In a recent issue of one of our industry trade ‘rags,’ the following chart really caught my eye: The chart shows the number of mutual funds by category in the US, according to Morningstar. It’s hard to read, but back in 1990, there were 665 US stock funds, 123 non-US stock funds, 481 taxable bond funds and 686 funds that fall into the ‘other’ category (I am guessing that they… Read More
Far and away, one of the best reads of the year is the Credit Suisse Global Investment Returns Yearbook – and the 2015 edition is no exception. Click here to download. The yearbook is hot off the presses, 68 pages and chock full of thought provoking content, so I am not even close to being finished at this point. One of the articles titled ‘Do Equity Discount Rates Mean Revert?’… Read More
I am a big fan of quantitative investing, although that term is often misapplied in my judgment, so let me define what I mean by that term. When I say quantitative investing, I am simply referring to a process driven approach to evaluating securities and making decisions. ‘Quant’ investors typically rely on computers to organize and evaluate data that serves as input in the decision making process. The financial press… Read More
Some kinds of diversification are better than others. Legendary investor Peter Lynch often referred to corporate ‘deworseification’ back in the conglomerate days when companies like ITT owned businesses as varied as hotels, insurance, defense contracting and for-profit education. One kind of diversification that Morningstar has popularized, but that I don’t think is particularly useful, is diversification by style box. As you can see in the image, Morningstar has cut the… Read More
Economists had expected that the economy would produce 235,000 jobs in January, so at first blush, it was hard to see why markets were excited by the actual number, which was 257,000. The good news came on two fronts. First, the previous two months were revised higher by a combined 147,000 jobs, which amounts to another month of job creation (a weak month, to be sure, but we’ve had plenty… Read More
In finance, the value of any asset is the present value of all of the future cash flows. When someone first told me that, I had no idea what it meant, so let’s run through a quick example. Assume that someone asks you to borrow $100 for one year. If you think inflation might be three percent in the next year, you’re going to need to charge a three percent… Read More
Many readers know that I have two grade school daughters because I’ve written about them in the context of saving for college. Like any parent, I want smart money kids. While this is a common goal among parents, it’s easy to say and much more difficult to actually accomplish in practice. There was an article in the New York Times over the weekend that described a guy who withdrew his monthly… Read More
January was a tough month for value stocks, as the S&P 500 Value index fell by -4.57 percent compared to the S&P 500 index, which lost -3.00 percent. When stocks have a tough month, it’s axiomatic that mutual fund managers who invest in stocks also had a hard time. That was particularly true for one well-known value investor, Bruce Berkowitz, manager of the Fairholme Fund (FAIRX), which lost -9.83 percent… Read More
Yesterday, I wrote that the yield on the 30-year US Treasury closed at an all time low at 2.25 percent. I also wrote that the yield on the 10-year was 2.66 percent, which was completely wrong: it closed at 1.66 percent on Friday, I simply made a fat fingered mistake – sorry. This mistake notwithstanding, I was struck by the two yields because the all-time record-low yield on the 10-year… Read More
There are only a handful of index providers globally and their intense competition breeds some very interesting innovation. Recently, one of the large providers, MSCI, launched a series of indexes that attempt to reflect the performance of companies based on their economic exposure rather than the location of their headquarters. When indexes were first created, most companies economic reach didn’t expand much beyond their own borders. Today, however, businesses are… Read More
