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Investment Allocation Commentary & Ramblings by Jan Z.

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Adam always seems to be tweaking his investment method madness.  Recently he decided to simplify his clients’ pie charts to only three slices (asset classes) to allow for increased opportunistic monetary benefits.  Say what?  

 Imagine you are a caterer. You provide a menu for a mid-summer event, and dessert is listed as BAKED PIE.  How vague, right? How lame, right? Au contraire! At event time, you will choose the very best of the season. Fruits at their peak ripeness! Locavore pies! Wonderful, bursting-with-flavor summer pies!   If tree fruits are not in season, then you will go with berries.   

Many of you might be familiar with your own investment pie (asset allocation). In it there is a % allocated to large capitalization stocks, another % to mid cap, small cap, international, emerging markets, yada yada, yada—you get what I’m sayin’?  Now, that is a lot of pie slices; but they are all in the EQUITY section of your pie chart. You knew that already, right? You faithfully read all of your monthly statements, and Adam’s dry boring quarterly newsletter articles, as well.

 Let’s agree that the small caps (berries) are ripe now, and the large caps (tree fruits) are not.  Rhubarb (mid cap) is past its prime, nut pies (international) are out of season, and just forget custards (emerging markets). Then you the caterer invest in berries, right?  I would!  You want all your BAKED PIES at this moment made with berries, right? Yes! Then, don’t you want all your EQUITY money invested in berries (er, the small caps) that are now ripe for the picking? Yes!   

Forget all those darn sub category lines and colors and blah blah that your darn pie chart has in the EQUITY section.  Just have Adam do his magic, pick the best fruits, and slide back and forth over those equity sub-category lines to give you exposure to the most attractive asset class at any given point in time! I said sub-equity, not sub sandwich—sheesh!  

What about the rest of your pie chart?  I thought you’d never ask.  What kinds of UNBAKED PIES are there? [The crust is baked, the filling is not.] There are cream, chiffon, meringue, and so on.  In the past, you had defining lines of percentages allocated to government versus corporate bond slices, money market versus CDs (if you think I mean music here, and you are a SFM client, Lord help you!). Recently Adam has decided to lump all the UNBAKED PIES (I mean FIXED INCOME assets) together into one big slice. So now you have just one big % for FIXED INCOME. Here again, Adam does his strategic money moving magic, like I explained before.   

The third and final pie slice is your ALTERNATIVE investments. This is a catchall of everything not correlated to stocks and bonds. Commodities, real estate, inflation hedges (Naked Alpha anyone?), and so on.  This just reminds me of NOT PIES.  You know, Whoopie Pies (not cushion!), Eskimo Pies, Mud Pies, Cow Pies.  And Adam says, ‘don’t forget Humble Pie’—especially when it comes to investing.