Basically, it entails investing in 7 asset classes, and 12 funds that constitutes the 7 asset classes.
More details can be found here: http://www.7twelveportfolio.com/index.html
Tuesday, August 16, 2011
7Twelve Portfolio
Came across this interesting portfolio concept.
Basically, it entails investing in 7 asset classes, and 12 funds that constitutes the 7 asset classes.
More details can be found here: http://www.7twelveportfolio.com/index.html
Basically, it entails investing in 7 asset classes, and 12 funds that constitutes the 7 asset classes.
More details can be found here: http://www.7twelveportfolio.com/index.html
Saturday, August 13, 2011
The latest crisis - A reversion to mean
Latest Crisis - The Cause
So what causes this latest round of crisis? Erring on over-simplifying the complicated issues, it is basically due to U.S. getting to expensive, and we are in the process of reverting to the mean.
U.S had grown so expensive over the past few decades that many of her companies find it cheaper to outsource the jobs and manufacturing to developing countries such as India, China, and SE Asia.
However, these outsourcing of jobs and manufacturing means that U.S has to pay the workers and capital equipment in these foreign countries, and import the end products. Both resulted in U.S sustaining trade deficit.
Is U.S at risk of defaulting
Again, we might be over-simplifying the issues. However, U.S debts are denominated in US$, and U.S can simply print more US$ to pay off the debt. Thus, U.S can choose not to default infinitely.
Next question - would the creditors continue to accept U.S debt? As long as U.S is able to repay the interest, probably. U.S debt is around 14T. GDP is also around 14T. As such, U.S should be able to sustain the interest payment as long as the tax revenue is greater than the required interest. Besides, they still have the printing press. Also, the creditors probably don't have much alternatives either.
What is at risk will be the internal budget such as healthcare, defence spending, etc. If these budgets are cut, jobs might be lost. However, this is simply a re-allocation of resources from shrinking industries to growth industries, as long as capitalism continues to function.
So what is happening now
Reversion to mean. U.S is printing money to repay the interest and debt. This results in inflation and devaluation of US$. And this means that companies that outsourced their jobs and manufacturing will find it more and more expensive to pay the foreign countries. Over time, the jobs and manufacturing will be brought back onshore. Employment will be created. Re-allocation of resources will take place from govt sector to private sector.
Potential Impact
Developing countries that currently hosting the jobs and manufacturing will experience unemployment.
What is our strategy
Personally, I'll switch out of emerging markets and bet on a U.S recovery. The best way to accomplish this is to diversify using U.S ETF.
For singapore market, these are a few candidates traded on SGX:
3) IS S&P500 10US$@ (gives ~2% dividends)
4) Lyxor ETF Dow Jones Industrial Average
So what causes this latest round of crisis? Erring on over-simplifying the complicated issues, it is basically due to U.S. getting to expensive, and we are in the process of reverting to the mean.
U.S had grown so expensive over the past few decades that many of her companies find it cheaper to outsource the jobs and manufacturing to developing countries such as India, China, and SE Asia.
However, these outsourcing of jobs and manufacturing means that U.S has to pay the workers and capital equipment in these foreign countries, and import the end products. Both resulted in U.S sustaining trade deficit.
Is U.S at risk of defaulting
Again, we might be over-simplifying the issues. However, U.S debts are denominated in US$, and U.S can simply print more US$ to pay off the debt. Thus, U.S can choose not to default infinitely.
Next question - would the creditors continue to accept U.S debt? As long as U.S is able to repay the interest, probably. U.S debt is around 14T. GDP is also around 14T. As such, U.S should be able to sustain the interest payment as long as the tax revenue is greater than the required interest. Besides, they still have the printing press. Also, the creditors probably don't have much alternatives either.
What is at risk will be the internal budget such as healthcare, defence spending, etc. If these budgets are cut, jobs might be lost. However, this is simply a re-allocation of resources from shrinking industries to growth industries, as long as capitalism continues to function.
So what is happening now
Reversion to mean. U.S is printing money to repay the interest and debt. This results in inflation and devaluation of US$. And this means that companies that outsourced their jobs and manufacturing will find it more and more expensive to pay the foreign countries. Over time, the jobs and manufacturing will be brought back onshore. Employment will be created. Re-allocation of resources will take place from govt sector to private sector.
Potential Impact
Developing countries that currently hosting the jobs and manufacturing will experience unemployment.
What is our strategy
Personally, I'll switch out of emerging markets and bet on a U.S recovery. The best way to accomplish this is to diversify using U.S ETF.
For singapore market, these are a few candidates traded on SGX:
1) DBXT STOXX GLOB DIV 100 ETF 10 (gives ~5-6% dividend based on 2011. Synthetic ETF)
2) db x-trackers S&P 500 ETF (dividends are re-invested back to fund. Synthetic ETF)3) IS S&P500 10US$@ (gives ~2% dividends)
4) Lyxor ETF Dow Jones Industrial Average
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