We were fortunate to be invited to a BlackRock “Alts” conference in Chicago last week, presumably the group was in town for the Morningstar throw-down.<\/p>\n
Mark Peterson,\u00a0BlackRock’s Director of Investment Strategy and Education\u00a0led off the\u00a04 presentations with what I thought was an open and honest discussion of\u00a0“Liquid Alts” and what they are, and what they are not.<\/p>\n
Mark had one slide in particular that caught our attention:<\/p>\n
Just dividing the universe between US Stocks (presumably the SP 500) and US Bonds (presumably something akin to the Barclay’s AGG),\u00a0here\u00a0is the return data BlackRock provided:<\/p>\n
US Stocks (Average Annual Return data):<\/strong><\/em><\/p>\n 88-year average: +10.08%<\/p>\n 1980-1999 avg: +17.9%<\/p>\n 2000 – 2013 avg: +3.6% (and this includes last year’s 32% SP 500 return remember)<\/p>\n US Bonds (Average Annual Return data): <\/strong><\/em><\/p>\n 88-year average: +5.29%<\/p>\n 1980 – 1999 avg: +10.0%<\/p>\n 2000 – 2013 avg: +5.6%<\/p>\n I remember sometime in 2010 or 2011, a reporter or conference attendee asking Larry Fink (BlackRock CEO) what his recommended asset allocation\u00a0was at that time, and he said “100% equity” which no doubt left every compliance and marketing person at BlackRock clutching their chests and looking for defibrillators, but it was a good call on Larry’s part. CNBC had a field day with that comment.<\/p>\n The above returns are pretty good evidence why we expect the bull-market in the SP 500 to continue, and why there are so many bearish the bond market(s).<\/p>\n You can see how the last 13 years of “average” US Bond returns remains closer to the 88-year average than the same return for US Stocks. The 13-year average return of +3.6% for US Stocks is well under the 88-year average of +10.88%, and hence we think more equity upside remains.<\/p>\n I wonder about that 88-year average US Bond return though. Up until the early 1980’s (and Mr. Fink was one of the pioneers of the MBS market), Mortgage-Backed Securities were rare, and the Treasury market was much different. I don’t think we saw 30-year Treasuries issued until the Reagan Administration, beginning in 1980. 1980’s saw the advent of MBS securities, the corporate high-yield market, and in the late 1980’s the explosion in asset-backed securities.<\/p>\n Id like to say thanks to BlackRock and\u00a0Trinity’s wholesalers for the invite. It was a very good 4 hours. Very informative.<\/p>\n We are still looking for a 5% – 7% SP 500 correction before a strong q4 ’14 rally.<\/p>\n Trinity Asset Management, Inc.<\/p>\n Brian Gilmartin, CFA<\/p>\n Portfolio manager<\/p>\n <\/p>\n <\/p>\n <\/p>\n","protected":false},"excerpt":{"rendered":" We were fortunate to be invited to a BlackRock “Alts” conference in Chicago last week, presumably the group was in…<\/p>\n","protected":false},"author":2,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_jetpack_memberships_contains_paid_content":false,"footnotes":""},"categories":[113],"tags":[],"class_list":["post-3802","post","type-post","status-publish","format-standard","hentry","category-reversion-to-the-mean"],"jetpack_featured_media_url":"","jetpack_sharing_enabled":true,"post_mailing_queue_ids":[],"_links":{"self":[{"href":"https:\/\/fundamentalis.com\/index.php?rest_route=\/wp\/v2\/posts\/3802","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/fundamentalis.com\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/fundamentalis.com\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/fundamentalis.com\/index.php?rest_route=\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/fundamentalis.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=3802"}],"version-history":[{"count":4,"href":"https:\/\/fundamentalis.com\/index.php?rest_route=\/wp\/v2\/posts\/3802\/revisions"}],"predecessor-version":[{"id":3806,"href":"https:\/\/fundamentalis.com\/index.php?rest_route=\/wp\/v2\/posts\/3802\/revisions\/3806"}],"wp:attachment":[{"href":"https:\/\/fundamentalis.com\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=3802"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/fundamentalis.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=3802"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/fundamentalis.com\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=3802"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}