9th
Check out the average hourly workweek stats. Somewhat concerning.
Chart courtesy of Freakonomics
It seems everyone is talking about correlation lately. Above is a very rough picture of how things have changed over the past couple years. I find it interesting that we’ve had two unique periods of high correlation between equities (SPY, EEM, EFA), commodities (GLD, DBC) and bonds (IEF - 10 year Treasury). In the Fall of 2008, shit was hitting the fan. This past Spring, correlation tightened during a ferocious rally (with the exception of gold). The conventional view has argued for a healthy mix of asset classes to avoid large drawdowns. Well, it didn’t help in September/October and if you were trying to hedge in March/Arpil, there wasn’t much available as everything with a high beta ran up. So, as the Bloomberg article linked above points out, cash turned out to be one of the better tools. I’m partial to the idea that Abnormal Returns suggests, maybe because it’s what I’ve been striving for over the past few months:
- 1/3 “risk free” assets (cash, sovereign bonds)
- 1/3 risk assets (equities, high yield, commodities)
- 1/3 active allocation (market timing strategies or fund managers that are flexible in terms of asset classes)