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Originally Posted by nwsteve
Studyjust released by Merrill Lynch indicates that nearly all asset classes are now well correlated with S & P 500. Only consumer products seem to be counter-cylclical. Apparently much of this alignment has happened in last 5 years
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I think more people are beginning to understand that correlations change over time. IOW correlations don't stay correlated. I didn't expect them to move this quickly, though-- I wonder if higher volatility & financial velocity is speeding up everything?
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Originally Posted by nwsteve
The Merrill researchers say bonds remain a good bet to rally when U.S. stocks sink.
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No kidding, Merrill-- really?!? I wonder how much people pay for that insightful analysis?
Quote:
Originally Posted by nwsteve
Another potential source of diversification is consumer-staples stocks. Consumer staples have become the only stock market sector less correlated to the S&P 500 today than in 2000. The reason: oil- and technology-obsessed investors have no interest in Tide or toothpaste, which is why stocks like Altria (Research), Proctor & Gamble, (Research) and Wal-Mart are stuck in neutral despite fine fundamentals.
Looks like a time to revisit asset categories. Isn't there an ETF that sector specific to Consumer Products? I know Fidelity has a sector fund for the category. Or do you buy P &G and enjoy the dividends.
nwsteve
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Either buy iShares' "Dow Jones U.S. Consumer Goods Sector Index Fund" (IYK) (of which P&G comprises 15%), individual stocks trading at multi-year lows, or the Fidelity sector fund, or... Berkshire Hathaway. It's interesting to note how many of BRK's stock holdings mirror the IYK ETF and how many more "boring" consumer-products companies they own outright.
But all of the above, Berkshire included, seem to be trading at or near multi-year highs.