4
Jun
2015
How Stocks Have Stayed Higher
There is no doubt that the current bull market is remarkable. Yes, it’s true that this bull market was born in a panic and the first three or four years the market was simply getting back to even from the pre-crisis peak. Since we broke even back in August of 2012, the S&P 500 is up almost 60 percent, which is just a little more than 18 percent per annum. … Read More
3
Jun
2015
Emerging Powerhouse
When the Communist People’s Republic of China (PRC) took control of China in 1949, all privately owned assets were expropriated by the government and what were once vibrant capital markets went dark until December, 1990 when eight companies started to trade publicly on the Shanghai Stock Exchange. Now, as I wrote in April, the mainland Chinese stock markets are red hot and many people believe they are in the middle of… Read More
2
Jun
2015
Where is GDP Headed?
As noted in yesterday’s Daily Insights, Gross Domestic Product (GDP) in the first quarter was pretty bad – we actually contracted at an annualized rate of -0.7 percent. As bad as that is (and it’s pretty bad), it’s actually better than the first quarter of last year, which saw an annualized contraction of -2.1 percent. Last year, we could blame the drop in output on the polar vortex that made… Read More
1
Jun
2015
ETF Deathwatch
Not too long ago, someone sent me an advertisement for an exchange-traded fund (ETF) that tracks the global airline industry. The ticker for the ETF is very cute: JETS. Personally, I think an index that tracks the airlines industry is nuts. Although it can’t be attributed to anyone specifically, it’s been said that the airline industry, in its entire history, has never made any money. I don’t have the data… Read More
29
May
2015
Finding the Best Ratio to Value Stocks
For a few years now, I’ve been pondering why academics always evaluate the cheapness or expensiveness of stocks based on the price-to-book (PB) measure. Even more oddly, they call it book-to-market, but that’s a mystery that won’t be solved. In case it’s been a while since you’ve had an accounting class, the book value of a company is equal to the assets minus the liabilities, or equity of a company…. Read More
27
May
2015
Advice for Graduates: Buy Stocks
It’s that time of year when another batch of kids finishes school and begins working. Old folks like me will offer plenty of advice knowing that most of what we say will be a little lost on these fine young people, just as it was on us when we were their age. You never know, though, good counsel today might get re-tweeted and go viral. My advice is simple: buy… Read More
26
May
2015
Quality Investments Over Quantity Investments
In recent months, I’ve been working to create a set of ‘primers’ that describe certain market factors that we pursue in our strategy in hopes of increasing returns, lower risk, or, in a perfect world, doing both. So far, we’ve looked at three equity factors: size (small companies tend to outperform large companies), value (cheap companies tend to outperform expensive companies) and momentum (stocks that have recently outperformed/underperformed are likely… Read More
19
May
2015
Dow 36,000
Seeing the DJIA at 18,000 reminds me of a book published at the peak of the internet bubble titled, ‘Dow 36,000: The New Strategy for Profiting from the Coming Rise in the Stock Market,’ by James Glassman and Kevin Hassett. At that point, the DJIA was about 11,000, so it only had to little more than triple to hit the 36,000 mark. I had graduated from college in 1995 when… Read More
18
May
2015
Nobody Knows Nothin’
The Wall Street Journal ran an interesting article over the weekend, ‘How Much Should a Currency be Worth? No One Really Knows.’ Click here for the article, though a subscription may be required. We don’t have any direct investment in currencies, but the headline caught my attention because I have the view that no one really knows what anything is really worth. The article focuses on the… Read More
15
May
2015
The Trouble with Hedge Funds
Yesterday, in my article about activist investors, I referred to a Yale academic who said that one hedge fund index showed that activists had sluggish performance, but then said that this index series is widely known to be troublesome without any explanation for what makes them problematic. Hedge fund ‘indexes’ are well known to overstate performance and understate risk, making them appear more appealing to investors than they really are. The… Read More