15 Nov 2016

Trump and the Reflation Trade

At this point, my view is that most of the market activity since the election can really be broken down into two distinct categories. The first category are stock sectors that clearly stand to win or lose from expected changes in government policy.  The most obvious winner is bank stocks, which will benefit from lighter regulation.  The big loser is hospital stocks that will lose Obamacare related revenue. The second… Read More

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11 Nov 2016

Small Cap Surge Continues

One of the interesting elements of yesterday’s trading was that small cap stocks continued to pop, jumping 1.59 percent. I don’t have a particular explanation for this movement, but it’s significant enough that I think it’s worth mentioning and it’s an example of positive volatility.  Too often we think of volatility to the downside, but the movement in small cap stocks in the past few days is a good reminder… Read More

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10 Nov 2016

Mr. Trump Meets Mr. Market

Most people probably caught the wild swings in the Dow and S&P 500, from a five percent drop in futures trading overnight to a 1.1 percent higher close, with most of the action in the 30 minutes before the market opened. Small cap stocks, which gained 3.1 percent during the trading session are particularly interesting because their relative performance to large cap stocks can be viewed as a signal of… Read More

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9 Nov 2016

What the Election Means for Your Portfolio

Just as markets were surprised when British voters elected to leave the European Union, markets wrongly expected Clinton to win last night. When it first became apparent that Trump had a credible path to victory around 10:30 pm CST last night, markets turned negative with futures on the Dow Jones showing a decline of -750 points. In addition to falling stock prices, bond prices rose sharply, with the yield on… Read More

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31 Oct 2016

Equity Risk Dominates Your Portfolio

When I describe ‘balance’ in a portfolio, here or in person, I am almost inevitably talking about an allocation that is somewhat evenly split between stocks and bonds.  I don’t have to specify that I am talking about how much money is in each allocation (forgetting for a moment all of the sub allocations). In recent years, however, some investment managers have pointed out that a portfolio that is evenly… Read More

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24 Oct 2016

Prerequisites for Alternative Investments

One of the more popular categories of mutual funds over the past few years have been so-called ‘alternative’ funds.  Alternative investments, broadly defined, are strategies that seek returns that are uncorrelated from traditional investments like stocks and bonds. While alternative investments were once largely confined to private partnerships, they are now popular in mutual funds, or what the industry refers to as ’40 Act Funds.  Following the 2008 financial crisis, alternative… Read More

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17 Oct 2016

Buffett’s Wild Ride

Warren Buffett is rightly considered the most successful investor of all-time.  Not only has his holding company, Berkshire Hathaway, grown at a much higher rate than the overall market, he’s managed to earn exceptional returns for much longer than others who have also earned high returns. I was only able to pull data from 1987, but the last 29 years have been extraordinary for Buffett and his fellow shareholders.  Over this… Read More

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3 Oct 2016

Two Lessons from the Third Quarter

Even though the first day of fall was on September 22nd this year, it’s only when we enter the fourth quarter that I start to think about the changing leaves, shorter days, corduroy pants, flannel sheets and raking the leaves. I do love summer, which I mentally compartmentalize into the third quarter and 2016’s was particularly enjoyable given the strong market performance across the board. The chart below includes the… Read More

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26 Sep 2016

Is the Grass Greener in Private Equity?

Private equity is in the news quite a bit, but finding the returns for this asset class is somewhat more challenging. There are a lot of stories about mega returns, but as they say at the University of Chicago, multiple anecdotes don’t make data. Until recently, I only had small windows into the world of private equity returns. First, when private equity management firms like Blackstone, KKR, and the Carlyle… Read More

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19 Sep 2016

Is Inflation Creeping Back?

One of the big concerns coming out of the financial crisis was runaway inflation.  Central banks around the world were buying bonds on a massive scale, which is effectively equal to printing money. In 2010, a group of highly respected economists and investors, including Cliff Asness, Richard Bove, Niall Ferguson, James Grant and John Taylor, wrote an open letter to then Fed Chair Ben Bernanke, arguing against more quantitative easing… Read More

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