The Real Charlie

Changes

I made a few changes to the left amidst the "Blogs of Note." I deleted a few that I had gotten less interested in and added two new ones:

The Swellesley Report is a nice summary of what's up in my little corner of suburbia, from the local papers, town hall and general word on the street. It's no Universal Hub, but then again what is?

Star Spangled Haggis is a delight. Sincere, snarky, loving, irreverent. I don't agree with her politics, but otherwise I love it. And as a bonus, her daughter "Bambina" is a pal of Roxanne's from the tot biz.

I am also contemplating changes on the investment front. I think that we are facing a recession next year. Not a big one, not a deep one, but one nonetheless. The housing slump is biting hard now, and dragging the consumer-driven parts of the economy down with it. Capital is still tight for corporate borrowers. Every indicator I see looks bad. Not awful, not disastrous, just bad. So I am hunkering down a bit, and considering a few moves.

One of my fixed income managers is not doing so hot. They manage tax exempt long bonds (25-30 year maturities), A and AA credits. I might liquidate, give some cash to my other fixed income manager (3-7 year maturities, AAA, tax-exempt but with authority to rotate into treasuries if the value is good), build a small "real return" position (probably in TIPS or something TIPS-based) and finally commit to an "alternative investment" fund (probably Diamond Hill Long-Short).

I also want to add to my cash cushion, probably by buying some CDs or T-bills. By the middle of next year or so, there may be some equity buying opportunities. During the 2000-2002 downturn I had a lot of free cash and picked up a nice set of iShares, Apache and ExxonMobil at a fraction of what they are, and some other nice buys. I'd like to be in a position to bargain hunt again. For that, I need to raise some more cash now.

The final thing I am considering is some form of tactical asset allocation. I have seen this really help returns in some endowment contexts and in my own retirement fund. What you do is pick a manger with a global, wide ranging authority and put 10% or so of the portfolio in their hands. Their ability to move more quickly than you can helps out in some turbulent situations, and when trends are just starting to form. I have had Blackrock Global Allocation in my IRA for a while, and it has been super. I might add more to that position, or look at a more fixed income focused tactical fund. I'll keep you posted.

Now if I can just keep my name out of the Globe for a few weeks...

Risks In Spelling and Asset Pricing

Thanks to Jon for pointing out the spelling errors (now fixed) in my last post. Readers: if you find an error, feel free to post a mocking comment. It will just drive me to fix it and check my work slightly better.

So as part of my work life I was at a meeting today where various people make asset allocation decisions about a large amount of money. One small piece of this pie had an allocation to a supposedly conservative (AA to A credits) bond fund that ended up down 9% for the month of July due to exposure to mortgage backed securities backed by sub-prime home loans, a 2 or 3 standard deviation event. The people on the committee were furious, and their angst spread to every asset allocation decision on the agenda. Every statement and every assumption about risk was being questioned, sometimes too much, sometimes just right, always with care and passion. There were a few sparks.

It made me think about my own portfolios, and the risks they carry, and how accurately those risks are described and priced. I think, for example, about the AAA bonds that are actually AA or A credits with insurance from issuers (MBIA, FGIC, etc.) that have their own (flawed?) ratings. I think about some financial stocks, and some stealth financial stocks (GE, for example), and their exposure to credit risk through the same problem of risks either incorrectly rated or concealed. The fear in the room today is making me take another look at the allocation of risk throughout my portfolios, the riskiness of individual securities and funds, and my tolerance for 2 and 3 standard deviation events involving my "safe" assets. You should probably entertain the same thoughts.

Tunnel of Fear, and the Little Jewish Assault Tank Destroyer

So part of the end game of the REAL Real Real Daddy episode I discussed last time was my trip out to Logan to pick up Abby and our youngest from their funerary trip. This required some time in Boston's now notorious tunnels and various detours. Sadly, I felt compelled to say a little prayer and look up nervously while I used the tunnels. Just pitiful. After $14 billion, I shouldn't have to pray like a seafarer about to set sail for Parts Unknown, Where There Be Dragons. I was just driving to East Boston.

But I survived, and life is now settling down in Real Charlie's little world.

On the subject of "little world," last night Abby tried to find an email from a blog friend from Germany. Her blog is called Isa's Kleine Welte, and Abby figured that her last name was Kleine or Welte. Thinking about this today I realized that, duh, her blog is called Isa's Kleine Welte, or Isa's Little World, a fine name for a blog about making little toys and crafts. I emailed this observation to Abby and apologized for not deducing this last night with my terrible, terrible German, derived mostly from books about World War II and the Holocaust. I also pointed out that if Ina had named her blog Ina's Kleine Judische Sturmjagdpanzer I would have caught the problem immediately, but that a blog called Ina's Little Jewish Assault Tank Destroyer was a rather different sort of thing. Abby says that made her laugh, and if I can make one person laugh or cry a day, particularly with a gag involving the word "sturmjagdpanzer," I'm a happy man.

Apart or A Part?

We (that is, my three girls and me) went to ArtBeat in Somerville this morning (some pictures someone else took here) right when it was opening, before it got too hot and crowded. My youngest snoozed out in the sling the whole time (when we took her out she was so sweaty and compressed it looked like she was being born again), the eldest got a handknit plush ice cream cone (she is curled up in bed with it now) and Abby got a wooden necklace. But better, she got to see and chat with some fellow blogging crafty women and a fellow Etsy e-tailer. Her blog (whileshenaps, linked on the left side here) is one of many craft blogs. She meets people in person, trades fabric and toys and even has a crafting nemesis. For something so solitary, it is very communal.

Your humble correspondent, on the other hand, blogs in a howling wilderness. I have not found my web community yet. I'm not sure that there is one for someone posting snarky comments about infectious diseases, half-baked hectoring about personal finance and various other ravings (not rantings, just ravings). And a community isn't all great all the time. I lurk on some blogs run by and (I guess) for observant Jews - more observant certainly than me, one of Boston's most notorious treif eaters. They are, by and large, merciless to each other. Many have the comments deactivated, others have comment rolls that are a litany of intra-Orthodox feuds and name calling. With apologies to the great Tom Lehrer and his song "National Brotherhood Week," the Lubavitch hate the Yeshivish, and the Yeshivish hate the Lubavitch, and everybody hates the Satmars. Check out Chaptzem for a small and light taste of this.

Anyway, I'll keep posting, maybe you'll keep reading, and we won't call anyone a heretic. This week.