Biz Direct MarketKnowing When To Make A Good Decision

Bonds or stocks? A nice investment this year has been the bric versus BRIC trade. Since I wrote about it, long Colombia/short China returned +50%, long Indonesia/short India +30%, Bangladesh bettered Brazil and Romania rose past Russia. Beta-neutral relative value emerging market strategies usually don’t make money on both sides. While economic expansion does NOT imply stock market growth, I’m more glad I didn’t tie up peoples’ cash in “risk free” cash. Long only? Too risky so I’ll leave others to chase the bond bubble. Absolute return is the SAFER alternative.

Seek alpha or bet on beta? Why does so much financial advice fixate on how much to allocate to various betas? The more “risk averse” the more in bonds? Is it sensible to recommend the same allocation at 1% yields as when they paid 10%? Can opportunity cost and default risk be ignored with coupons so low and borrowing so high? There are NO risk free bonds but at least higher yields did deliver the fixed-income on which so many individuals and institutions depend. Financial reform and regulation has as much chance of preventing the NEXT crash as ordering the ocean to stop rogue waves. Get sunk again OR benefit from them? Investors can choose.

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