24 Aug 2016

Investors Behaving Badly

Yesterday, when discussing the volatility of emerging market stocks, I have to admit that I was a little surprised by the year-to-date return, which is up 16.15 percent through yesterday as measured by the MSCI EAFE EM index. That’s pretty amazing because three months ago, the index was basically flat for the year – the entire return occurred almost exclusively since the Brexit (not that they are related – I… Read More

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23 Aug 2016

Allocating to Risky Assets

What’s the right allocation to a risky asset class like emerging markets stocks? Since the launch of the MSCI EAFE EM index that tracks emerging markets in 1988, the returns have outpaced the S&P 500 by 0.33 percent per year: 10.56 percent versus 10.23 percent.  (All data from Jan 1988 through Jun 2016). As you might expect, the extra return has come with extra risk: the emerging markets index has… Read More

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22 Aug 2016

Awaiting a Positive Economic Shock

Last week, I attended a ‘first annual’ Wealth and Asset Management research conference held at Washington University’s Olin School of Business. The basic idea behind the event was to connect top tier academics with local practitioners, which seems obvious given Wash U’s stature and the fact that St. Louis has more people working in financial services than any other city outside of the big apple. I was drawn by presentations by… Read More

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29 Jul 2016

The Peril of Company Stock

Like most 22-year olds, I didn’t know how to invest my 401k when I started making contributions.  I asked some of the people that I worked with and they told me to put 100 percent in the company stock, Mark Twain Bancshares (ticker: MTWN at the time, but long gone!). Thanks to the magic of my Bloomberg terminal, I can see why they said to buy the stock: in the… Read More

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28 Jul 2016

Fed Seems Hawkish to Media, Not Markets

As expected, the FOMC left rates steady following its July meeting, noting that the labor market had strengthened since June and that economic activity had been expanding at a moderate rate. Ryan Craft noted that the media is talking as if the Fed was quite hawkish, but the markets didn’t behave that way.  He noted that yields were falling sharply, stocks were largely unchanged after the news and that fed… Read More

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21 Jul 2016

Modest Results for Public Pensions

As you probably already know, I’m always interested in the goings-ons at large institutional investors.   This week yielded two interesting stories, one from each of the two largest California public pensions, Calpers and Calsters (the public employees and the teachers).   Calpers, the larger of the two, manages $295 billion and lost -0.6 percent during their calendar year, which ends on June 30.   Broadly speaking, the portfolio is… Read More

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20 Jul 2016

A Silly but True Market Anomaly

I heard a funny exchange between Gene Fama and Dick Thaler, two University of Chicago professors that sit on opposite sides of the debate about whether markets are efficient.  If you’ve got 45 minutes, I recommend watching the whole discussion by clicking here. As an example of market inefficiency, Thaler told a funny story about a closed-end mutual fund with the ticker symbol: CUBA.  The Herzfeld Caribbean Basin fund doesn’t invest… Read More

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19 Jul 2016

Turkey’s Failed Coup and Your Portfolio

Personally, I was a little surprised that stocks held up as well as they did yesterday after the failed coup in Turkey. Even though the political regime ultimately didn’t change, I thought that tanks rolling through the capitol would be enough to remind everyone that emerging markets (EM) are risky. Instead, the MSCI Emerging Markets index gained 0.26 percent and the two main ETFs that track EM stocks both gained 0.88 percent… Read More

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18 Jul 2016

Is Helicopter Money Coming to Japan?

The S&P 500 was up 1.49 percent for the week, which was actually the third straight weekly gain of more than one percent. The continued ramp up in policy support expectations was a widely discussed positive for the week.  Much of the focus was on Japan, where Prime Minister Abe’s ruling coalition scored a landslide victory in the upper house last Sunday. Abe ordered his ministers to immediately begin compiling an economic stimulus… Read More

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15 Jul 2016

Earnings Season is Upon Us

As you can see in the chart below, earnings season is upon us.  While 31 companies have already reported, a full 421 companies report in the next three weeks, leaving the last 48 companies to report during the rest of August and September. Analysts aren’t expecting much out of earnings season and think that earnings will decline by -5.6 percent. According to FactSet, it will be the first time that the S&P… Read More

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