30 Apr 2015

American Stocks and Cities

The other night while washing the dishes, I had the thought that St. Louis is a mid-cap, meaning that the size of our fine city is roughly equivalent to a mid-sized US company.  It’s a weird thought, but I thought it would be fun to carve up US cities the same way that researchers carve up the capitalization of the stock market. I started at Wikipedia with a list of… Read More

29 Apr 2015

Twitter is the Perfect Growth Story

The social media company Twitter (ticker symbol: TWTR) announced yesterday that first quarter revenue grew less than expected and told investors to expect lower sales growth in the near future as well.  As a result, the stock was down almost -20 percent in late trading. When I first saw the headlines, my immediate thought was, ‘this is why you don’t buy growth stocks – when they disappoint on growth or… Read More

28 Apr 2015

Attention Gold Bugs: Don’t Worry, Be Happy

Last week, I wrote that it was difficult to find ‘alternative’ investments that were truly diversifying and that, as a whole, alternatives provide basic broad market exposures that you can find less expensively elsewhere.  Click here to refresh your memory. A client wrote in after that email to ask if we would ever consider gold.  I wrote about gold a little more than a year ago (twice because it’s such… Read More

27 Apr 2015

Flash Crash Surprise, Five Years Later

It’s been almost five years since the ‘flash crash,’ when markets fell by about nine percent in less than 40 minutes in the middle of a trading day. Some well-established companies like Procter & Gamble fell by 40 percent within one minute while others like Sam Adams traded for just one penny per share even though it was selling for around $60 per share minutes earlier. I remember it vividly… Read More

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24 Apr 2015

New Thoughts on the Active Passive Debate

Wednesday night, I was reading a new paper by some of the principles at AQR titled, ‘Fact, Fiction and Value Investing.’  You can find a copy here and this follows on a paper that they wrote last year called, ‘Fact, Fiction and Momentum Investing (which you can find here).’ Now that you’ve read our primers on value and momentum investing, no further explanation is required, although if you want a refresher, you… Read More

23 Apr 2015

China’s Red Hot Market

Last Friday, Chinese regulators said that they were going to make borrowing on margin more difficult for investors in an effort to curb the recent euphoria in Chinese stocks. I have to admit that I didn’t grasp just how hot Chinese markets have been recently, partly because the Chinese stock markets are broken up into multiple segments that are hard to follow and have dramatically different returns.   The Hang… Read More

22 Apr 2015

A Real Greek Tragedy

We may not be happy with the slow and choppy recovery from the 2008 financial crisis, but I think we would all agree that we can thank our lucky stars that we aren’t suffering like the Greeks. The definition of an economic depression isn’t precise, but I think we can all agree that Greece is mired in a horrible depression: the economy is almost 30 percent smaller on an inflation… Read More

21 Apr 2015

Momentum: A Moving Body in Motion

In recent weeks, I’ve written about two well known risk factors, the size premium and the value premium. Today, I’ve got a more difficult topic to cover: momentum.  Virtually everyone agrees that you can find evidence of momentum in the data, but there’s a lot of disagreement about why it exists and how it should or shouldn’t be applied in the real world. In short, momentum is the tendency for stocks that… Read More

20 Apr 2015

Finding True Diversification in Alternatives

They say that the only free lunch in finance is diversification. With stocks trading at lofty valuations and bonds yields historically low, it’s sensible to look at other alternative strategies that could potentially lower risk or increase return (or better yet: do both). Over the last five years, investors have flocked to ‘alternative’ investments, although the definition of alternative is pretty broad and can include things as generic as REITs… Read More

16 Apr 2015

Wither Emerging Markets?

In the first few years after the 2008 financial crisis, a lot of investors were excited about emerging markets. The story making the rounds at the time was that the US and other developed markets were in for a long period of sluggish growth while the prospects for economic growth in emerging markets were still strong. Therefore, the story went, investors should allocate money away from the US stocks into… Read More