29 May 2015

Finding the Best Ratio to Value Stocks

For a few years now, I’ve been pondering why academics always evaluate the cheapness or expensiveness of stocks based on the price-to-book (PB) measure.  Even more oddly, they call it book-to-market, but that’s a mystery that won’t be solved. In case it’s been a while since you’ve had an accounting class, the book value of a company is equal to the assets minus the liabilities, or equity of a company…. Read More

By Tags:
27 May 2015

Advice for Graduates: Buy Stocks

It’s that time of year when another batch of kids finishes school and begins working. Old folks like me will offer plenty of advice knowing that most of what we say will be a little lost on these fine young people, just as it was on us when we were their age.  You never know, though, good counsel today might get re-tweeted and go viral. My advice is simple: buy… Read More

By Tags:
26 May 2015

Quality Investments Over Quantity Investments

In recent months, I’ve been working to create a set of ‘primers’ that describe certain market factors that we pursue in our strategy in hopes of increasing returns, lower risk, or, in a perfect world, doing both. So far, we’ve looked at three equity factors: size (small companies tend to outperform large companies), value (cheap companies tend to outperform expensive companies) and momentum (stocks that have recently outperformed/underperformed are likely… Read More

By Tags:
19 May 2015

Dow 36,000

Seeing the DJIA at 18,000 reminds me of a book published at the peak of the internet bubble titled, ‘Dow 36,000: The New Strategy for Profiting from the Coming Rise in the Stock Market,’ by James Glassman and Kevin Hassett. At that point, the DJIA was about 11,000, so it only had to little more than triple to hit the 36,000 mark.  I had graduated from college in 1995 when… Read More

By Tags: ,
18 May 2015

Nobody Knows Nothin’

The Wall Street Journal ran an interesting article over the weekend, ‘How Much Should a Currency be Worth?  No One Really Knows.’  Click here for the article, though a subscription may be required.     We don’t have any direct investment in currencies, but the headline caught my attention because I have the view that no one really knows what anything is really worth.    The article focuses on the… Read More

By Tags:
15 May 2015

The Trouble with Hedge Funds

Yesterday, in my article about activist investors, I referred to a Yale academic who said that one hedge fund index showed that activists had sluggish performance, but then said that this index series is widely known to be troublesome without any explanation for what makes them problematic. Hedge fund ‘indexes’ are well known to overstate performance and understate risk, making them appear more appealing to investors than they really are.  The… Read More

By Tags:
14 May 2015

Another Wall Street Soap Opera

You know I love Wall Street soap operas and one just ended yesterday between the activist investor Nelson Peltz and the old-line chemical company, DuPont (ticker symbol: DD).    An activist investor is someone who buys a large stake in a publicly traded company and uses that ownership stake to force management to make major changes.     Being from St. Louis, Carl Icahn is the most famous activist investor in… Read More

By Tags:
7 May 2015

Unconstrained funds and Uncontained funds

Yesterday, I wrote that Bill Gross, the former bond king, said that shorting German bonds was the short of a lifetime. Although I didn’t have my nice chart (which I’ve added below), I did note that German yields had spiked, which means prices fell and his short must be working out well.  I also went through the details of a short trade, so if you missed it, you can click here…. Read More

By Tags:
6 May 2015

Celebrating Short-Sellers

Just 13 trading sessions ago on April 17th, the yield on the German 10-year government bond, or bund, fell to less than 0.05 percent. Given that a third of all non-US bonds issued worldwide had a negative yield, the question wasn’t whether the yield on bunds would go lower, but how far into negative territory they would go.  Unfortunately, I didn’t have the right tools to make a chart, so I’ve… Read More

By Tags:
5 May 2015

Estimating the All-In Costs

While I was in New York over the weekend, my sister walked me past a six-story townhouse right off of Fifth Avenue that now belongs to one of my (very few) high school girlfriends.  It’s a pretty nice house with views of Central Park and apparently cost them a cool $26 million (not including any renovation and decoration costs).    This woman married her college boyfriend who is now the… Read More

By Tags: