Saturday, December 13, 2014

The Imaginary "Barbarian Capital All-Star Global Rejects 2013" Portfolio

About a year ago, bond manager, herbal tea enthusiast*, Boston** sports fanatic and occasional blogger @DavidSchawel emailed me (and several other people) to crowdsource portfolio ideas for a blog post. The blog post never came but I had already saved the portfolio that I submitted: The Barbarian Capital All-Star Global Rejects 2013: ONLY for people who hate money.

The simplistic portfolio approach was to buy the worst performing global assets in 2013 via ETFs available in the US. If you remember, interest rates were rising in the US so US fixed income and real estate had not done well. Internationally, we had weakness in several markets, some commodity driven. We also had weakness in precious metals and coal.

So the portfolio was 15% each GDX gold miners, KOL global coal, TLT long US bonds, IYR US Real Estate, and 5% each ECH Chile, BRF Brazil Small Cap, IDX Indonesia, TUR Turkey, EPI India, THD Thailand, REM Mortgage REITs and PFF US Preferred Stocks.

How did it do? Not bad actually: up a little over 8% after 365 days even with train wrecks likea Coal and Brazil. Most of the performance was driven by declining US rates (helped TLT IYR REM and PFF), as well as a breakout in India. An equally weighted portfolio would have done a little better, at 9.8%.

What can you learn from it? Nothing: it shows momentum, mean-reversion and luck. May be a case for diversification.

Screenshot of the portfolio and the original email below.

*,**- Schawel actually likes coffee and Chicago sports

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