2
Oct
2014
Patience is a Virtue
Every investment strategy requires patience. Let’s say, for example, that you believe, as we do, that small cap stocks tend to outperform large cap stocks over time. You’ve got the empirical data going back to 1926 that clearly shows, with statistical significance, that small stocks outperform large ones. Small stocks are more volatile than large stocks, but that fits elegantly with the theory that to earn a higher return, you… Read More
1
Oct
2014
3 Current Stock Market Observations
Back in February, I wrote that the stock market was overvalued and cited metrics like the Shiller PE ratio and Tobin’s Q that show the market is high relative to history. At the time, I concluded by saying that timing the market is notoriously difficult, so pick your stock/bond allocation and stick with it through thick and thin. (Click here for the article) A few people called or emailed back… Read More
30
Sep
2014
My Experience with Alternative Investments
We like to say that we eat our own cooking because we invest your money the same way that we manage our own. As one of the chefs in the kitchen, I also eat a lot of things that I’m not ready to serve. For better for worse, my account operates like a test kitchen. Some of the experiments turn out unexpectedly well and it is served out to everyone… Read More
29
Sep
2014
Bill Gross, Meet Derek Jeter
When I first saw the headline on CNBC that Bill Gross was leaving PIMCO, I didn’t pay close attention because I assumed it was one of those headlines that didn’t have any facts but asks a provocative question, like ‘Is Bill Gross Leaving PIMCO?’ It’s almost an absurd question, but that’s exactly what happened on Friday after a series of bad public stumbles, some of which I’ve chronicled already (click… Read More
26
Sep
2014
Canaries in a Coal Mine: Stocks Sell Off
Since taking over Daily Insights last July 1, the market has gone up steadily at an annualized pace of 19.69 percent through the close of business yesterday. In addition to the substantial gains, volatility for the S&P 500 has been uncharacteristically low. Naturally, I’m appreciative that we’ve all been able to enjoy a straight-up market, but I’m also realistic and know that it won’t always be like this. It’s normal… Read More
25
Sep
2014
Retiree Spending
In our retirement planning model, the Acropolis Financial Forecaster, there are essentially five key variables that affect the probability of meeting your goals. They are as follows: Saving Before Retirement When to Retire Spending in Retirement Market Returns & Inflation Rate Portfolio Risk The first three factors are entirely under your control and the second one is the most critical because the timing of your retirement stops contributions to your… Read More
24
Sep
2014
Hedge Funds Flip-Flop
A recent examination of hedge funds by the Securities and Exchange Commission (SEC) found a variety of deficiencies in almost half of the firms examined, according to the Wall Street Journal. None of the findings were particularly surprising, but the SEC appears to create a new name for an old problem: flip-flopping (and not on a wind-surfer). The problem is that some securities, especially ones that are unique or illiquid,… Read More
23
Sep
2014
When Academics Go Bananas
You may have noticed already, but I constantly refer to academics and academia. As a firm, we put a lot of value on the ideas that come from the ivory towers and have academic support for nearly every strategy and sub-strategy that we employ. We appreciate the thoughtfulness, research, peer-review process that has contributed so much to the way we think about markets. But, sometimes, academics can get a little… Read More
22
Sep
2014
What if You Called The Bond Market Perfectly?
It’s an interesting question. The ability to call the tops and bottoms with perfect accuracy is considered the “holy grail” of bond market investing. We spend a great deal of effort talking to clients about the risk of trying to make speculative calls – the risk of being wrong of course. Just as an exercise I thought it would be neat to imagine what it would be like if we… Read More
22
Sep
2014
Alibaba vs. Amazon
Alibaba Group Holding (ticker: BABA) went public on Friday at a price of $68 per share, which valued the company at $168 billion, making it one of the 40 largest companies in the world, according to S&P Capital IQ. Once the stock started trading in the open market, however, investors bid the stock higher and it ended the day at almost $94 per share, valuing the company at $231.4 billion…. Read More