HDR Sunset Photograph

A few days ago I was on the Oregon Coast to view an art exhibit.  That evening, as the sun was setting, I set up my camera on a tripod to see what would happen if I tried to create a High Dynamic Range (HDR) photograph.  The sky was very clear so I knew the sunset would not be anything special.  To create this photograph I took three images, one over exposed, one under exposed, and one at a normal exposure.  In one of the three pictures, a seagull entered the frame and you see the outline of the bird in this composite HDR image.

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“Creme List” – 5/6/2011

Twenty-three stocks made the "Creme List" this week, one of the highest numbers on record.  No stocks were eliminated from the list and four were added.  All of the newly added companies were on the list at one time.  I think I've posted this list for well over ten years.

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Sample Portfolio

In response to a request from a Platinum member, I ran the following analysis of seventeen investments with the associated percentages.  For assumptions, I used the most recent three years of data and I projected the S&P 500 would return 7.0% over the next year.  As readers can see, the projected return is 7.2% or a little higher than we expect from the S&P 500.  The standard deviation or uncertainty is 13.8%.  However, that value is lower than the actual value as BWZ, the largest holding in the portfolio, does not have a three-year record.  When this is the situation, the projected risk or uncertainty looks better than it really is.  The projected Return/Uncertainty ratio of 0.52 is higher than it would be had BWZ had a full three years of data.

Scrolling down the QPP analysis, this portfolio is not all that well diversified for a portfolio with 17 holdings.  We see that expressed in the 25% Diversification Metric value.  Our goal is to see the DM at 40% or higher.

The reason for the modest 25% Diversification Metric has its roots in the Correlation Matrix shown below.  Note the high correlation between most of the holdings.  GLD and BND provide some diversification.  Values associated with BWZ are suspect due to insufficient data mentioned above.

 

Schrodinger Portfolio Update

Schrodinger Review

With so many portfolios carrying several asset classes that are out of balance, it is nice to see one where all the equity and bond assets are within the 25% threshold range.  Such is the case with the Schrodinger, as one can see in the following screen shot.  We always expect to see the Money Market out of balance if the allocation is set to zero.

The Schrodinger was launched over ten years ago and it is one of the best examples I have for a passive investing.  Very little action takes place in this portfolio.  Last month we brought several asset classes into balance or closer to target by purchasing 100 shares in each of the following ETFs.  Small-Cap Growth was filled by VBK, and we purchased shares of VEU and VWO to fill developed international markets and emerging markets respectively.  Note how the portfolio is skewed toward the value side.  This portfolio also carries higher percentages in the mid- and small-cap asset classes.

Even though the last ten plus years were volatile, this portfolio came through in fine fashion even though no bonds were held during much of the treacherous and stomach turning period. Most of the time, we stayed with the Strategic Asset Allocation and the data below shows the power of passive investing.

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