Outside of a short blip in January, there has not been a period of time this year where the total return of the S&P 500 over the prior 200 trading days has trailed the total return of long-term US Treasuries. With the S&P 500 up 23.4% and long-term US Treasuries down 10.2% over the last 200-trading days, the current performance spread between the two asset classes is above 30 percentage points. In what has become a comparison that is increasingly looking as lopsided as matches between the Harlem Globetrotters and the Washington Generals, when people compare the two asset classes, there are very few who would pick Treasuries to win.
The chart below takes a look at the performance spread between the total return of the S&P 500 and long-term US Treasuries over a 200-day rolling period going back to 1989. Since then, the average spread has been 1.84 percentage
How can an investor get guidance on how to construct a portfolio that will protect them should the stock market have another losing streak that lasts more than a few days? We discuss this question while specifically looking at how much gold an investor may want to hold in a portfolio.
(Click to enlarge)
In 1934, the price of gold was $35 an ounce; as of September 30, 2013, it was $1,331, yielding an average return of about 5%? Gold bugs might argue this suggests gold should have a permanent place in investors’ portfolios. Conversely, however, those thinking the yellow metal is a barbarous relic, may only see themselves confirmed in their view that gold is overpriced. Keep in mind, the same point can be made about stocks’: historical returns are not “proof” of future returns. Without endorsing either view, let’s have a look at how an investor could have
Robert Olstein is the manager of the Olstein All Cap Value Fund (OFALX). As of December 6, 2013 OFLAX had about $650 million of assets under management - an amazing figure given the fund's expense ratio of 2.3 percent. You would think that given that high an expense ratio the fund must have generated great returns in order to justify the investment. And given the fee, it shouldn't come as a surprise that when Olstein was asked about index funds he angrily responded: "What do you mean I can't beat the market?"
In a December 7, 2013 interview with the New York Times Olstein stated that index funds give you mediocrity. And while he acknowledged that most active managers underperform, he aims for much better. He stated: "The rise of index funds is part of a trend toward sloppy investing - a willingness to follow the herd." He