13
Apr
2015
Old Advice, as Valuable as Ever
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
10
Apr
2015
To Hedge or Not to Hedge
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
9
Apr
2015
Money for Nothing: Negative Yields
I’ve written a fair amount about negative yields in Europe (click here or here for a refresher), but the Swiss government crossed a new threshold yesterday by actually issuing bonds with a negative yield. Previously, bonds that were already trading in the secondary market had reached such high prices that they had a negative yield, but that’s quite different than an issuance with a negative yield because it means that the issuer actually… Read More
8
Apr
2015
Are Markets Getting More Volatile?
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
7
Apr
2015
A Small Cap Primer
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
6
Apr
2015
A Test Too Tough
Just in the last 30 days, Jeff Sommer for the New York Times has written two articles about the persistence of performance among actively managed mutual funds. On March 14, in an article titled, ‘How Many Mutual Funds Routinely Rout the Market? Zero,’ Sommer wrote that not a single actively managed mutual fund had consistently beaten the market since the bull market was born in 2009. Using data from the… Read More
2
Apr
2015
Equal Weight: Something New Under the Sun?
As you might hope and expect, we are constantly looking for ways to improve returns, reduce risk, or in a perfect world, both. That means that we are always looking at strategies, evaluating their pros and cons and trying to figure out whether they are better than we are currently doing. One interesting strategy that we’ve looked at over the years that is simple to understand is to buy the… Read More
1
Apr
2015
Cat Bonds: Profiting from Tranquility
In the last six or seven years, a growing number of esoteric hedge fund strategies have made their way into mutual funds available to mom and pop investors like us. I’ve fussed around with a lot of these products in my own account in an effort to learn more about them and, don’t worry, you haven’t missed anything. One of the newer offerings buys ‘catastrophe bonds,’ or cat bonds, and… Read More
31
Mar
2015
Beat the Market in Bonds
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
27
Mar
2015
Warren Buffett’s Special Access
Warren Buffett is the master. There was never any real doubt about that in my mind, but the Heinz/Kraft deal that was announced yesterday is another reminder that the Oracle of Omaha hasn’t lost his touch. Over the past few years, Buffett has been on a buying spree, probably to help set the course for Berkshire Hathaway in the coming decades knowing that he might not be around to steer… Read More