12
May
2014
IRA Rollover Rule Changes
I am a little embarrassed to admit that there are so many rules about IRAs that I find it difficult to keep them straight and I have to refer back to a guide that I have and constantly have to ask other Acropolitans if I’ve got my facts straight. There are a lot of rules, even more exceptions and getting it wrong can be costly. A recent IRS ruling highlighted… Read More
28
Apr
2014
The Trouble with College Savings
As loyal readers know, I am a big fan of 529 savings plans and am a Missouri Most customer on behalf of my two grade school aged daughters. I was reminded of why a high quality education is so important: on average, the unemployment rate declines as education levels increase and incomes increase. The chart shows that for those who didn’t finish high school, the unemployment rate is 11 percent… Read More
22
Apr
2014
It’s Easy to Beat the Market
I love Robert Shiller. He’s a Yale professor that’s really shaped my thinking on how to value the stock market with the Shiller PE, he wrote a book called Irrational Exuberance at the peak of the technology bubble and he won the Nobel Prize in Economics last year for his efforts in showing that markets aren’t as efficient as the other Nobel Prize winner, Gene Fama, would suggest. Last week,… Read More
21
Apr
2014
The Truth About Global Growth
Legendary investor Peter Lynch once said that if you spend 13 minutes per year on economics, you’ve wasted 10 minutes. Although I spend more than three minutes per year looking at economic data, I do tend to look a lot less than others in the industry. Many years ago, I saw a study that showed that the connection between gross domestic product (GDP) and stock market returns were lowly correlated,… Read More
17
Apr
2014
PIMCOs Star System Goes Awry
Yesterday, I came back from lunch and found the most recent Bloomberg Business Week on my keyboard so that I couldn’t possibly miss it. The cover features a confused and slightly incredulous Bill Gross, the Chief Investment Officer (CIO) of PIMCO and general bond king with the headline, ‘Am I really Such a Jerk?’
16
Apr
2014
Are Small Caps Expensive?
The recent underperformance of small cap stocks has me wondering whether the outperformance that small cap stocks has enjoyed over the last decade could be coming to a close. Over the last ten years, the S&P 500 has gained 7.16 percent and the S&P 600 Small Cap Index has earned 9.81 percent a year, an outperformance of 2.65 percent per year.
10
Apr
2014
The Wisdom (and Madness) of Crowds
The 2004 book, The Wisdom of Crowds, by James Surowiecki, starts with a vignette about the famous British scientist Francis Galton set in 1906. In the story, Galton travels to the county fair and finds a weight judging competition, where the crowd could wager on how much a fat ox weighed. For a sixpence, people could write down their wager and the closest person one a prize (but not the… Read More
2
Apr
2014
The Market is Not Rigged
My favorite author, Michael Lewis, appeared on 60 Minutes last Sunday and started out by saying, ‘The stock market is rigged. The United States stock market, the most iconic market in global capitalism, is rigged.’ A few second later, when anchor Steve Kroft asked who the victims were, Lewis said, ‘Everybody who has an investment in the stock market.’ Wow – that’s scary! Thankfully, his comments aren’t really true. It’s… Read More
1
Apr
2014
Quarter End Wrap-Up
Thanks in large part to today’s rally, the S&P 500 closed up 1.81 percent for the quarter. That might not seem like much, but if you annualize it, it works out to an annualized return of around 7.5 percent. I’m not saying that the market will return 7.5 percent for the year since there are nine months to go, but I am saying that what the market earned in the… Read More
31
Mar
2014
Buybacks vs Dividends
When a company earns a profit, all accounting maneuvers aside, there is more cash in the till at the end of the year than there was in the beginning. Some of the money reinvested in the business in the form of capital expenditures (often called CAPEX), which refers to the purchase or upgrade of physical assets like property, buildings or equipment. When management has made all of their capital expenditures,… Read More