Puplava: Unloved, Undervalued and Underowned

[Francisco Monjardino]

Mais um artigo publicado pelo Jim Puplava no site financialsense.com.

Está excelente, de leitura obrigatória para quem quer saber mais sobre a utilização da diversificação para reduzir o risco.

Aqui fica um pequeno excerto:

Unloved, Undervalued and Underowned

If you have ever taken an investment course, read a book about investing, or talked to an investment advisor, you've been made aware of the importance of diversification. Diversification means different things to different people. To some it's having money in stocks, bonds, and cash. To others it's owning stocks in different sectors. To many it means owning domestic as well as foreign stocks and bonds. Diversification is used as a means of reducing risk. Yet today the application of diversification strategies is seriously flawed. Most advisors simply put their clients in diversified portfolios primarily made up of paper assets.

The basic elements of modern portfolio theory emanate from Professor Harry Markowitz as outlined in his 1959 paper "Portfolio Selection: Efficient Diversification of Investments."[1] The central theme of Markowitz's work is that rational investors should conduct themselves in a manner which reflects their inherent aversion to absorbing increased risk without compensation by an adequate increase in expected return. Risk was defined by Markowitz as the uncertainty, or variability of returns measured by the standard deviation of returns around the mean. Starting with the conception of risk and the assumed aversion to risk, investors should try to minimize deviations from expected portfolio returns by diversifying their security selections. This meant holding either different types of securities and/or securities of different companies. Markowitz pointed out that holding different issues wouldn't significantly reduce risk if the different securities contained a high degree of positive covariance. What Markowitz meant by that statement is that if the different securities held in the portfolio all moved in the same direction and magnitude or if their price movements were similar, risk would not be reduced.

To reduce risk in a portfolio it would be important to own securities that did not fluctuate in similar fashion. If one component of the portfolio was moving down, you would want to own assets that moved in the opposite direction. In other words, various components of the portfolio should be negatively correlated.

Markowitz's approach to investing has been criticized from both a theoretical and practical point of view. The greatest criticism relates to the assumption that rational investors are risk averters. In the bubble markets of the 1990s and the bubble markets of today investors have shown remarkable and consistent behavior in ignoring risk. One only has to look at stocks such as Google and Yahoo!, which sport triple digit P/Es. Then there are the IPOs such as last year's Marchex, which had only $23 million in sales and no earnings and yet the stock sports a $500 million market cap. Irrational behavior isn't confined only to individual investors. Professionals have been buying these stocks in addition to high risk assets such as junk bonds and foreign sovereign bonds with low credit ratings. The result is that credit spreads have narrowed considerably. So today's high risk investments offer very little in the way of a premium for taking on higher risk.

This criticism of Markowitz doesn't invalidate the concept of negatively correlated assets as a means of reducing risk. If everything in the portfolio moves in the same direction, then risk is not reduced. To reduce risk, various assets held in a portfolio should be negatively correlated. The investment class that is negatively correlated to stocks and bonds is commodities. In their research paper "Facts and Fantasies About Commodity Futures" professors Gary Gorton of Wharton and K. Geert Rouwenhorst of Yale show conclusively that commodities are negatively correlated with equity and bond returns. The main reason is due to the business cycle. The other is that commodities are positively correlated with inflation, unexpected inflation, and changes in expected inflation.[2]

In their study of investment markets and commodities from 1954-2004 the professors found the following:

1)    Commodity futures were negatively correlated with returns on the S&P 500 and long-term bonds.

2)    The negative correlation between stocks and bonds increase with the holding period.

3)    Commodity futures returns are positively correlated with inflation.[3]

What the professors showed from their research was that commodities as an asset class were negatively correlated to paper asset classes. When the financial markets did well as they did between 1982-2000 commodities did poorly. When paper markets performed poorly–as they did in 2000-2002–commodities produced positive returns. This has a lot to do with the business cycle and inflation, which I will get to in a moment. More importantly, what the professors' work illustrated is that as an asset class commodities performed well when they were needed the most. As shown in the graph below, commodities produced a positive return when stocks and bonds were performing poorly.

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O artigo é algo extenso e divide-se em mais quatro pontos:


- Commodities and Inflation;

- The Business Cycle;

- The Fundamentals;


- Supply and Demand.


Boa leitura,