Yesterday, Ryan Craft and Cliff Reynolds sent out their email newsletter, ALM Insights. If you don’t know what ALM stands for, it just means that you’re not a banker (it stands for Asset Liability Management). As you know, banks take deposits from folks like you and me and lend the money out to consumers and businesses. But they can’t loan out all of the money that they take in, they… Read More
The FOMC minutes release was the macro focus of the day. The minutes said that most participants judged that if second quarter data showed a pickup in economic growth, then a rate increase might be appropriate. Given the weak first quarter and that live tracking estimates of current growth are much better, the statement strongly implies a June hike. The FOMC members observed that the labor market continues to improve… Read More
Lately, I’ve been interested in looking at strategies that have struggled in the past, in part because some of our strategies are struggling right now. Take value, for example, the strategy of buying cheap stocks with the idea that they outperform the overall market over time. It’s a tried and true approach dating back to the 1930s, but the last year has been so rough that the 10-year track record… Read More
Last December, I wrote that fading internet stock Yahoo was trading below the sum of its parts. You can read the whole article here, but the basic idea was that when you looked at the component value of Yahoo’s major parts, the market was saying that the core business was worthless. At that time, Yahoo owned stock in Alibaba worth $32 billion, stock in Yahoo Japan worth $8.5 billion and cash… Read More
Acropolis diversifies in more ways than you may realize. In addition to the well known methods like single company exposure, sector, industry, geography, creditworthiness and asset classes, we also diversify by risk factors. I’ve written about the equity factors that we use (see a list of our primers on size, value, momentum and quality here), but I think it’s also important to note that there are some factors that we avoid…. Read More
It’s the second to last day here in Montreal and there is a recurring subject that I have noticed popping up in many of the sessions here at the conference – Behavioral Biases. In the investing world this refers to the psychology behind investor behavior and the effect that widespread decision making can have on markets. As an investor it’s important to understand them because they really do matter. First,… Read More
Today I attended a session on Contrarian Value Investing. During the speakers prepared remarks I began to think about whether our investment philosophy here at Acropolis could be characterized as contrarian. It’s easy to say that we are value investors. We have value biases in many of our stock asset classes, and by a slightly different definition we invest fixed income dollars with a value bias too. But are we… Read More
I suppose that the event planners at the CFA Institute know better than to cram too much technical material into the first day of a conference, especially on a Sunday. For one of the first sessions they invited Jeremy Hunter, a professor at the Peter F. Drucker Graduate School of Management and expert in the field of applying mindfulness meditation in business. Jeremy has spent the last 3-years developing a mindfulness… Read More
The Bureau of Economic Analysis reported today that the advance estimate of gross domestic product (GDP) grew at a seasonally adjusted annual rate of 0.5 percent in the first quarter, below the consensus estimate of 0.7 percent. In many ways, the weak reading is reminiscent of the weak first quarter results that we’ve seen for the last decades (see my article about weak first quarter GDP from last year by… Read More
As expected, the Federal Reserve left policy unchanged. For the third straight meeting, they left out any assessment of the balance or risks and said that they ‘continue to monitor inflation indicators and global economic and financial developments. The big concern going into the meeting was that the Fed could describe risk as more closely balanced, potentially providing a strong signal for a June rate hike. The statement no longer… Read More
