Old Advice, as Valuable as Ever
13 Apr 2015
When my wife and I got married more than 15 years ago, we had a lot of things in common including the fact that we had both inherited stock in GE. In fact, it was about 10 percent of our combined net worth. I don’t remember the exact numbers anymore, but the cost basis on the stock was low for both of us because each of us had separately… Read More
To Hedge or Not to Hedge
10 Apr 2015
For the most part, the returns associated with foreign stocks and bonds have two components: the return of the stock or bond and, secondly, the return of the foreign currency. Over the past eight months, the impact of the exchange rate has been unusually high. For example, a German investor that owns an index fund in the DAX is up 24.04 percent so far this year through yesterday. For… Read More
Are Markets Getting More Volatile?
08 Apr 2015
I’ve had the feeling recently that stocks were more volatile than usual. As funny as this may sound, I don’t trust my own gut at all. Despite its size, my gut is no better than anyone else’s at creating hunches that are worth a darn, so I turn to data frequently. To address my intuition, I did a quick check of the average volatility for the first quarter compared to… Read More
A Small Cap Primer
07 Apr 2015
In recent weeks, I’ve written about the various risk premiums that have been found in academia that both explain returns and offer some hope of beating the market. Each time, I wished that I could link back to an article that explains the concept more fully, so today, I am going to write the first of a series of articles explaining the well-known risk premiums. First up is the size… Read More
Beat the Market in Bonds
31 Mar 2015
One way to judge the performance of a mutual fund or ETF is to compare the results to a relevant benchmark, which is usually an index that has relatively similar characteristics. Another method is to compare your fund to a group of funds that are basically pursuing the same strategy. Admittedly, we don’t use this approach very often, even though I think it would make our job a lot easier… Read More
Fund Manager Beats Market for 40 Years
24 Mar 2015
The most recent issue of Bloomberg Markets magazine featured a photo of a stately gentleman with a blazing headline that read, ‘This Fund Manager Has Consistently Beaten the S&P 500 for 40 Years.’ The article highlights the performance of The Nicholas Fund (ticker: NICSX), a $3.6 billion mutual fund run by Albert Nicholas, who started the fund in 1969. The article says that he has outperformed the S&P 500 by… Read More
The Fed’s New Drug of Choice
23 Mar 2015
Even though I was out of town last week on vacation, I generally keep my ear to the ground for market news and last week that was especially true because the Fed was expected to move one step closer to raising interest rates. For at least a year, the Fed has maintained that they would be ‘patient’ about the timing of raising rates. I assumed, like most people, that the… Read More
What Corporate Bond Yields are Telling Us
12 Mar 2015
It should not come as a surprise to anyone that markets have performed very well over the past five years. The S&P 500 has earned 16.12 percent per year in the five years that ended in February. Few investors realize that corporate bonds have also done very well over the past five years. For the five years that ended in February, the Barclays US Corporate Bond index has earned 6.22… Read More
A Bear Market Strategy
10 Mar 2015
When I was a senior in college, and just starting to take some finance classes, my professor expressed deep concerns about the stock market’s valuation at the time. Of course, at the time I had no idea what he was even talking about, let alone an opinion about whether he was right or not. Using my trusty Bloomberg terminal, I can see that the price-earnings (PE) ratio for the S&P… Read More
Buffett Speaks, Acropolis Listens
02 Mar 2015
Warren Buffett released his 50th annual letter to shareholders over the weekend and, as usual, it was an enjoyable read. In case you missed it, here’s a link. The report on 2014 activities was fine, but the really interesting part is a look back at the past, present and future of Berkshire Hathaway that begins on page 24. Buffett spends the first five pages discussing the early days, most notably… Read More