14
May
2015
Another Wall Street Soap Opera
You know I love Wall Street soap operas and one just ended yesterday between the activist investor Nelson Peltz and the old-line chemical company, DuPont (ticker symbol: DD). An activist investor is someone who buys a large stake in a publicly traded company and uses that ownership stake to force management to make major changes. Being from St. Louis, Carl Icahn is the most famous activist investor in… Read More
7
May
2015
Unconstrained funds and Uncontained funds
Yesterday, I wrote that Bill Gross, the former bond king, said that shorting German bonds was the short of a lifetime. Although I didn’t have my nice chart (which I’ve added below), I did note that German yields had spiked, which means prices fell and his short must be working out well. I also went through the details of a short trade, so if you missed it, you can click here…. Read More
6
May
2015
Celebrating Short-Sellers
Just 13 trading sessions ago on April 17th, the yield on the German 10-year government bond, or bund, fell to less than 0.05 percent. Given that a third of all non-US bonds issued worldwide had a negative yield, the question wasn’t whether the yield on bunds would go lower, but how far into negative territory they would go. Unfortunately, I didn’t have the right tools to make a chart, so I’ve… Read More
5
May
2015
Estimating the All-In Costs
While I was in New York over the weekend, my sister walked me past a six-story townhouse right off of Fifth Avenue that now belongs to one of my (very few) high school girlfriends. It’s a pretty nice house with views of Central Park and apparently cost them a cool $26 million (not including any renovation and decoration costs). This woman married her college boyfriend who is now the… Read More
1
May
2015
Those Brits Know Investing
When academics evaluate a strategy like value or momentum, they test the data in a variety of ways to make sure that the effect that they are studying is real and not spurious (to use their term for bogus). When Rolf Banz first proposed the small cap effect in 1981 (the original study can be found here), he used US return data from 1936 to 1975. He used the data that was available to him… Read More
30
Apr
2015
American Stocks and Cities
The other night while washing the dishes, I had the thought that St. Louis is a mid-cap, meaning that the size of our fine city is roughly equivalent to a mid-sized US company. It’s a weird thought, but I thought it would be fun to carve up US cities the same way that researchers carve up the capitalization of the stock market. I started at Wikipedia with a list of… Read More
29
Apr
2015
Twitter is the Perfect Growth Story
The social media company Twitter (ticker symbol: TWTR) announced yesterday that first quarter revenue grew less than expected and told investors to expect lower sales growth in the near future as well. As a result, the stock was down almost -20 percent in late trading. When I first saw the headlines, my immediate thought was, ‘this is why you don’t buy growth stocks – when they disappoint on growth or… Read More
28
Apr
2015
Attention Gold Bugs: Don’t Worry, Be Happy
Last week, I wrote that it was difficult to find ‘alternative’ investments that were truly diversifying and that, as a whole, alternatives provide basic broad market exposures that you can find less expensively elsewhere. Click here to refresh your memory. A client wrote in after that email to ask if we would ever consider gold. I wrote about gold a little more than a year ago (twice because it’s such… Read More
27
Apr
2015
Flash Crash Surprise, Five Years Later
It’s been almost five years since the ‘flash crash,’ when markets fell by about nine percent in less than 40 minutes in the middle of a trading day. Some well-established companies like Procter & Gamble fell by 40 percent within one minute while others like Sam Adams traded for just one penny per share even though it was selling for around $60 per share minutes earlier. I remember it vividly… Read More
24
Apr
2015
New Thoughts on the Active Passive Debate
Wednesday night, I was reading a new paper by some of the principles at AQR titled, ‘Fact, Fiction and Value Investing.’ You can find a copy here and this follows on a paper that they wrote last year called, ‘Fact, Fiction and Momentum Investing (which you can find here).’ Now that you’ve read our primers on value and momentum investing, no further explanation is required, although if you want a refresher, you… Read More