12 Dec 2014

Portfolio Construction: Get Your Yellow Hard Hat On

Sometimes I inadvertently slip into financial jargon that is meant to convey a very specific message but ends up being gobbledygook that is off-putting for a lot of people. Recently, I used the term ‘portfolio construction’ in a meeting and the client, understandably said, ‘Dave, I know you mean how it’s built, but what exactly are you talking about?’ It’s true, the term portfolio construction sounds obvious but isn’t necessarily…. Read More

12 Nov 2014

Finding Meaning in the Morningstar Star System

The Morningstar Star system is, by far, the most popular way for individual investors to assess a mutual fund or exchange traded fund (ETF). While the system is fairly straightforward in theory, it can lead to odd, and often confusing results. As always, it pays to understand how the system works to understand what the stars are telling you. The case in point is the Vanguard Total Bond Market funds… Read More

24 Oct 2014

Anatomy of a Short Squeeze

Although it’s come and gone, I am still thinking about the price spike in the 10-year US Treasury note that occurred last Wednesday. Someone from Blackrock told me yesterday that it was the most volatile day for the 10-year since 1980, which implies that it was more volatile than 99.91 percent of all of those trading sessions. You can see from the chart that all of wilding was in the… Read More

23 Oct 2014

You Can Be a Stock Market Genius

Years ago, before the crisis, I read a terrific book by investor Joel Greenblatt titled, ‘You Can Be a Stock Market Genius: Uncover the Secret Hiding Places of Stock Market Profits.’ Usually a title like that is a turn off for me because it implies that investing is easy and that someone’s behind the curtain who knows the secrets to making money that no one else knows. Despite the title,… 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

17 Sep 2014

ALM Insights – September 2014

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: What if You Called The Market Perfectly? The Impact of Fed Tightening Why Aren’t Interest Rates Higher?

17 Sep 2014

ETF Deathwatch

Although the first exchange-traded-fund (ETF) hit the market in 1993, they really didn’t catch on until about 10 years ago. The first product ever is still one of the most popular, the Spider S&P 500 ETF Trust, which trades under the ticker SPY. When we launched Acropolis in 2002 there were 113 ETFs on the market with a total of $102 billion in assets under management according to data from… Read More

11 Sep 2014

Avoid This Catastrophic Loss

Every now and then, I come across some research that really drives a point home. Yesterday, I found a terrific study by JP Morgan on what they called catastrophic losses – or what kids today might call ‘epic fails,’ which Urban Dictionary defines as: a complete and total failure when success should have been reasonably easy to attain. In the JP Morgan study, a catastrophic loss is defined as a… Read More

28 Aug 2014

Diversification or Di-worse-ification?

As I described yesterday, the S&P 500 is on a hot streak this year, up 9.68 percent so far this year through yesterday. I should also note that outside of REITs (which I mentioned a few days ago) and Emerging Markets, the S&P 500 is the hottest thing going this year. Given that REITs and Emerging Markets are relatively small portfolio weights, you might not be feeling the benefit from… Read More

21 Jul 2014

Money and Happiness

Any sensible person knows that you have to save money for the future. At the very least, you need to have money set aside for the so-called ‘rainy-day.’  If you don’t have a cushion, the consequence of a negative surprise can be a lot worse than if you have an emergency fund set aside. Do money and happiness go together?  Can saving actually make you happier?  I wouldn’t have thought… Read More