19 Oct 2015

Deflation in Switzerland

Back in January, I wrote about how some economists were arguing that a little deflation might not be such a bad thing (you can refresh your memory here). Deflation, or falling prices (negative inflation), is widely feared by economists because falling prices lead to lower consumer spending, which is a major component of economic growth.  Producers respond by slowing down their factories, which leads to layoffs and wage reductions that… Read More

By
9 Oct 2015

The Right Time Horizon for Stocks

When people ask me how long their time horizon ought to be when investing in stocks, I usually say 10 years.  It occurred to me the other day that either I’ve never really looked into this in a very detailed way or I’ve forgotten about it.  In either case, it’s now time to look. To answer this question, I looked at rolling returns for the S&P 500 since 1926 for… Read More

By Tags:
9 Oct 2015

Visualizing Stock Returns

A great way to visualize asset class returns is to put them into what the industry calls a ‘periodic table,’ which I’ve done below.  The basic idea is to order the returns of asset classes in each calendar year from best to worst. In the chart below, 2006 is the first year and the best performing asset class in gray was 35.9 percent.  At the bottom of the column is… Read More

By Tags:
8 Oct 2015

Who is to Blame for the August Market Selloff?

When markets fell sharply in late August, a number of traditional managers pointed their fingers at a relatively new breed of asset managers pursuing a relatively new strategy and blamed them for the spike in market volatility. There are a lot of articles covering the public blame game; here are a few from the Financial Times, the New York Times, the Wall Street Journal, and Barron’s. The new strategy in question… Read More

By Tags: ,
7 Oct 2015

Today’s Ugly Duckling is Tomorrow’s Swan

Normally when we talk about the perils of performance chasing, we are referring to investors buying into asset classes that have done well in the recent past and avoiding those that haven’t fared as well. Right now, for example, investors want to own US large cap stocks because the S&P 500 is up 13.74 percent over the five years ending Oct. 5, 2015 and want to avoid emerging market stocks… Read More

By Tags:
6 Oct 2015

Bond Traders Know Best

Last week, I wrote about how losses at the Swiss mining company Glencore were affecting the overall market.  In the article (found here), I said that bond prices in the market often reflect credit conditions before the ratings agencies like S&P and Moody’s make any changes. The Glencore situation may be a good example because bond prices have changed markedly in recent weeks as investors worry about their credit worthiness. … Read More

By Tags:
5 Oct 2015

Active or Passive? Yes, Exactly.

The Wall Street Journal ran an interesting article over the weekend entitled, ‘Three Things to Know About Smart Beta.’  You can find the article here, but you may need a subscription. Before diving into the article, the first thing you should know is that smart beta is the marketing term for tilting your portfolio towards factors like size, value, momentum and quality. We call this factor investing, but there are tons of names in the market… Read More

By Tags:
2 Oct 2015

Best Cities to Retire

I recently stumbled upon a fascinating website, the Milken Institute’s Best Cities for Successful Aging. I was doing some research to try and determine whether moving to a state without income tax like Florida or Texas really made a difference to an overall retirement plan.  I created a hypothetical client and ran 10,000 scenarios that were identical other than the state where the client retired. As I expected, the difference… Read More

By Tags:
1 Oct 2015

What If I was Japanese?

Stocks enjoyed a positive finish to a tough quarter, as the S&P 500 gained 1.91 percent yesterday but was still down -6.44 percent for the quarter. It was the worst quarter for most markets since 2011 during the first phase of the European debt crisis. Somewhat surprisingly, markets shook off weak purchasing manager data from Chicago and the onset of Russian airstrikes in Syria. Some investors believe that more stimulus… Read More

By Tags:
30 Sep 2015

Some Bonds Fall as Stocks Falter

As stocks fell over the past several weeks, the junk bond market has also sold off as seen in the chart below.  The orange line follows the Barclays High Yield, or junk, bond index and you can see how it has roughly tracked the S&P 500 this year. Some commentators have argued that junk bonds served as a bit of a ‘canary in the coal mine’ because they dropped off… Read More

By Tags: