Portfolio Management – Page 73

The Gold Medal Gold Model

Posted on 13 December 201113 December 2011 by David Merkel

Eddy Elfenbein is a clever guy; he put together a model of gold prices that fits the data very well.? Tonight, I will share my own variation on the model, and try to give an intuitive explanation of why it works.

Ask yourself this: where does investor put his money if he wants to stay safe?? Most people are savers not investors, so ideally they would want to put their money on deposit and earn a real return with the ability to access their money at any time.? Then there is the alternative asset, gold.? Gold is a hedge against inflation, but it throws off no interest.? But at some level of real return, savers begin to conclude that they aren’t earning all that much, so they may as well hold gold.? Vice versa when real rates rise.

One more thing: gold doesn’t benefit from productivity increases, as stocks do.? Rapidly increasing productivity makes gold less attractive than stocks.

Eddy’s model boils down to this (in my implementation):

Percentage change in gold price = Multiplier * Percentage change in (Deflator Index / Real return Index)

where the Real Return index compounds three month T-bill yields less inflation via the 12-month CPI-U in arrears.

Here is how well the mode works, since 1970:

The first model attempts to minimize absolute dollar price differences between actual and model.? The second attempts to minimize the ratio between actual and model prices.? Both have R-squareds over 90%.

The deflator return is constant in percentage terms.? For the two models it is around 2.3%/yr, which is not far from productivity gains.

As for the multiplier, it is near six.? The multiplier is like a duration figure with bonds.? What this means is that the percentage change in real interest rates, three-month T-bills less CPI-U inflation, is projected to persist for six years.? Six years is a reasonable figure, because monetary policy changes slowly, but not glacially.

Now, at present levels of real interest rates, with T-bill yields near zero, and the CPI above 3%, it implies a gold price rising at 3% per month.? If inflation stays where it is and the Fed holds good on its promises, that means a gold price in the $3000s in mid-2013.

Do I believe this?? Partially.? I own lots of oil stocks, but nothing in metals at all.

Eddy’s model helps to clarify the value of gold.? It is a store of value, as its price anticipates the degradation and strengthening of the dollar, because changes in real rates will persist on average for six years.

Industry Ranks December 2011

Posted on 10 December 201111 December 2011 by David Merkel

I?m working on my quarterly reshaping ? where I choose new companies to enter my portfolio.? The first part of this is industry analysis.

My main industry model is illustrated in the graphic.? Green industries are cold.? Red industries are hot.? If you like to play momentum, look at the red zone, and ask the question, ?Where are trends under-discounted??? Price momentum tends to persist, but look for areas where it might be even better in the near term.

If you are a value player, look at the green zone, and ask where trends are over-discounted.? Yes, things are bad, but are they all that bad?? Perhaps the is room for mean reversion.

My candidates from both categories are in the column labeled ?Dig through.?

If you use any of this, choose what you use off of your own trading style.? If you trade frequently, stay in the red zone.? Trading infrequently, play in the green zone ? don?t look for momentum, look for mean reversion.

Whatever you do, be consistent in your methods regarding momentum/mean-reversion, and only change methods if your current method is working well.

Huh?? Why change if things are working well?? I?m not saying to change if things are working well.? I?m saying don?t change if things are working badly.? Price momentum and mean-reversion are cyclical, and we tend to make changes at the worst possible moments, just before the pattern changes.? Maximum pain drives changes for most people, which is why average investors don?t make much money.

Maximum pleasure when things are going right leaves investors fat, dumb, and happy ? no one thinks of changing then.? This is why a disciplined approach that forces changes on a portfolio is useful, as I do 3-4 times a year.? It forces me to be bloodless and sell stocks with less potential for those with more potential over the next 1-5 years.

I like some technology names here, some energy some healthcare-related names, P&C Insurance and to a lesser extent Reinsurance, particularly those that are strongly capitalized.? I?m not concerned about the healthcare bill; necessary services will be delivered, and healthcare companies will get paid.

A word on banks and REITs: the credit cycle has not been repealed, and there are still issues unresolved from the last cycle ? I am not interested there even at present levels.? The modest unwind currently happening in the credit markets, if it expands, would imply significant issues for banks and their ?regulators.?

I?m looking for undervalued and stable industries.? I?m not saying that there is always a bull market out there, and I will find it for you.? But there are places that are relatively better, and I have done relatively well in finding them.

At present, I am trying to be defensive.? I don?t have a lot of faith in the market as a whole, so I am biased toward the green zone, looking for mean-reversion, rather than momentum persisting.? The red zone is pretty cyclical at present.? I will be very happy hanging out in dull stocks for a while.

P&C Insurers Look Cheap

After the heavy disaster year of 2011, P&C insurers and reinsurers look cheap.? Many trade below tangible book, and at single-digit P/Es, which has always been a strong area for me, if the companies are well-capitalized, which they are.

I already own a spread of well-run, inexpensive P&C insurers & reinsurers.? Would I increase the overweight here?? Yes, I might, because I view the group as absolutely cheap; it could make me money even in a down market.? Now, I would do my series of analyses such that I would be happy with the reserving and the investing policies of each insurer, but after that, I would be willing to add to my holdings.

Do your own due diligence on this, because I am often wrong.? One more note, I am still not tempted by banks or real estate related stocks.? I am beginning to wonder when the right time to buy them as a sector is.? As for that, I am open to advice.

Improve the Position

Posted on 9 December 2011 by David Merkel

It’s hard to take a loss.? But taking losses is necessary to avoid even larger losses.

This is prompted by Barry Ritholtz tweeting to me a piece he wrote 3 months ago called, Take The Loss.? Good piece, worth a read.

What I suggest to you today is that there is a better way to manage portfolios.? Ignore the cost basis — the price at which you bought it.? Instead, focus on improving the economic value of your portfolio.

It is hard, really, really hard to choose the best assets.? I? can’t do it. It is easier to choose assets that are better than the ones you currently own.

This assumes that you have a reasonable way of estimating the value of assets.? When I was a corporate bond manager, it was easy, because I had a large number of rules to help me estimate the proper yield tradeoffs, perhaps more than most managers had at the time.

Discount vs Par vs Premium bonds
Differing maturities
Special covenants
Deal size
Secured, senior unsecured, junior unsecured, trust preferred, preferred stock
Implied credit betas of different industries (take more/less risk when you want to)
Spread tradeoffs needed for capital requirements and likely default/capital losses
Holding company vs operating subsidiary
Public bond vs 144A vs private placement

There are probably more, but they aren’t coming to me now.? It is generally easier to estimate the tradeoffs with fixed cash flow streams with a maturity than unlimited life instruments where any cash flow back to you is uncertain.

Thus equities are squishier, where you have to compare valuation, industry trends, use of free cash flow, company quality, etc., to determine what is more valuable.? This is a much harder game, but one that can be played with discipline to good effects.

It is a lot easier to do swaps in equity portfolios than to to try to create the current optimal portfolio.? It is much easier to make comparative judgments (these are better) than absolute judgments (these are the best).

Other things equal, can you:

Improve the cheapness of your portfolio?
Improve the quality of your portfolio (unless you are in a period where leverage is expanding dramatically, and the opposite will pay off for a time)?? This applies both to balance sheet and accounting quality in earnings.
Improve your industry allocations?
Own management teams that use cash flow more effectively, and are more shareholder oriented?

Always trade for what is better, and ignore the price where you bought the assets.? It doesn’t matter what you paid; that is a historical artifact.? Trade for better securities regularly, subject to transaction costs and other limits.

Book Review: What Works on Wall Street (4th Edition)

Posted on 8 December 20118 December 2011 by David Merkel

I previously reviewed the First Edition.? Now it is time for the Fourth Edition.? Rather than do a teardown, I think it would be more useful if I explained how the book can best be used.? Here goes:

There has been a lot of research done on stock returns, the results of which have encouraged investment in:

Cheap stocks relative to book value, earnings, sales, EBITDA, FCF, etc.
Stocks with strong price momentum.
Stocks with strong earnings quality.

And such is true of this book.? And so, I encourage investors to focus on earnings quality, cheapness, and maybe, momentum, which hasn’t done so well of late.? (Probably too many following it.)

Now, the wrong way to use the book is to look at the highest returning strategy of the past, and follow it.? Since they test so many strategies, the one at the top is an accident of the historical period it covered.? Far better to be more humble and use a strategy that borrows from many successful strategies.? In doing that, there is less chance of amplifying the noise of the past.

Quibbles

The danger of this book is data-mining.? The deeper you dig to find what would have worked best in the past, the more you mirror the idiosyncrasies of the past, which does not then reveal the long-term principles that generally work, over intermediate-term periods.

Far better to stick with “pretty good” methods that never reach the top, but usually work.? Don’t be concern about hitting home runs, as much as getting on base regularly.? I say this because it works well for me and my clients.

Who would benefit from this book: Most investors would benefit from this book, if they are careful not to grab for the “brass ring” and imitate the strategy that has worked best in the past.? If you want to, you can buy it here: What Works on Wall Street.

Full disclosure: The publisher asked if I wanted the book.? I said ?yes? and he sent it to me.

If you enter Amazon through my site, and you buy anything, I get a small commission.? This is my main source of blog revenue.? I prefer this to a ?tip jar? because I want you to get something you want, rather than merely giving me a tip.? Book reviews take time, particularly with the reading, which most book reviewers don?t do in full, and I typically do. (When I don?t, I mention that I scanned the book.? Also, I never use the data that the PR flacks send out.)

Most people buying at Amazon do not enter via a referring website.? Thus Amazon builds an extra 1-3% into the prices to all buyers to compensate for the commissions given to the minority that come through referring sites.? Whether you buy at Amazon directly or enter via my site, your prices don?t change.

Valuing Behemoths, Redux

Posted on 7 December 20117 December 2011 by David Merkel

A few things I left out last night.? Here’s a country breakdown for Behemoths trading on US exchanges:

Note: if I had a Bloomberg terminal and could give you global data, this would look much less US-centric.

And, here is a sector and industry breakdown:

Going cell-by-cell, Oil & Gas – Integrated had the largest concentration. The companies were Exxon Mobil Corporation, Royal Dutch Shell plc (ADR), Chevron Corporation, Petroleo Brasileiro SA (ADR), BP plc (ADR), and TOTAL S.A. (ADR).? Oil & Gas Operations was not all that different, and that company was PetroChina.? These are simple companies, as I view them, mining all over the world to find energy for a hungry planet.

Then there is Schlumberger, in the Oil Well Services & Equipment industry.? They are the elephant in their industry, though small compared to the majors, and smaller compared to the national oil companies that control most of the world’s oil resources.

Computer services are IBM and Google, two very different companies.? Software & Programming is Microsoft and Oracle, also very different.? Apple is Computers & Hardware.? Intel is Semiconductors.? The hard question with this group is who is managing their companies to use free cash flow wisely.? This is a maturing industry, and the best companies in the future will treat their capital providers well.

In Healthcare the differences in industries is not worth considering.? The companies are: Johnson & Johnson, Merck, Pfizer, Novartis AG (ADR), Roche Holding Ltd. (ADR), GlaxoSmithKline plc (ADR).? They are all big pharmaceutical developers, though J&J has significant hardware businesses.

Communications Services boils down to China Mobile Ltd. (ADR), AT&T Inc., Vodafone Group Plc (ADR), Verizon Communications Inc.? Big companies pursuing their advantages in the US, UK and China, with wireless dominating over wireline.

As for Retail, that is WalMart.? Who else could it be?? No other company in retail is so extensive. The hard question for them is how they move the needle.? Are there no more worlds to conquer, a la Alexander?

Those that call regional banks are not so — JP Morgan and Wells Fargo are Money Center banks.? HSBC (ADR) is as well.

Rounding out the financials are two nontraditional companies — Berkshire Hathaway, and General Electric.? BRK is an insurance company funding an industrial conglomerate.? GE is an industrial company with a finance arm attached to it.

Beverages (Non-Alcoholic) are simple. Coke and Pepsi.? What could be simpler?

The other three in Consumer Non-Cyclical are Unilever N.V. (ADR), Procter & Gamble, and Philip Morris.? It would be very difficult to reverse-engineer the competitive advantages that these companies have built up.

With Metals Mining it is BHP Billiton Limited (ADR), Vale (ADR), and Rio Tinto plc (ADR).? They have become almost an oligopoly for a variety of minerals.

Finally, among auto and truck manufacturers, there is Toyota Motors, a well-run company that has had its share of problems lately.

=-=–==-=-=–=

Most of these companies are likely to be slow growers.? One exception is some of the tech and pharmaceutical companies, where they will fight for new markets versus obsolescence of old markets.? Unless one is an industry expert, hard to see how the battle comes out.

And, as I commented on last night’s piece:

Maynard, that?s a concern of mine as well. Will they dispose of noncore assets attractively? Even slack cash, after a suitable buffer, is noncore. How will management use the free cash flow?

1) Dividends?
2) Small value-creating acquisitions that can be grown organically?
3) Buybacks at discounts to the firm?s private market value?

Those create value, but it is hard to manage a complex company ? so growing via acquisition is tough without overpaying by buying scale, or creating a company that is even more complex, and unmanageable.

That?s why I think management is the key with large companies ? will they make the right capital allocation choices or not?

Tough analysis — but to me it boils down to how shareholder friendly behemoth companies will be. Try to analyze what the main strategies are, and only invest where you think they are managing for the good of shareholders, rather than management.

Full disclosure: my clients are long CVX, PBR, TOT, VOD, WMT, INTC, ORCL

Valuing Behemoths

Posted on 6 December 2011 by David Merkel

There have been a lot of articles recently about how cheap the Behemoth stocks are — I define Behemoth stocks as those with over $100 Billion of market capitalization.? At the close on December 2nd, there were 39 of them that trade on US Stock exchanges.

It’s no secret that Behemoth stocks have underperformed.? One example of it comes from looking at the cap-weighted S&P 500 versus the equal-weighted S&P 500 over the last decade.? The larger cap stocks underperformed, particularly the financials, as they ballooned, and popped.

Here is a graph showing how the median P/Es of the current behemoths have declined, and may decline further, if prices don’t rise, but earnings do.

So why have the P/Es of the largest companies compressed? In an environment where low global growth is expected, the biggest companies have felt it most severely.? They are so big that they cannot compensate much for changes in global demand, as opposed to smaller companies that can try to tap markets that they haven’t tapped so far.

For Behemoth companies to achieve large earnings growth, they have to find monster-sized innovations to do so.? Those don’t come along too regularly.? Even for a company as creative as Apple (or Google), it becomes progressively more difficult to create products that will raise earnings by a high percentage quarter after quarter.

As a result it should not be a surprise that Behemoth stocks trade at discounts to the market when global growth prospects are poor.? They have more assets and free cash flow to put to work than is useful in a bad environment.? Not every environment offers large opportunities.

My clients and I own 7 of the 39 Behemoths (18% of assets).? When is it reasonable to own Behemoths?

It makes sense in a period where leverage is expanding, but that’s not now.? It also makes sense to own them when the earnings yield (E/P) exceeds the return on high-yield bonds by 3% or more.? In that case, like Buffett, we look at the stock like a bond, and look for growth in the book value per share to drive the growth in the price.

There is another value driver — I have a saying: “The equity always holds the capital structure option.”? For small companies, they can decide to merge or lever up.? For Behemoth companies they can decide to pay special dividends, buy back stock, or spin off or sell subsidiaries.

I don’t know that the Behemoth companies that I own will do this, but I expect at valuation levels like we are at today, where the prospective earnings yield is 9% or better, there will be enhancements to value and plenty of them.? After all, the Behemoths for the most part don’t face liquidity issues, and most of them have cash flow in excess of investment needs.

But the big payoff may come from Behemoths splitting into smaller companies.? Management abilities peak out after a certain level of asset value… it’s hard to manage Behemoth companies, unless the company is simple — energy companies can grow larger, because it is only a question of more geography.? There is no threat that they need to sell a different product.

As a result of all of this, we should pay much greater attention to how shareholder-friendly the Behemoths are.? Analyze the management teams, and see how willing they might be to take actions that will enrich shareholders.

Personally, I think almost all companies with market caps over $100 billion would perform better if they broke themselves into more logical pieces.

Get a Piece of the Schlock

Posted on 2 December 2011 by David Merkel

There is a benefit to reading books on marketing for those that will never be marketers: it will immunize you to sales pitches.? Think of it as studying the strategies of the enemy.? When you talk to salesmen, you can flip their words back at them, or tell them “no,” to the questions that have a guaranteed “yes” attached to them.? Better, if you want, you can tell them, “Stop. I know your tactics.? Cease the sales language and answer these questions I have…” Maybe they will cease.? If not, leave.? There are many places to buy, and some people that will listen to you elsewhere.

Some weeks ago, I was traveling, and heard an ad for a “financial seminar.”? This one sounded better than most, and featured the teachings of a well-known writer.? For fun, I signed up for the free seminar, just to see what would happen.

In reading what little I had before the seminar, I concluded that the only way of doing what they claimed was private ownership of high cash flow properties or businesses.? When I went to the seminar, I was not disappointed — that was the main idea.? Secondarily, they said you could get non-recourse financing easily, or equity limited partnerships to finance you.? (Money grows on trees…)

The first problem is this: mispriced properties are few and far between, and there is competition to buy them, generally.? Second, financing for property investment is scarce, especially for anything where the lender has no recourse to the borrower.

Passive Income

Passive income is an idol in these shows.? It seems like free money, but in practice it is difficult for investors to buy properties cheaply, finance them, and get rents that are far higher.

If it were that easy, they would create a REIT and do it themselves.? I asked the presenter at the end of the presentation: “If there are that many high cash flow properties available, why doesn’t a REIT buy them?? After all, they can finance more cheaply than you.”? Response: “What’s a REIT?”

That’s more than the wrong answer; it means you don’t know what you are doing.

Tactics

There was a lot of framing going on.? The package was worth $5000, but we have a special offer for $600.? Today for you?? $200.? After some people leave — “Yes, $200, but your spouse can some too.”? Oh and if you buy today, we’ll throw in these extras…

I suspect there were shills in the audience, who went back to buy.? I looked back several times, and estimated that 50-60 out of 200 went back to buy.? At the end, only 30 remained to hear the ending advice.

Regardless, the gross revenue of the day was around $6000, which supposedly covered only the cost of the presenter and the hotel room.? I have my doubts.

Other? Notes

Twice the presenter mentioned that the company that the author worked with was publicly traded.? Well, sort of, it deregistered in Spring 2011, and the company is worth less than $10 million today as it trades on the pinks.? What can you say for a company with a negative net worth, normally negative income, and very low trading volume?? (Leave aside the lawsuits…)

The presenter appealed to Buffett on not diversifying, but Buffett tells average investor that they are best invested in mutual funds.? Being undiversified carries with it the idea hat one is incredibly smart, and able to do far better then the averages.

The reason that they put forth a private market strategy is that it can’t be falsified.? That is the great thing about selling people on investing in real estate.? There is no way to put forth an audited track record.? You can tell anecdotes, and people buy your educational materials.

Summary

Be skeptical.? Nothing good is easy.? Anything advertised in investing can’t be that good.? I knew this, and my experience proved it as I reviewed the charlatans.

Ignore Sharp Moves

Posted on 29 November 2011 by David Merkel

In general, my experience is that sharp moves up or down over a day or a few days proceed from investors that are reacting, not thinking.? Those moves tend to get erased by future market action.

Slower, intermediate-term moves tend to persist, and those moves don’t get the same media attention, because they aren’t dramatic.? Bear market rallies are sharp, so are Bull market panics.

That’s why I don’t make too much out of days like yesterday.? A news-driven market is over-reactive.? Days where there is no no significant news gives us a feel for how the large players are adjusting their exposure; the same is true of looking at the trend over 6-12 months, where the effect of short-term news gets washed out.

So be wary, skeptical, etc., and keep some cash on hand to buy up future bargains.

When you see an odd opinion

Posted on 27 November 2011 by David Merkel

I find commentary regarding open vs. closed minds to be vapid.? For example, I saw this tweet:

Inspired_Ones Inspiration!!!

Minds are like parachutes – they only function when open. -Thomas Dewar

I responded with this:

AlephBlog David Merkel

‘ @Inspired_Ones Minds are like castles under attack; they function well when the drawbridge is up, moat full, & the defenders are ready. 😉

I’m a value investor.? I do well partly because I am skeptical.? I implicitly trust few opinions shared over the internet, or among my acquaintances.? There are many out to bamboozle the naive.

Now, I’m not saying never believe anything.? I am saying that you should test claims that you receive from others. What is the historical evidence?? What are the biases of the writer?? Few in investing write neutrally, so analyze the angle of the writer.

But after that, once you understand the biases, read the contrary data.? They may know something that you or I don’t know.? Compare it against other opinions, and ask those that would likely disagree for their opinions.? Analyze, asking which opinion is most likely, or whether yet another opinion not yet imagined could be right.

This isn’t easy to do; it takes humility, which makes it hard for me to do, but the effort must be made.

Odd opinions must be made to jump high hurdles.? We don’t want to be like those that believe things merely because they are odd.? (I have known more than my share of those.)? For investors, in prosperous times, oddity yields bad results.? In unprosperous times, oddity yields volatile results. Some do incredibly well, and some very badly.

If someone proposes a novel investment idea to you, be wary.? Few novel ideas pay off.? This is not to say that classic ideas always do well, but the odds are skewed against novel investments.

In closing, be sensitive to your economic environment.? There are no economic environments that offer unlimited potential.? There are many that limit “normal” economic opportunities.? Don’t force an overly optimistic view on the markets, or an overly pessimistic view.

Do your “due diligence.”? Analyze your assets, and potential replacements.? Then make businesslike decisions to buy and sell, after you have analyzed the situation in entire.

Book Review: Bonds — The Unbeaten Path to Secure Investment Growth

Posted on 11 November 2011 by David Merkel

What do you do with a book that has one major thing wrong, and a lot of minor things right?? I?m not sure, but my compromise is to give it a low num1er of stars on Amazon, and mention the good and bad points.

In a perverse sense, it makes sense that someone will write a book pushing high quality bonds when the yields are so low.? There are always those that push foolish retail investors to act amid low rates.? ?It?s time to preserve value,? as low rates lock in low returns, but will low returns from bonds beat stocks, commodities, or cash?

I think not.? At present, high quality bonds are return-free risk, as James Grant would put it.

Now, the authors allege that bonds match/beat the performance of stocks over the long run.? But their argument relies on buying and rolling to an unusual bond ? the long Treasury bond.? I?m sorry, but few could have bought and rolled that, the volatility is too great.? The same argument applies to junk bonds as well.? Bearing the excesses of maturity risk or credit risk over time can yield great returns, but few can live with the volatility.

I am not a backer of the idea that the equity return premium over bonds is big, but I do back the idea that it is positive.? Equities outperform bonds by about 1%/year, with a lot of noise, which makes the outperformance dubious to na?ve watchers.? You need at least 40 years to demonstrate the effect.

The authors push their perverse view that a portfolio of high-quality bonds will outperform stocks.? Are they betting on the Second Great Depression in the process?? That?s what it would take, with rates so low.

Further, by limiting their fixed income purchases to AA bonds or better, the authors ensure that their clients lose money from their lazy investing, when it is well-known that BBB bonds return the best even after default losses.? I suspect the authors don?t want to deal with the stress that comes from occasional losses, which is a lazy way to run an investing business.? Good bond investing makes more on credit spreads than it loses on default losses.

The same argument applies to their avoidance of structured securities (ABS/MBS); intelligent investors can make extra money there.? Broad prohibitions of any investment should be a red flag to investors, particularly when the authors have no evidence.

Back to their five initial questions, with my answers:

1)????? Everyone I know has the bulk of their money in stocks, and stocks always outperform bonds.

Sorry, but the authors obfuscated to make their case.? Over the long run, stocks have outperformed bonds by 1-2%/year, but that outperformance comes in spurts, it is not level.? The authors deceptively made their case by arguing the spurts were abnormal.? Sorry, but abnormality is a normal part of markets.

2)????? I won?t be able to retire with the returns from bonds.

Particularly true with the lame way the authors invest; starve on their very modest interest income.? Investment returns are lumpy, but people want smooth returns.? Markets can?t be changed, but can people discipline themselves to wait for lumpy returns when they come?

3)????? I understand stocks, but bonds are too complicated.

Bonds are simple, but yield little now.? Stocks yield more, but yes, can go down.

4)????? Bonds won?t keep up with inflation.

No they won?t, but stocks, particularly cyclical stocks will do far better.

5)????? Bonds don?t provide any growth.

One of the biggest lies of this book is that bonds provide growth as a result of investing what you don?t spend.? That is not growth, that is savings.

All that said, unless the investor can discipline his emotions, he is probably better off investing in bonds, even though he will earn much less.

Quibbles

Page 52 ? The authors did not do their homework: the Old Testament did not prohibit interest; it prohibited taking interest from the poor, to avoid enslaving them.? Business loans were permitted.

Pages 330-331 the authors make a lot out the disadvantages of bond funds, but aside from paying an upfront load, the disadvantages are small relative to individual bonds over a long time period.

Page 362 ? the authors don?t fully get stable value funds.? Yes, the attempt to create them for anyone to invest in did not work, but for 401(k)s, which is the majority of the market, there was never an investigation, and they function well to this day.

Who would benefit from this book: No one would benefit from this book.? It deceives and preys on the ignorance of average investors who have been burnt by the stock market.? If you want to, you can buy it here: Bonds: The Unbeaten Path to Secure Investment Growth.

Full disclosure: The publisher asked if I wanted the book.? I said ?yes? and he sent it to me.