Lest any of our readers are unaware of our Archives page, we recommend it as a comprehensive index of our blog entries. The articles are sorted four ways: by topic category, title, week, and month.

Come and Take Choice of All Our Library

If, instead, you are trying to locate a snippet of language or factoid that you read on this site, Mars’ sword couldn’t burn it from our search module. Just select the option to search Stracia.com. (You can perform a true Google search from that or any of our pages.)

Every search you do here supports Stracia which, indirectly, helps to support our bootless butler, Baines. Knowing that this economy does little to justify his extortionate salary, Baines has been on his best behavior lately. And even this is unacceptable. Let’s sit back and watch him ruin another Thanksgiving. ♦

The current issue of CFA Magazine offers the following compilation of resources related to clean-tech and alternative energy. Use them together, use them in peace. (Hear “human error” warning a la Kubrick.)

Last month in Dubai, The Carlyle Group’s co-founder David Rubenstein made this presentation. It examines the root causes of the global financial crisis — and warning signs leading up to it — as well as the impact on markets and the private-equity industry.

We find it interesting that, even in hindsight (and even as presented in this excellent presentation), the so-called warning signs seem not at all predictive.

We would argue that last summer’s (a) decline in mortgage-backed securities prices and (b) collapse of two subprime-CDO funds were symptoms of the crisis. They augured worse to come, yes, but the trouble had already started — as marked by these events.

How, then, could one have foretold the crisis itself?

We can trace the origins of what happened — is happening — and describe them in detail. We can chart and graph them and document the crisis’s early days. But over a year later, our best forecasting methodologies fail even to “predict” this crisis in hindsight.

Unless someone, somewhere, is sitting on a black box, grinding out returns based on private advances in modern portfolio or statistical theory — of which none are known to have occurred since 1972. We plan to write more about the shortcomings of modern financial modeling and statistical theory in a future post. It may be a long post.

Has anyone read any books devoted to this topic? ♦

We recently came across a technical-analysis blog called “Smart Stocks.” It grabbed our attention for a couple of reasons.

First, markets worldwide have been experiencing such strife that, from across a room, it’s difficult to differentiate a chart of the Australian dollar from corn futures from Otter Tail: Most asset classes have been moving aggressively downward with high correlations.

We are fundamental analysts by training, but clearly “the fundamentals have left the building.” This is always the way in market crises; at such times, technical analysis (TA) combined with fundamentals may be the only crutch. Actually, there is no kind of market environment in which the two do not pair well — but a market vortex rebalances our priorities in favor of TA.

So, it is time to get technical.

As with so many aspects of global-macro investing, it’s difficult to find credible, useful analysis (or even a sounding board) that truly covers the global asset categories. That’s why we devised the GOCMX, which takes the guesswork out of allocating assets among major asset types on a global basis.

SageTrader’s “Smart Stocks” is the work of Mumbai-based analyst Avinash Bachate. We like that his eyeballs are not glued to CNBC, and that in the last week alone, he has published short, clear analyses of major markets in China and Hong Kong, Singapore, Argentina, and the U.S., with supporting exhibits. Last month, he even called a bullish reversal in the World Index three days before the ACWI bottomed.

We are adding “Smart Stocks” to our recently announced Link Panel, in the Technical Analysis section. ♦

We just returned from our buddies’ annual Halloween bash and are catching up on our reading — including a weekend Journal article discussing global stock valuations. We plan to build a country-allocation model soon, perhaps using the iShares MSCI indexes.

In the meantime, there is an easy way to gain exposure to four dozen of the world’s major equity markets in one trade: the MSCI All Country World Index Fund (ACWI) attempts to replicate the price and yield performance of 48 global stock markets.

One of those countries is the United States — a geographic region to which many investors do not need additional exposure on an absolute basis, much less for greater diversification. A related index, the ACWX, helpfully “subtracts” the U.S. from the All Country World Index, leaving you with exposure to the other 47 markets.

The ACWX offers a number of potential benefits:

• diverse exposure to developed and emerging markets;
• low cost: operating expenses of 0.35%;
• high correlation with the underlying markets: MSCI’s benchmarks aim to represent 85% of each market’s public float; and consequently,
• limited exposure to any single company — a crucial safety factor when markets are rotten with surprise defaults and bankruptcies.

Part of the reason we devote time and effort to this blog is to increase our readers’ awareness of the benefits of global, multi-asset category diversification — and to bolster that awareness with a discussion of practical tools for achieving such benefits. In this context, the ACWX is an option for even the laziest U.S.-centric investor.

No vehicle so broadly diversified could hope to capture anything but beta returns, in our view. But for investors not otherwise willing or able to achieve broad international diversification, the ACWX deserves a look. ♦

In the last week, we’ve introduced three new site features. Most important is our bespoke analysis service, where we build a model portfolio of the assets you care about — specific stocks, asset categories, whatever you invest in. We use our proprietary allocation and optimization techniques to create the best risk-adjusted portfolio of securities you own, cover, or focus on. (Send us an e-mail for more information, or for an estimate on your project.)

The second new feature is somewhat less ambitious, but still better than many of you deserve: check out our Link Panel. It is a compendium of resources useful to the global investor. We put it together at the suggestion of our butler, Baines, who dislikes helping us find things.

Today, we are introducing the third new feature: our Best-of-Breeds page. It is a list of companies that represent the premier players in their industry, in the opinion of our new Editor, BoB.

BoB has rendered his opinion on the best-of-breeds in fifteen industries so far, and the list will grow. You, the reader, can post a comment if you disagree with any of Bob’s picks, or if you want to suggest an addition to the list. (You can also e-mail BoB.)

We hope these new features/services make the site even more useful. And outsourcing certain responsibilities to a “theme” editor like BoB — who is basically responsible for maintaining a single list on one page — helps us build the site. We hope to bring on additional volunteers to manage specific topics. Post a comment if you have any suggestions, would like to volunteer, or know where we might find a less irascible butler. ♦

We are introducing the Stracia Link Panel, a collection of high-quality Web sites pertinent to global-macro investing. We visit these sites frequently — they provide unique content, for free, with good interfaces.

Like Stracia, most don’t require registration. (You can opt-in to our e-mail list or subscribe to the GOCMX, but it’s never required — even when you post a comment!)

Currently, our Link Panel has sections devoted to market and geopolitical news/commentary, global financial data, world maps, and more. We will expand the Panel over time to include sector-specific sources and more global databases. Is there a Web site we should include on the Link Panel? Post a comment and tell us. We are also considering a “Central-Bank Watch” page — stay tuned.

You can make the Panel your home page and even perform Google searches there — as from any of our content pages (note the search tool in the right-hand column). Your searches generate revenue that helps us keep the jack-o’-lantern smiling and Baines in poncey English footwear. Happy Halloween! ♦

Starting today, Stracia is happy to offer custom analytical services. This means that we can now apply the proprietary analytical techniques that we use to build Globally Optimized™ investment portfolios to your unique capital-asset problems. It’s like having a floor full of investment research analysts working to help you increase risk-adjusted returns.

We Build Model Portfolios

Using your target assets (listed securities), exposure constraints, average holding period/portfolio turnover, and other metrics, we can build and back-test custom portfolios — optimized according to your unique investment objectives. We can also work with you to define, test, and redesign the constraints themselves, given the unique target market in which you invest and the needs of your constituents.

For example, you may wish to construct an optimal risk-adjusted target portfolio that is bound to a minimum 30% exposure to equities, maximum 45% exposure to fixed-income securities, and maximum 15% allocation to cash. Your annual portfolio turnover is 35% and your minimum return target is 12%.

We Work with You

We can define a model portfolio, or range of portfolios, given these constraints. We will back-test the models and deliver the underlying data (both inputs and outputs) to you in clean spreadsheet form. We will also deliver — in spreadsheet, PowerPoint, Illustrator, or other form — a complete set of graphical charts and exhibits aiding your interpretation of the model portfolio(s). (The data and exhibits will be yours to publish or even sell, if you wish, without reference to Stracia, LLC.)

Your Target Assets

Or, we can construct and test portfolios of specific stocks — all 30 names in the Dow, the most active high-volume names over the last month, or a basket of stocks that you define (such as your current holdings or watchlist). We can even gather the data for you. Then we deliver the optimized, risk-adjusted allocation results and exhibits to you by deadline.

Pricing and Confidentiality

Pricing varies depending on the scope of the project. For more information, read our new Bespoke Analysis page or peruse some of our quantitative entries:

• Introducing the GOCMX
• Global Sector Performance
• Country Performance
• Global Correlations Grids: Original and Update — we can create these for you using any securities, sectors, currencies, etc., of your choice
• Over/Under-Representation
• GOCMX versus S&P 500

Contact Us

When you are ready to discuss your project or request an estimate, e-mail us regarding bespoke analysis and we will respond promptly.

(We keep all the details of your project confidential, and if necessary, can provide a signed confidentiality agreement at your request.) ♦