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Spring mesclun mix

album cover - moss on wood

After a dance-heavy mix last time, this one offers a little more variety.  J is of course a folk and world music fan, and I’ve started to dig through her CD collection, picking up at least a few interesting artists along the way: Kevin Breit, Amadou & Mariam, Sarah Harmer, Basia Bulat and Tri-Continental, to name a few.

Electronic music continues to hold my attention, but I’m a little tired of the repeated echoes of electro and I never got very far into dubstep.  Ninja Tune’s recent four-CD XX twentieth-anniversary collection blew my mind, though: take the various ideas coming out of electro and dubstep, and let some eccentric artists take them in wild directions. Trippy stuff; perhaps more so if I had more of a taste for UK hiphop.

Download here, for a few weeks only.

  1. kevin drew. frightening lives. rock, from spirit if…, 2007.
  2. diplo. summer’s gonna hurt you [diplo 2010 remix]. dubstep, from ninja tune xx compilation, 2010.
  3. dj krush. pretense. instrumental hip hop, from jaku, 2004.
  4. kanye west. all of the lights. hip hop, from my beautiful dark twisted fantasy, 2010.
  5. sufjan stevens. riffs and variations on a single note for jelly roll, earl hines, louis armstrong, baby dodds, and the king of swing, to name a few. pop, from come on feel the illinoise, 2005.
  6. belle & sebastian. string bean jean. pop, from dog on wheels ep, 1997.
  7. basia bulat. heart of my own. folk, from heart of my own, 2010.
  8. patrick watson. traveling salesman. rock, from wooden arms, 2009.
  9. hot chip. keep fallin’. electro-soul, from coming on strong, 2005.
  10. grasscut. blink in the night. downtempo, from ninja tune xx compilation, 2010.
  11. béla fleck & the flecktones. prelude. jazz, from outbound, 2000.
  12. peaking lights. all the sun that shines. downtempo, from 936, 2011.
  13. parov stelar. catgroove. acid jazz, from coco, 2009.
  14. dennis ferrer. son of raw. acid jazz, from future sounds of jazz vol. 11 compilation, 2007.
  15. vive la fête! assez. electro, from nuit blanche, 2003.
  16. björk. pagan poetry. pop, from vespertine, 2001.
  17. amadou & mariam. m’bife blues feat. manu chao. world, from dimanche à bamako, 2005.
  18. harry manx & kevin breit. curly may and his brother. folk, from jubilee, 2003.

Was this list influenced by any YouTube memes or the occasional “just for laughs” impulse? You be the judge.

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Passive portfolio tweaks 2011

I’ve posted several times previously about my investment portfolio, but I thought I’d update regarding a few tweaks I’ve made in the last year. The main inspiration for the tweaks comes from reading Rick Ferri’s book All About Asset Allocation — I  finally found a book that laid out the main aspects of portfolio selection in a thorough way, with enough graphs and correlation coefficients to satisfy my inner mathematics geek.

Here’s a table comparing last year’s portfolio target with my current target:

Weight
(last year)		 Weight
(now)
Equities
   U.S.A. VTI 30.1% 28.7%
   Europe / Pacific VEA 28.7% 26.4%
   Emerging VWO 5.2% 8.9%
   Canada XIC 16.0% 16.0%
Subtotal 80% 80%
Fixed income
   Short bonds XSB 15.0%
   Broad bonds XBB/VAB 11.3%
   Real return bonds XRB 3.8%
Subtotal 15% 15%
Cash 5% 5%

Equities

I took a more careful approach to splitting equities up across the regions of the world. The weights are based on the total market capitalization of the stock markets in each region (rather than “GDP weighted”) as of Oct. 2011, with an adjustment to force Canada to 20% of the equity portfolio.  As can be seen, the emerging markets are the main item that changed in this review, mostly because different sources list different countries in the “emerging” category, and because emerging markets have gained quite a bit against developed markets since I first put my targets together several years ago.

(Side note: there’s also now a nice VXUS Vanguard fund covering VEA, VWO and some XIC, with better small-cap exposure and reasonable fees. Definitely a nice way to keep the VEA/VWO balanced for less effort.)

Fixed income

Ferri’s book helped me understand bonds better, and how stocks and bonds interact in a portfolio. I’d read advice that “long bonds have poorer returns that stocks over the long term, and therefore you should own stocks for high risk/high return and short-term bonds for safety.” On that basis, I’d bought XSB (a short-term bond index, average duration of about 2.9 years).

Medium- and long-term bonds are also quite “safe” (over an investment horizon of several years). They also typically offer better returns than short-term bonds. One source I read described short-term bonds as helpful in “inflationary recessions” and long-term bonds as helpful in “deflationary recessions.”  Regardless, I’ve seen little evidence to favour short-term bonds over the other types. As a result, I’ve shifted to XBB (or VAB) which contains a mix of short, medium and long-term bonds, all investment grade.

More importantly, I now understand how stocks and bonds interact. In technical language, they have low correlation, but I find there’s an easier way to think about it.  When you hold both stocks and bonds and rebalance at the end of each year, you’re essentially using the “low correlation” as a way to sell high/buy low. If it’s a great year for stocks, it’s usually a poor year for bonds. Rebalancing will require you to sell stocks at the end of the year (“sell high”) and shift money into bonds (“buy low”). It’s a really simple way to force you into this strategy. Additionally, stocks and bonds have a good fundamental basis for being “low correlated” – they are really different ways of providing capital to a company. Stocks are “high risk” ownership where stockholders take on the risk of good/bad economies, good/bad company performance etc. Bonds are “low risk” loans where bondholders receive income regardless of the economy or company performance; the main risk that bondholders retain is interest rate risk (that is, the risk that they could have asked for more interest on their loans if they’d loaned at a later date).  These two different types of retained-risk fundamentally drive the low correlation, and make stocks and bonds much more distinct than, say, two stocks from different industries.

I also find that this “buy low / sell high” understanding of stocks/bonds helps me decide how to make changes to my portfolio targets. For example, given the past year of poor stock performance and good bond performance, it’s a poor time to change the stock/bond allocation in my portfolio from 80%/15% to 75%/20% because that would mean “selling stocks low” and “buying bonds high.” Instead, if I want to make that change, I’ll wait a year or two.

Finally, I’ve also added “real return bonds” to the portfolio – as I understand it, they are very similar to the “broad bonds,” but with a different mix of interest-rate vs. inflation risk.  I’ll admit my understanding remains a little fuzzy.

Cash

I keep most of my cash in the bank to avoid transaction fees.  However, I’ve seen some portfolios where short-term bond ETFs are treated as cash – after all, they’re very safe and liquid instruments with a healthy 3-4% annual return.

Small-caps and Value

I learned a little about the Fama/French finding – that small-cap companies and “value-oriented” companies have historically offered higher returns than the overall stock market. I considered buying some ETFs for this purpose, but ultimately held back. My take is that the Fama/French findings are very well-known now, and that it’s not clear that a premium will continue to exist.  Tilting the portfolio in that direction is essentially a “bet” on an ongoing premium.

Instead, my equity investment goal is simply to reproduce the performance of the global equity market, weighted by market capitalization. No ifs, ands or buts; and no addition of extra layers of “bets.”  I’ll continue to aim to get coverage of small-caps and micro-caps in my portfolio, but I won’t give them extra weight as a Fama/French bet.

Performance

And now, a quick detour into the performance of this portfolio over the past several years. The table below shows the annual returns of each component of the portfolio, giving the “sequence of returns” for each piece.

2007 2008 2009 2010 2011
Equities
   U.S.A. VTI -9% -23% 11% 11% 6%
   Europe / Pacific VEA -6% -27% 10% 3% -8%
   Emerging VWO 17% -42% 52% 13% -15%
   Canada XIC 9% -33% 34% 17% -9%
Subtotal -1.6% -28.3% 19.8% 9.9% -3.9%
Fixed income
   Mixed bonds XBB/VAB  3% 6% 5% 6% 9%
   Real return bonds XRB  1% 0% 14% 10% 18%
Subtotal 2.5% 4.6% 7.4% 7.1% 11.4%
Cash 0% 0% 0% 0% 0%
Total -0.9% -22.0% 16.9% 9.0% -1.4%

Assumptions:

  • Expressed in Canadian dollar terms (i.e., including all currency shift effects and using no currency hedging)
  • Rebalanced annually

Cumulative returns:

  • From Jan. 2007 to Dec. 2011: -2.9%
  • From Jan. 2008 to Dec. 2011: -2.0%
  • From Jan. 2009 to Dec. 2011: 25.6%
  • From Jan. 2010 to Dec. 2011: 7.4%

I started investing in late 2008, so I usually look at the Jan. 2009 – Dec 2011 return – but it’s always good to remember that this gives a very rosy view compared to other starting dates.

Closing Thoughts

Sure, it’s been a poor year – the European crisis hit stocks hard – but the impact on the whole portfolio was still not huge.  I’m feeling steadily more comfortable with investment, thanks to a few years of watching the markets closely and really trying to understand what’s happening.  I can’t predict the ups and downs, but at least I’ve done my homework.

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Delicious food

It’s time for a quick plug of my favourite cookbook of recent years: Mark Bittman’s How to Cook Everything Vegetarian.

I’m by no means a militant vegetarian. I spent about five years eating “pesco-vegetarian” (no meat except fish). I now eat about 80% vegetarian and label myself a “less-meat-atarian,” mostly for environmental reasons.  My exit from strict vegetarianism began for two reasons: because I didn’t know how to cook tasty food, and because Toronto restaurants have appallingly limited vegetarian options. At the time I stopped eating vegetarian, I’d received Mark Bittman’s earlier non-vegetarian cookbook and marvelled at the tastiness of his simple recipes.  A few years later, this vegetarian book knocked my socks off.  All of his cookbooks are recommended, and I understand there’s a great iPhone app for the recipes too.

What makes this vegetarian book so good? First, Bittman clearly loves food and doesn’t beat anyone over the head with the politics. He understands the climate change imperative, and wants to help those aiming for a lower-carbon diet find appealing ways to do it.  If vegetarian food doesn’t taste good, many people will stick with meat dishes.

Second, Bittman deconstructs food in an internationalist way: many recipes come with 3-4 different variations that show how to modify the same basic dish to give an Indian, Spanish or French way.  “Use chickpeas instead of beans, rice wine vinegar and peeled fresh ginger instead of the red onion. Instead of olive oil, use two tablespoons peanut oil and two tablespoons cocount milk. Use cilantro instead of parsley.”

Third, he gives a serious lesson in making the most boring and untaught parts of vegetarianism manageable: cooking tofu, lentils and beans in ways that make them tasty.  His chilis are unbelievably rich and meaty, he provides 5-6 different ways of preparing tofu that were largely new to me, he has many lentil dals and soups with a wide range of textures and flavours, he taught me the tastiness of roasted nuts as a protein source, and I’ve even learned to like eating bean-based dishes.

Finally, when I’m eating vegetarian, I often approach meal construction differently. Instead of starting with a meat and looking for ways to cook it and side dishes, I usually start with 2-3 vegetables in the fridge and try to build something around them. The book’s index is ideal for this, giving a huge range of options for any given vegetables. The book is generally really well organized, and well adapted to my way of working and level of skill. Recipes are usually quick and designed for “everyday” cooking rather than big productions. He keeps to a short list of ingredients and avoids exotic items, or else gives easy substitute ingredients. And he assumes the reader is a novice cook, with no assumptions about knowing the lingo.

Some of my favourite recipes from this book:

  1. Chili with black beans & tempeh – page 677. The tastiest veggie chili you will ever taste, courtesy of whole roasted garlic, beefy tempeh bits, and smoky chipotle peppers.  A little more labour-intensive than some of the other versions, but worth it. (Or: try the version with espresso, page 608.)
  2. Mung bean dal with apples, coconut and mint – page 602. I would never have guessed it was possible to make such a refreshing, green and summery lentil/bean dal, but he pulls it off.
  3. Boulangerie beans with sweet potatoes – page 621.  Baked beans that melt in your mouth, with stock reduced into a sweet glaze on the potatoes.
  4. Beet salad and avocado with grapefruit – page 66. Sweet, sour, creamy and acidic. You can’t go wrong.
  5. Braised lentils, spanish style – page 598.  Lentils with red wine and saffron; delicious.
  6. Dry pan eggplant – page 294.  A fantastic, oil-free way to prepare eggplant, turning the inside creamy and liquid and the skin into a complex, smoky crispy coating.
  7. Sea green and mushroom stirfry – page 357.  Who knew seaweed was such a useful ingredient?
  8. Vegetable soup, Thai Style – page 127.  Basically a “tom yum” soup, very easy to make.
  9. Chickpea soup with saffron and almonds – page 117. The crunchy roasted almonds add great texture.
  10. French-style lentil soup with spinach – page 116. Lemon juice, good lentils and spinach make this simple soup quite tasty.
  11. Simple Paella with mushroom caps – page 523.
  12. Tofu, Provençal Style – page 649. Tofu with black olives, tomato, capers and marjoram.
  13. Quick-Cooked Edamame with Kobu Dashi or Soy Sauce – page 583. A really easy, refreshing dish with nice japanese flavours. The seaweed variation is also nice.
Some favourite techniques:
  • Poached tofu – page 641
  • Soup stocks – from vegetables (scraps or whole, page 101), or from seaweed (page 103), or with additions like cheese rinds
  • Using the correct oils to impart a regional flavour – peanut, olive and neutral
  • “Shocking” steamed vegetables in ice water for texture and colour – page 236
And while I’m at it, let me share some of my favourites from his other books:
  • Creamy Pumpkin or Winter Squash Soup, Version II – HtCE, page 60. Half squash, half granny smith apples, plus white wine, tarragon and cream: rich and sour and delicious.
  • Pasta with Saffron-Cauliflower Sauce – HtCE, page 135. Anchovies, raisins and pine nuts make this sumptuously rich (and a little pricy… but cheaper than beef).
  • Tender Greens with Peanuts and Tomatoes – HtCE, page 98. I make this with dandelion greens, which are impossibly bitter alone – but add in sweet tomatoes, the umami of roasted peanuts, the sourness of lime juice and a bit of chile, and the bitterness is masked and delicious.

All told, a great book. Mr. Bittman feeds us very well.  I also highly recommend his meat-oriented books; very good, but in a much more crowded field.

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Honduras 3: Pico Bonito

The other best part of our vacation: a three-day jungle hike in Pico Bonito national park.

A gleaming, shiny ferry took us from the island of Roatan to La Ceiba on mainland Honduras. A short 25-minute taxi ride later, we were far outside town in the Cangrejal river valley. The destination was an “eco jungle lodge” by the name of Omega Tours, run by a pair of friendly Germans in a beautiful little slice of jungle. This place had the best food of the vacation: four types of German beers (even served in the right glasses), schnitzel, fleidelsuppe, plantains/honey/sour cream breakfasts, and delicious juices.  Honduran food is fine but fairly simple, and the best stuff—fruit and vegetables—are usually off-limits due to issues with the local water.  This place knows about our delicate digestive systems and cleaned everything carefully, offering us great juices: tamarind, “jamaica juice” (hibiscus), marañon (fruit of the cashew), guava and more. Omega gets our unqualified recommendation: we loved it here, and spent an extra day just hanging around and eating nice food.

Omega offered a range of prearranged tours, and we liked the sound of a three-day hike into the jungle. Two local guides were part of the deal, and they shouldered the big packs and cooked us meals up at the top. While we’re not really used to that level of luxury while camping, it was pretty pleasant, and the guides were great for pointing out wildlife.

And there was some pretty good wildlife. Mammals are shy and scarce, and we saw none. There are many dangerous snakes in the area, and we saw at least two dodgy ones, including a brilliant red-and-black striped critter. The first day of the hike took us up to a small camping ledge on top of a huge waterfall, and the second then took us on a dayhike higher up, circling a ridge around a bowl. From that vantage, we were at most at eye level with a lot of the jungle canopy, and could spot some interesting birds: the toucanet, waving his huge beak around in a show dance. Another bird was described to us as the “koa” and was probably a trogon: like its more famous relative the quetzal, with shiny iridescent feathers. The final charmer was a 15cm chameleon we spotted on a tree trunk. The guy was well camouflaged, and took his role-playing of a “stick on a trunk” seriously: our guide tried to pry him off, and the little reptile just went rigid and played “dead stick.”

Our campsite had its share of interesting features too. We were perched on top of a huge waterfall, but a little upstream was a smaller 15 metre fall which made for a great shower, with pressure massage. The rock pools around here revealed more good critters, like the plate-sized crab who menaced briefly and fist-sized spiders. Nightfall brought more intrigues: at dusk a local type of firefly came out, with brightly glowing abdomens. When the fireflies rested on a branch the abdomen went off, but two eerie green dots remained skittering along the branch: their eyes, as we later discovered. Very pretty, but also a sad scene: we watched one firefly misfire and hit the stream (possibly going for its reflection?) and then get swept over the large 100 metre waterfall. Funny and tragic, all at once.

I’d also bought a new camera just before the trip, the Canon S95. By this stage of the trip, I had enough of grasp of the manual controls to start shooting genuinely gorgeous pictures: striking vistas in dozens of shades of green, misty overcast jungle, orchids and textured tree bark all succumbed to the camera. J gets credit for a fair number of these too, especially the various plant shots.

We had a very wet first day, as the heavens opened and dumped a tropical downpour on us during the ascent. My hiking boots filled up, and it felt like I was standing in buckets full of water. Thankfully, our guides had a great reviving meal of fire-roasted chicken together in short order, washed down with the classic combination of rum and guava Tang. The German influence still came through with tasty liver påté included on the lunch menu; this exotic treat was quite popular with our guides. The rest of the trip was pretty dry, but hard work. The hills were steep, requiring us to haul ourselves up using the tree trunks. Complicating matters, we’d been warned about a particular type of tree: one with near-invisible 5cm needle-thin thorns, capable of going straight through your hand. Not the type you wanted to grab hard and haul up on. No accidents, thankfully.

Looking back and describing the experience, it’s hard to capture how fantastic it felt. The immersion in steamy jungle, the lush, bursting life, the sweaty exercise and the refreshing waterfalls and pools all combined for a truly great three days.

After the three day hike, we attempted to wash our sweat-soaked clothes and took a day off at Omega. The local toads apparently loved the recent downpour and were croaking at full volume, then mating and leaving the swimming pool full of toad eggs. We took a stroll down the road to the town of Las Mangas, and a short canyon hike out there. On the way, we had to admire the amazingly engineered nests of the oropendola bird: a super-deep 1.5m nest, with dozens all hanging from a single tree. They also have a really electronic and liquid sounding call, which I described at the time as Stephen Hawking singing underwater.

Locals in the area seemed unusually invested in the jungle. I think Omega Tours employs enough people (growing food, cooking, guiding, cleaning, making furniture) that the tourism benefits of an intact jungle are clear to people. It’s probably one of the best-kept parks I’ve visited: virtually no litter, comparable to B.C. parks. Something like 75% of the Pico Bonito area is completely off-limit to hikers, a real wildlife preserve.

See the rest of our photos from Pico Bonito and from Omega and the Cangrejal River area.