Earlier CNBC had John Duffy from JP Morgan on who among other things made the point that if you missed the best five days of this year you missed out on 12% of upside. This bit of logic comes up every so often and I think it is wildly flawed.

Forgetting about predicting anything for the moment if the market peaks on a certain day then drops 28% (normal bear market decline) over the following 12 months (within the range of normal bear market duration) then the most important thing would be being completely out even if along the way in that 12 month 28% decline there were four different days where the market was up more than 5%.

These sorts of best days worst days commentaries come along every so often but they make too many assumption and leave out too many details. If you are one to try to make defensive allocations when you think the market will struggle you should remember that there will be feel good rallies along the way.

Duffy did have one interesting thing to say about a general target allocation they use for clients which is 40% equities, 35% cash and fixed income and 25% alternative assets. This fits in line with some of the posts here of late.

What do you think of the 25% into alternative assets? What would you include in alternative assets? What would you like to see that does not already exist in the way of accessible alternative assets?

Last 5 posts by Roger Nusbaum

• The Big Picture for the Week of November 15, 2009 - November 14th, 2009
• Process Drilldown - October 23rd, 2009
• Sunday Morning Coffee 10-18-09 - October 18th, 2009
• A Little Followup From This Morning - October 8th, 2009
• Wednesday Roundup - October 7th, 2009