On February 5th, Jerome ‘Jay’ Powell was sworn in as the 16th Chairman of the Federal Reserve, following Janet Yellen, who served one term starting in 2014. Powell’s first day on the job was the sharpest day of the recent stock market selloff, when the S&P 500 lost more than four percent. I don’t think that the market fell because of the new Fed Chair, but I have read a… Read More
For almost 50 years, one of the most controversial ideas in finance is that markets are efficient, as presented by Gene Fama’s Efficient Market Hypothesis (EMH) in 1966. Let’s start with a simple definition of EMH: Current market prices incorporate all available information and expectations and are the best approximation of intrinsic value. In some ways, it’s such a simple statement that it’s a little surprising that it’s so controversial…. Read More
Long time readers know that I’ve been cautious on US stocks for some time, calling them overvalued in 2014. Last year, I referred to a quote from Sir John Templeton, who famously said that ‘Bull markets are born on pessimism, grow on skepticism, mature on optimism and die in euphoria.’ I said then that I could see the rally continuing on for years but that we were probably moving from… Read More
In 2014, one of the breakout movies of the year was The Fault in Our Stars, a romantic drama based on a book written in 2012. I didn’t see the movie or read the book, but I did notice the box office receipts of $307 million compared to the production budget of $12 million – now that’s a solid return on investment! I also liked the sound of the title,… Read More
After a summer of historically low and realized volatility in the market, we finally saw a sharp spike in volatility as tensions rose between North Korea and the US last week. While the exact cause and timing behind the volatility could not have been predicted, we did know that the low levels of volatility would not continue forever. Whether or not volatility is back for a while, it is always… Read More
Last weekend, I took an extended drive through the Great Lakes region to drop my kids off at their respective camps. We stayed in Michigan the first two nights – first in Holland and then Munising, right on Lake Superior in the Upper Peninsula. After a drop off in Minocqua, Wisconsin, we stayed in downtown Madison. All told, we traveled about 2,300 miles. While my wife and kids were hooked… Read More
For what feels like the first time in forever, foreign stocks are outpacing US stocks so far this year. The table above includes the MSCI All Country World exUS index, which combines all developed and emerging markets. As of Friday, the MSCI ACWI is outperforming the S&P 500 by 1.79 percent. That contrasts with the results over the last five years ending in March, when the S&P 500 earned 13.3… Read More
The stock market since the election has brought all of the major indexes to fresh all-time highs. I also noticed last week that the Shiller PE ratio is about to cross 30, which is far from an all-time high, but is still notable since the only two times in history this ratio has been so high was in the Roaring 20s and during the Tech Bubble. For those of you that… Read More
I am continually amazed by the huge number of thoughtful and apropos quotes that concern investing. I’ve been writing and editing our quarterly newsletter, Portfolio Insights, for more than 15 years and I can still find plenty of great quotes without too many repeats. While I enjoy a great quote, I can’t say that any of them rise to the level of being an investing philosophy to live by, except… Read More
When I graduated from college in 1995 and started in this industry, I was told that the current saying for the Dow Jones Industrial Average (DJIA) was ‘10,000 by 2000,’ referring to the turn of the century. It seemed impossible to me because, at that point, the DJIA was trading below 4,500. Just a few months before, one of my finance professors said the market was overvalued. Less than six months… Read More
