Three notes on the blog itself.  1) I will be guest-blogging for one post at another site on Thursday.  Won’t say where, but watch for “The Fundamentals of Real Estate Market Bottoms.”  It will be reposted here Thursday evening.  2) I can’t paste certain bits of code in my blog because of a WordPress limitation introduced in version 2.5.  As of now, that won’t be remedied until version 2.9, which as far as I can tell, is a huge update, and is at least half a year off.  3) I have not left RealMoney, though I have not posted there in a while.  I started this blog so that I would have a site with my own distinct voice, and so that I could have greater creative freedom to write about things dearer to me that I felt would not fit the RM audience.  Also, I felt that I had run out of articles to write, simply because I held myself to a higher standard, and didn’t want to write articles just for the sake of putting something into print.  RM readers deserve better.  I will come back to posting at RM, I just don’t know when, amid my current busy-ness.

I last mentioned portfolio moves a little more than a month ago.  Here are my moves since then:

Rebalancing Buys:

• Ensco International
• Nam Tai Electronics
• Cemex
• Assurant
• Industrias Bachoco
• Charlotte Russe
• Valero
• Cimarex

Rebalancing Sells:

• Universal American
• OfficeMax
• International Rectifier
• Jones Apparel
• Smithfield Foods
• Group 1 Automotive
• Shoe Carnival

For a six-week period, that ‘s a decent number of trades, at least for me.  My methods are designed to try to not trade frequently, but to trade to minimize risk and maximize return in a majority of situations.  For those not familiar with my rebalancing trades, I keep a fixed set of target weights in a largely equally-weighted portfolio.  When a security gets more than 20% away from its target weight, I buy (after review) to bring it back to target weight, or sell to bring it back to target weight (take some money off the table).

There have been three other actions during this time. 1) National Atlantic’s merger went through.  A loss for me, but I ain’t missing them at all.  2) After the buyback announcement, I traded my holdings in Anadarko for holdings in Devon Energy.  I like the valuation, and the Natural Gas exposure better at Devon.  3) I tendered all my MetLife shares for shares in RGA.  I like RGA a lot here and am willing to make it a double-weight in my portfolio. In the current tender offer, I should get approximately 10% more value in RGA shares for my MetLife shares, subject to a number of conditions listed in the prospectus.  Also, RGA is a unique company that makes its profit mainly from mortality, which is not correlated with other financials.  It is a well-run company, and deserves to be valued at a significant premium to book value.

Full disclosure: long RGA MET DVN SCVL GPI SFD JNY IRF OMX UAM XEC VLO CHIC AIZ IBA CX NTE ESV

I read your blog frequently, and I always find it very insightful and realistic, and without invective, which is refreshing. I’d like to pose a question to you, to which you can probably provide a good answer.

Given the current pessimistic mood of the U.S. economy and financial markets, I’ve been trying to figure out where the light at the end of the tunnel will be for U.S markets. But I get stuck at this point: Baby Boomers retiring. Their portfolios are the ones that have grown over the past 30+ years, and they will soon be drawing upon those savings as a source of income at a steady rate, and one that allows them to live at similar quality of life as when they retired. I have read plenty (I think) on the current state of Social Security, but I’ve seen nothing on the private pillar of retirement.

This future, steady drawdown must have some effect on U.S. equity markets, correct? Enough to keep markets moving sideways? Downwards for the long-term?

As an early 30-something who has been financially responsible (no consumer debt, no mortgage, high savings rate), I’m trying to figure out what might happen to my savings long-term, and how heavily a portfolio should be weighted with U.S. securities.

Could you possibly point me in the right direction where I can find some literature or statistics on how Boomer’s retirements will affect U.S. markets?

So went a recent question from one of my readers.  I’ve been studying this topic for 20 years, and writing about it for 15 years.  The questions are difficult, and the answers are not clear.  Let me point you to one thing that I have written on the topic: Society of Actuaries Presentation.

The US is bad off demographically, but most of the rest of the world is worse off.  The US has a problem because it has not been saving, but that is largely because much of the rest of the world is neo-mercantilist, and is subsidizing export industries, and the US buys.

Remember the lesson of the mercantilist era: the consumers won.  Those that tried to get gold got gold, and at a high cost in terms of other goods.  In the same way, the neo-mercantilistic nations are sucking in dollars that are worth less and less.  On page 32 of my presentation, it is amazing that the net debt position of the US has been flat, because our debts are worth less dur to the decline of the dollar.  What a boon it is to be the world’s reserve currency.

Now, as for the “retirement” of the Baby Boomers: there will be some stagnation in our equity markets to the degree that retirement causes liquidation of assets.  That said due to low savings rates, it is quite possible that retirement dates will be extended for most Baby Boomers.  They will need to labor longer, and they should do so, after all, at age 65 the average retiree is not within ten years of death.

To the extent that this causes labor shortages, the US will see greater employment prospects for its people.  In Japan that seems to be happening now.  But America welcomes immigrants (legal or illegal) in a greater way than most countries do.  That will mute any gains for unskilled labor in the US.

My advice for you is to look at global demand.  Rather than looking at investing with countries as a first screen, consider it through the lens of industries.  Look to which industries are benefiting from increased global demand, and if they are at reasonable valuations, buy them.

I know this is not a full answer, but it is the best medium-to-short answer that I can give you.