn. If that results in uncomfortable answers, perhaps the kind that make administrators wonder about the need for the degree, so be it.

[bimetalaupt]

Hi, welcome BiMetal! Here is my question... I understand the idea of a barbell effect. What I contend is-- the fundamentals of integrity in assets no longer exists. Nothing associated with housing is a solid Risk. How does that play into your A++ rating aspect when at best we can only expect to repeat the ball-dropping by Moody's, etc?

Read more: notmsnmoney.proboards.com/index.cgi?action=display&board=moneytalk&thread=333&page=1#ixzz193ZCkDIg
V.L.,Thank-you for the question... I thought I would first post on math models and the problem with lack of risk matrices in them
Two points...An old friend called me with some Muni's to sell last week and I told him the bonds did not meet my risk matrices.. We did not accept any CDS as proof of solvency. All bonds in the system are T-Bonds.. I did have some zero's in an retirement plan.

Things are looking ruff for the EU... Axel Weber has his point and I will bet he wants out of the EU!!! I know the hard working German and Swedish workers do not want to lend money to Greece knowing they will never be repaid..

Just a thought,
BI Metal Au Pt aka Bruce

I know your fine example posting and as a great Mod.. Thank-you

[bimetalaupt]

Two things.. I have been working on the next Generation A++ market driven Bell-Bar system.. It is real hard for me to say this but with the increased in future Bond Default to 3.49% vs History of 0.51%.. My numbers are going to test a new "reality" of 72% Equities and 28% No risk/almost zero return mostly 30Y T-Bonds...

Flow5 has been talking about the single mandate for the Bundesbank of inflation. O&G has used terms like De-Basement of coinage
VS M3..

Points to think about..
A: where and when do you put large CD's in the system... with inflation you are at risk. The banks remember the 1970 when they had loaned long term but cost were short term.. Lost a ton of money!!!! That is why they started selling loans on Houses.

B: If prices are going down and you know it .. You can buy a new house next year at or for less then today. What is a house??? In the old days the "Section House" was the heart of the ranch.. Now add bunkhouses and Windmill with chuck House and you have an extended household.. Funny we are seeing that again!!! So the rancher sells his cows through the Fort Worth stock yard and deposits the money the in bank.

C: With zero inflation you buy your dreams on hard work and savings.. This will make for good stewardship and savings. The money is now invested in system where trust in the most important asset. If lack of trust then the rancher would hold the gold and risk robbers braking through and stealing.

D:Question now is are we seeing a return to trust.. BIS III is all about lack of trust. With More capital we could see a retuning savings system to about 12% as before. Now who are we going to lend the money too.. The rancher in the production? The Rail Road to move the meat to the market in New York? The ice house to keep the meat cold? The packing Plant to reduce the 1700 lbs cow to usable sizes? Soap producer to make soap ? All above items .. so we will have a boom.. That is what we saw in 1870 !!!
Then when the banks in Austria crashed we got a real bad depression.. More problems in the Eastern Europe just like today.
With our stronger banking system we will pull out before Europe. Inflation will be the price...

See M3.. Note it is hooking at the end and this was about the time the world saw our Stress Test was a lot stronger then Germany. We are adding to the Teir1 capital of all international banks.. As above our banking system are back with a lot of BULL!!!! ADD OIL and GOLD!!!!
Just a thought,
Bruce

[bimetalaupt]

Dec 27, 2010 0:46:25 GMT -5 bimetalaupt said:

Two things.. I have been working on the next Generation A++ market driven Bell-Bar system.. It is real hard for me to say this but with the increased in future Bond Default to 3.49% vs History of 0.51%.. My numbers are going to test a new "reality" of 72% Equities and 28% No risk/almost zero return mostly 30Y T-Bonds...

Flow5 has been talking about the single mandate for the Bundesbank of inflation. O&G has used terms like De-Basement of coinage
VS M3..

Points to think about..
A: where and when do you put large CD's in the system... with inflation you are at risk. The banks remember the 1970 when they had loaned long term but cost were short term.. Lost a ton of money!!!! That is why they started selling loans on Houses.

B: If prices are going down and you know it .. You can buy a new house next year at or for less then today. What is a house??? In the old days the "Section House" was the heart of the ranch.. Now add bunkhouses and Windmill with chuck House and you have an extended household.. Funny we are seeing that again!!! So the rancher sells his cows through the Fort Worth stock yard and deposits the money the in bank.

C: With zero inflation you buy your dreams on hard work and savings.. This will make for good stewardship and savings. The money is now invested in system where trust in the most important asset. If lack of trust then the rancher would hold the gold and risk robbers braking through and stealing.

D:Question now is are we seeing a return to trust.. BIS III is all about lack of trust. With More capital we could see a retuning savings system to about 12% as before. Now who are we going to lend the money too.. The rancher in the production? The Rail Road to move the meat to the market in New York? The ice house to keep the meat cold? The packing Plant to reduce the 1700 lbs cow to usable sizes? Soap producer to make soap ? All above items .. so we will have a boom.. That is what we saw in 1870 !!!
Then when the banks in Austria crashed we got a real bad depression.. More problems in the Eastern Europe just like today.
With our stronger banking system we will pull out before Europe. Inflation will be the price...

See M3.. Note it is hooking at the end and this was about the time the world saw our Stress Test was a lot stronger then Germany. We are adding to the Teir1 capital of all international banks.. As above our banking system are back with a lot of BULL!!!! ADD OIL and GOLD!!!!
Just a thought.. see the hockey puck leaving the stick??? WE have a true epiphany in Money it is called savings.. Root of all investments!!!!
Bruce

[img src="[/img]"]

[bimetalaupt]

The other side of banking was lending money.. So a strong bank would increase its own wealth with lending.

a shorter period of M3 shows in more detail the recovery in trust...We trust the bank to lend when the money is in a good productive project and as long as the ability to keep paying for the loan is visible being able to maintain a duel relationship.. This is how banks make money!!!

Just a thought,
Bruce

M3 chart

[bimetalaupt]

Dec 27, 2010 1:40:41 GMT -5 bimetalaupt said:

The other side of banking was lending money.. So a strong bank would increase its own wealth with lending.

a shorter period of M3 shows in more detail the recovery in trust...

Just a thought,
Bruce

M3 chart

[/img]

[bimetalaupt]

Look at the wild money supply growth.. Think MMXII has lost it , but all it is doing is looking at the growth of M1 esp.. We should see growth as soon as Oct 2011 with this huge cash infusion..
The thought from LUX is the ECB must also increase M1 to keep the PIIGS from killing each other!! The is a real sign the Federal Reserve is seeing some Black Swans flying in the Missing Bird formation.. Could it be the Bank of America?? This is a real headbanger!!

Just a thought,
Bi Metal Au Pt

Attachments:

[Driftr]

Sept 1, 2011 11:08:58 GMT -5 bimetalaupt said:

The is a real sign the Federal Reserve is seeing some Black Swans flying in the Missing Bird formation.. Could it be the Bank of America??

Don't get my hopes up like that Bruce.

[bimetalaupt]

Frank the Investor's friend,
I should say at this time my Expert system driven Portfolio is in the reverse position..

Equalities = 82.135073%
T-Bonds =17.551507%
Cash= 0.313420%

My brother tells me I am overweight in cash!! Getting ready for a wild ride.. I blame you for all my profits...!! !

Just a thought,
Bi Metal Au Pt
Note: I am out of gold!!!
OK I am in early but can sell bonds or leverage up to 90% on my bonds.. I know I did not read very well my own post about the Sep Oct buying ...

[flow5]

"We should see growth as soon as Oct 2011"

That's the bottom in flows.

[bimetalaupt]

Sept 1, 2011 19:16:41 GMT -5 flow5 said:

"We should see growth as soon as Oct 2011"

That's the bottom in flows.

Flow5,
How bad is the Bank of America deal? I keep hearing from my shorting group it is very weak and they need some 50 billion more in Tier1 capital to level things from all the bad loans they bought... Did anyone do their D.D.?

It looks like a long depression for the EU with the ECB reducing M1 and increasing interest rates to reduce inflation!!! Nothing reduces prices like a depression.. Check out the numbers from Dr. Barro of Harvard School of Business or Economics???

Thank-you in advance,
Bi Metal Au Pt,

K4U for U and for my broken

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[usaone]

Bruce the EU has been behind the curve for 3 years now. I don't think that is going to change anytime soon.

"nothing lowers prices like a depression".....ain't that the truth!!!!

K for Bruce

[Aman A.K.A. Ahamburger]

Note: I am out of gold!!!


OK I am in early but can sell bonds or leverage up to 90% on my bonds.. I know I did not read very well my own post about the Sep Oct buying ..

I always make money because I sell too soon! What's another few hundred?

You can't be upset about buying at a time like this BTI.. Sept/Oct COULD be better, but might not be.

[bimetalaupt]

A++,
Yes, 4 Trillion dollars in our economy with a turn factor of six = 24 Trillion USD total Potential in the Means of Translation relationship Flow5 talks about. . With a tax rate of 20% that would increase 4.8Trillion dollars in revenue.

We could be Debt free in six years!!! and still be able to keep Israel well protected.. I see where they are in the streets this week-end talking about expensive housing and other things.

Well it is getting time to think about October-Fest and other ways to stimulate the economy. Next week in Abilene,TX We have the Rodeo and that always brings lots of folk to spend money. I talked to my mechanic who told me his business goes to almost zero during the rodeo week. Try finding a room in the INN. Also the feed store is always out of oats during this week..I wish they would stop "Horsing around" and get stocked up for rodeo week. Love the heavy horses like the one in the picture from Germany. We had a 100% 20 Hands high Black horse lead the Ranch Rodeo pulling a very nice Phantom carriage. He made the Budweiser horse look small...I think he was a Shire???

Have a great week end and K4U..
Just a thought,
Bi Metal Au Pt

and for me...

[bimetalaupt]

Sept 1, 2011 22:13:57 GMT -5 usaone said:

Bruce the EU has been behind the curve for 3 years now. I don't think that is going to change anytime soon.

"nothing lowers prices like a depression".....ain't that the truth!!!!

K for Bruce

USA WON,
FT has a very good interview with Dr. Roubini about the state of the economy in the EU and how the Cost to save the Banks is now making the Sovereign debt risky. This is the "BLACK SWAN" events in the financial world..Cell of depression are everywhere with the PIIGS. Now we have the sovereign bring down the major banks.. It could cost Germany over 150 billion EURO to back the banks from the debt of the PIIGS.

Well it is worth watching... From the conference at Lake Como.. Like the place painted by Fredrick Church and Joseph Turner.. Brilliant area of northern Italy. Where the two royal Roman barges were found underwater.

Just a thought,
Bi Metal Au Pt

K4U2. after Dr. Roubini I need a ( make that a Manhattan )

[Aman A.K.A. Ahamburger]

We could be Debt free in six years!!! and still be able to keep Israel well protected.. I see where they are in the streets this week-end talking about expensive housing and other things.

That's the plan!! It's good to be debt free..

Israel is learning to be a little bit more understanding..

Sounds like your going to have a good time a the Rodeo, hope all was well with Eric.. Nothing like a party in town to get the m1 flowing.. ;D

Have a great weekend also.. k4u!

[flow5]

Another blogger "Septhaka" said:

"taking the CCB sale as an example - capturing a $3.3b gain on the sale of ~5% of a company is a fairly good haul. Also, the move creates much more capital than $3.3b under the new Basel III rules. Why? Investments in financial institutions are subject to limitations under the new Basel III rules but those limitations only apply if the stake is at least 10%. BAC is now below the 10% ownership threshold in relation to its CCB stake. Thus, the sale not only created $3.3b of capital but probably an additional ~$5-10b by eliminating a subtraction under the Basel III rules when they come online. This is something the major media outlets missed when reporting the capital impacts of this sale"

[bimetalaupt]

Sept 4, 2011 11:48:45 GMT -5 flow5 said:

Another blogger "Septhaka" said:

"taking the CCB sale as an example - capturing a $3.3b gain on the sale of ~5% of a company is a fairly good haul. Also, the move creates much more capital than $3.3b under the new Basel III rules. Why? Investments in financial institutions are subject to limitations under the new Basel III rules but those limitations only apply if the stake is at least 10%. BAC is now below the 10% ownership threshold in relation to its CCB stake. Thus, the sale not only created $3.3b of capital but probably an additional ~$5-10b by eliminating a subtraction under the Basel III rules when they come online. This is something the major media outlets missed when reporting the capital impacts of this sale"

Flow5,

Great point.. Like the market from May to Now has been hit will a lot of overstated news and no real facts.. Like the Swiss lending $200 million from a swap with New York Federal Reserve bank got all talked up over an unindented leak. Do you think we can talk our way into a downturn in personal spending.. Savings held to 5% for the month of July.. Down from 5.8% in June.

Thank-you for your post.. You are always welcome here.!!

Thank-you with a K4U
Bi metal

[bimetalaupt]

From FT....
Asset management enters a new era
Aug 16 2011 Jonathan Lipkin, head of research and pensions at the Investment Management Association, says the results of the IMA's annual asset management survey signal the beginning of a new period for asset management. Respondents indicated they are focusing more on customers' needs. The shift can be seen in a growth in liability driven investment, target date and diversified growth strategies, and, in the retail market, a shift towards absolute return funds.

Talking about expanding to the Bar-Bell re-balancing system.. The Professor of Economic quoted in 1999 saying bonds will outperform stocks over the next 10 years.. Bell-bar worked better then the 50/50 system of experts but that was better then 100 % Stocks.. You may have read FTI and BTI posting on this subject over the last three years.. The three asset system has done better then bell-bar with less Standard Deviation.

Just My thoughts,
Bi Metal Au Pt

[bimetalaupt]

Sept 4, 2011 15:22:05 GMT -5 bimetalaupt said:

From FT....
Asset management enters a new era
Aug 16 2011 Jonathan Lipkin, head of research and pensions at the Investment Management Association, says the results of the IMA's annual asset management survey signal the beginning of a new period for asset management. Respondents indicated they are focusing more on customers' needs. The shift can be seen in a growth in liability driven investment, target date and diversified growth strategies, and, in the retail market, a shift towards absolute return funds.

Talking about expanding to the Bar-Bell re-balancing system.. The Professor of Economic quoted in 1999 saying bonds will outperform stocks over the next 10 years.. Bell-bar worked better then the 50/50 system of experts but that was better then 100 % Stocks.. You may have read FTI and BTI posting on this subject over the last three years.. The three asset system has done better then bell-bar with less Standard Deviation.

Just My thoughts,
Bi Metal Au Pt

The chart makes this a bit more easy to understand.. the 20 % managed futures reduces SD and improves return or did improve return over the tested years,,

Just a thought,
Bi Metal Au Pt

[bimetalaupt]

Sept 5, 2011 20:32:39 GMT -5 bimetalaupt said:

Sept 4, 2011 15:22:05 GMT -5 bimetalaupt said:

From FT....
Asset management enters a new era
Aug 16 2011 Jonathan Lipkin, head of research and pensions at the Investment Management Association, says the results of the IMA's annual asset management survey signal the beginning of a new period for asset management. Respondents indicated they are focusing more on customers' needs. The shift can be seen in a growth in liability driven investment, target date and diversified growth strategies, and, in the retail market, a shift towards absolute return funds.

Talking about expanding to the Bar-Bell re-balancing system.. The Professor of Economic quoted in 1999 saying bonds will outperform stocks over the next 10 years.. Bell-bar worked better then the 50/50 system of experts but that was better then 100 % Stocks.. You may have read FTI and BTI posting on this subject over the last three years.. The three asset system has done better then bell-bar with less Standard Deviation.

Just My thoughts,
Bi Metal Au Pt

The chart makes this a bit more easy to understand.. the 20 % managed futures reduces SD and improves return or did improve return over the tested years,,

Just a thought,
Bi Metal Au Pt

Yes, I am a little angry with myself... Thought I was rebalance back to 20% bonds and 1% cash not the market did it for me.. Nice dividends also helped with interest on the 30 year Old T-Bonds..as did Oil production.
Equities 78.3757149% 8.94851842266%
bonds 20.0185213% 7.48663%
Cash 1.6057637% 2.50000%

Weighted Average 8.55232220949363863838%

10 y note 1.9790000%
equity risk premium 6.96951842266%

Just a thought,
Bi Metal Au Pt
I thinking about checking our the Piano market.. Steinway Upright Model K?