23 Aug 2016

Allocating to Risky Assets

What’s the right allocation to a risky asset class like emerging markets stocks? Since the launch of the MSCI EAFE EM index that tracks emerging markets in 1988, the returns have outpaced the S&P 500 by 0.33 percent per year: 10.56 percent versus 10.23 percent.  (All data from Jan 1988 through Jun 2016). As you might expect, the extra return has come with extra risk: the emerging markets index has… Read More

19 Jul 2016

Turkey’s Failed Coup and Your Portfolio

Personally, I was a little surprised that stocks held up as well as they did yesterday after the failed coup in Turkey. Even though the political regime ultimately didn’t change, I thought that tanks rolling through the capitol would be enough to remind everyone that emerging markets (EM) are risky. Instead, the MSCI Emerging Markets index gained 0.26 percent and the two main ETFs that track EM stocks both gained 0.88 percent… Read More

15 Apr 2016

Yale Bets Big Overseas

One of my favorite reads of the year is from the Yale Investments Office, which manages their $25.6 billion endowment.  You can find the report by clicking here. Yale is routinely the best-performing endowment in the world and has earned a remarkable 13.9 percent return over the last 30 years – well above the 10.7 percent return for US stocks, 8.7 percent return for foreign stocks and 7.1 percent return… Read More

26 Oct 2015

Jack Bogle Doesn’t ‘Do” International Investing

Jack Bogle, the founder of Vanguard, is one of my heroes.  Earlier this year, there was a petition to award him the Presidential Medal of Freedom (that I asked you to sign) and he wasn’t even close to getting enough signatures for the President to consider the petition.  I was both surprised and disappointed. I’ve read several of his books and whenever I see him interviewed, I pay attention.  A… Read More

22 Apr 2015

A Real Greek Tragedy

We may not be happy with the slow and choppy recovery from the 2008 financial crisis, but I think we would all agree that we can thank our lucky stars that we aren’t suffering like the Greeks. The definition of an economic depression isn’t precise, but I think we can all agree that Greece is mired in a horrible depression: the economy is almost 30 percent smaller on an inflation… 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

24 Mar 2015

ALM Insights – March 2015

ALM Insights is focused on banks and other institutions that use their portfolio to manage risk on both sides of their balance sheet. It takes an in-depth look at securities investment strategies, balance sheet and asset/liability strategies, regulatory topics and general economic information. To view this issue, click the image below. In This Issue: At Least We Aren’t Europe Bond of The Day – When Does 2% ≠ 2%? More Problems… Read More

5 Mar 2015

Vanguard Changes Course

I’m a big fan of Jack Bogle and Vanguard, so I was interested to see that Vanguard has made some fairly substantial changes to their Target Date Funds (TDFs). A TDF is a mutual fund that is designed for working people who know roughly when they will retire. For example, if I want to retire at 67 when my Social Security payments begin, I would buy a 2040 TDF. As… Read More

23 Jan 2015

The ECB Strikes Back

After years of stalling, the European Central Bank (ECB) finally launched a meaningful quantitative easing (QE), or bond-buying program. ECB President Mario Draghi announced that the ECU will buy €60 billion, which at today’s rate is roughly equivalent to $69 billion dollars. The program will begin in March and is expected to last through at least September 2016, which means that the ECB is expected to spend close to €1… Read More

3 Dec 2014

We Are the World: Global Investing

The good news is that the S&P 500 is up almost 14 percent this year through yesterday. The bad news is that no other equity asset class is doing nearly as well. Most clients that I’ve been talking to understand why we diversify, but a few of them have said something along these lines: ‘Dave, I hear what you’re saying and you’re probably right, but shouldn’t we do something different?… Read More