Morning Thoughts

Some Reads:

Americans  (and I) are jacked up on coffee Bloomberg

Yields reach record lows WSJ

Ritholtz on the dialogue of Finnacial pundits Ritholtz

Meb Faber does podcast (LISTEN TO THEM!!!!!!!!!!!!!!!!) Meb Faber Show

Charts:

Southern Energy vs SPX (S&P 500)

 

Southern Energy vs TLT (20+ year bond ETF)

Thoughts: The charts above are very interesting because it shows the amazing performance of Southern Energy (SO) which is a Utility that services the southeast United States. SO has had a stunning 23% return over the past year and the XLU (Utilities Sector ETf, which I own) has had about the same return. The S&P has returned about 2% and the TLT has returned 17%. Utilities are now at a stretched valuation, trading at a 20 P/E when they normally trade at 7-8, So I’m not recommending a long in Utilities here, but just shedding some light on the best performing sector i the S&P.

If you take the time to listen to Meb Faber’s podcast, and you should, you will hear him talk about a study he did in his book about the 60-40 asset allocation (6o% of the portfolio in stocks, 40% in bonds) and the various returns that it got over time. As I was watching Bloomberg Surveillance this morning, while sipping my espresso, the conversation was focused around the almost record low yield that US bonds have right now. I immediately thought back to the 60-40 allocation. For years now we have heard pundits talk about how easy stocks were and how you can invest in almost anything. We are now getting to the point that it is getting to be that way for bonds, or at least over the past three years. So I began to wonder how these years will be shown in the performance of that allocation, many people like Mike Batnick ( head of research at Rithotz wealth management @michaelbatnick) often do blog post about this. I am looking forward to these studies and post coming out and in the mean time take a look of the performance of the SPX and TLT.

SPX is up 56.19% vs TLT up 45.64%