Last week, I talked to a client who said something like, “My bonds aren’t doing well because yields are going up, but the Fed just cut rates. I don’t understand.” I can understand, and the answer is that the industry is lazy when discussing yields and rates. Let’s start at the beginning, though. The first part of the statement states that bonds aren’t doing well because the yields are going… Read More
Over the last ten years, the oldest technology ETF I could find, the Select Spider Tech fund (ticker symbol XLK), has made more than 20 percent per annum through September 30th. A $10,000 investment in that fund would have been worth $64,172 at the end of last month. Even though I know better than to drive forward while looking out through the rearview mirror, I can’t help it: I want… Read More
An Arizona State professor, Hendrik Bessembinder, wrote a fascinating paper detailing something that we intuitively sense: a small handful of stocks have created almost all of the wealth over time, and most stocks don’t provide much in the way of returns. It’s one of the reasons we want hot tips (even when we know they aren’t likely to be hot). The paper’s provocative title is “Do stocks outperform Treasury bills?”… Read More
People started asking me about a year ago what the election would do to stock prices. I didn’t know then, and I still don’t. Over the years, I’ve read many articles describing how markets fare under Democratic and Republican administrations. I’ve also done the research myself and written several of those articles. Last year, I even wrote about what happened in the year leading up to the presidential election because… Read More
When we launched Acropolis over 22 years ago, I thought understanding optimizations would be the key to our success. If we could just figure out “the” optimal allocation, we would be well ahead of everyone else. Of course, that’s true, but figuring out “the” optimal allocation wasn’t possible because you can’t tell in advance. My memory (which could be better) is that the software package we used then suggested a… Read More
Early last week, few questioned whether the Federal Reserve would cut interest rates; the only question was whether they would cut by a quarter or a half of a percent. We know now that the Fed cut half a percent (or 50 basis points), but two questions remain. First, why did they cut as much as they did? Second, how much more will they cut? Perhaps I should start with… Read More
I saw a chart last week that caught my attention, and I recreated it below. It shows the market capitalization weight of Chinese and Indian stocks. Finding historical weights is a little challenging, so my chart shows the year-end weight of the two countries, except in 2024, where I show the market weight as of June 30th, 2024. The picture makes it appear that the last half-year is a complete… Read More
Last week, Minjung Son sent the Investment Committee some information showing that the total market value of all emerging market stocks was about $10 trillion. Ryan Craft chuckled and said that was about equal to the three largest stocks in the US. Although I’ve written about how concentrated the US market is and how emerging markets haven’t done all that well in recent years, I was amazed that three stocks… Read More
One of my favorite long-time readers and clients asked me a good question last week, which was: As I recall, David, you said that eventually, higher interest rates would be a benefit. If my recollection is correct, when will that be? It’s such a great question, and I thought I would answer it for everyone, but unfortunately, my answer is a little mealy-mouthed: it depends. It depends on how high… Read More
I was having breakfast the other day, and someone said they missed not having the 3,000 percent gain on Nvidia (NVDA) over the past five years. Of course, I agreed, but then I returned to the office thinking that the return couldn’t have been that high. In fact, over the five years ending on June 28th, the cumulative return for NVDA was 2,926 percent, so I’ll give that to them…. Read More
