Legendary investor Peter Lynch once said that if you spend 13 minutes per year on economics, you’ve wasted 10 minutes. Although I spend more than three minutes per year looking at economic data, I do tend to look a lot less than others in the industry. Many years ago, I saw a study that showed that the connection between gross domestic product (GDP) and stock market returns were lowly correlated,… Read More
Yesterday, I came back from lunch and found the most recent Bloomberg Business Week on my keyboard so that I couldn’t possibly miss it. The cover features a confused and slightly incredulous Bill Gross, the Chief Investment Officer (CIO) of PIMCO and general bond king with the headline, ‘Am I really Such a Jerk?’
The recent underperformance of small cap stocks has me wondering whether the outperformance that small cap stocks has enjoyed over the last decade could be coming to a close. Over the last ten years, the S&P 500 has gained 7.16 percent and the S&P 600 Small Cap Index has earned 9.81 percent a year, an outperformance of 2.65 percent per year.
The 2004 book, The Wisdom of Crowds, by James Surowiecki, starts with a vignette about the famous British scientist Francis Galton set in 1906. In the story, Galton travels to the county fair and finds a weight judging competition, where the crowd could wager on how much a fat ox weighed. For a sixpence, people could write down their wager and the closest person one a prize (but not the… Read More
My favorite author, Michael Lewis, appeared on 60 Minutes last Sunday and started out by saying, ‘The stock market is rigged. The United States stock market, the most iconic market in global capitalism, is rigged.’ A few second later, when anchor Steve Kroft asked who the victims were, Lewis said, ‘Everybody who has an investment in the stock market.’ Wow – that’s scary! Thankfully, his comments aren’t really true. It’s… Read More
Thanks in large part to today’s rally, the S&P 500 closed up 1.81 percent for the quarter. That might not seem like much, but if you annualize it, it works out to an annualized return of around 7.5 percent. I’m not saying that the market will return 7.5 percent for the year since there are nine months to go, but I am saying that what the market earned in the… Read More
When a company earns a profit, all accounting maneuvers aside, there is more cash in the till at the end of the year than there was in the beginning. Some of the money reinvested in the business in the form of capital expenditures (often called CAPEX), which refers to the purchase or upgrade of physical assets like property, buildings or equipment. When management has made all of their capital expenditures,… Read More
A few days ago, I was listening to the podcast EconTalk (yes, that’s what I do in my ‘off’ time). The host, economist Russell Roberts interviews well known economists about a whole hos to economic subjects, from the broad theory to the day-to-day application. The episode that I was listening to (but haven’t yet finished), featured Gene Fama, the University of Chicago Booth School of Business professor who came up… Read More
Markets closed lower on Friday, but were up strongly for the week. The S&P 500 was up 1.38 percent, the Russell 2000 was up 1.04 percent, the MSCI ACWI ex US was up 0.23 percent and the Barclays Aggregate bond index was up 0.18 percent last week. Please note that I’ve made an index change from the MSCI EAFE to the MSCI ACWI ex US index starting today. The reason… Read More
