30 Apr 2020

Economy Contracts, Stocks Surge. Surprised?

Yesterday, the Commerce Department announced that the economy contracted by -4.8 percent in the first three months of 2020, the worst reading since the last quarter of 2008. Analysts expect that next quarter, GDP will drop by more than 30 percent, the worst in our lifetimes. Stocks surged.  Surprised? One of the phrases that you see me write all the time is ‘better than expectations,’ or ‘worse than consensus.’ Investors… Read More

22 Apr 2020

Dodging Commodities

One of the best decisions that our Investment Committee made was back in 2008 when we decided not to add commodities to the portfolio. It’s hard to believe now, but there was a lot of pressure back then to add it because stocks were down and commodities were doing well. If you look at the 12-month period ending on June 30, 2008 just before the worst part of the storm,… Read More

11 Feb 2019

Why Bother with International Stocks?

According to data from Dimensional Fund Advisors (DFA), the value of the US stock market at year-end was worth $28.1 trillion – about 55 percent of the market value for all of the world’s stocks, which totals $51.2 trillion. Developed international stocks are worth $17.4 trillion in aggregate (34.0 percent), and emerging markets stocks are worth $5.7 trillion (11.0 percent). In theory, passive investors should allocate their portfolio accordingly. In… Read More

17 Dec 2018

What’s Driving the Market Lower?

Stocks are suffering for two basic reasons: slowing global growth and tightening central bank policy.  While both of these rationales are true, they’re also very generic. Therefore, I thought it would be interesting to look at the big sectors driving the market performance and try to describe what’s happening in each one for a little more granularity. There are 11 sectors, and I won’t be discussing all of them, because… Read More

23 Jul 2018

Whither Value? Ask Warren Buffett

I feel as though I’ve written this article a few too many times: value investing is struggling. Pioneered by Warren Buffett’s mentor Benjamin Graham, value investing is the method of buying stocks inexpensively, with the hope that the current problems that’s causing the cheapness pass, and the stock will rebound sharply. Decades into Buffett’s illustrious career, finance academics found that the process of buying cheap stocks led to higher than… Read More

18 Jun 2018

What Happened to International Stocks?

As we approach the halfway point of 2018, some things are looking very different from last year. Although it has been a bumpier ride compared to last year, US stocks are on track to have another good year as the S&P 500 is up more than 4.5 percent and the Russell 2000 Index is up more than 10 percent. But unlike last year, international stocks have effectively been flat, flipping… Read More

4 Jun 2018

Changes are Coming to the S&P 500

In the old active-versus-passive debate, the S&P 500 serves as the champion fighter in the passive corner.   That’s funny, because the S&P 500 is hardly passive. For example, it’s not a list of the largest 500 companies, but a curated list of stocks chosen by the index committee at Standards & Poor’s.  Most of the differences between the index and the actual list of the largest 500 companies are relatively… Read More

12 Mar 2018

Busting Another Wall Street Myth

Over the last few months, I’ve read multiple articles making the claim that the correlation between stocks and bonds is shifting and that the new relationship will negatively impact portfolios. One recent Bloomberg article, titled ‘Easy Allocation Models ‘Doomed’ as Diversification Breaks Down’ really set me off and caused me to take a closer look at some of these claims. The thrust of the claim is that the recent negative… Read More

4 Dec 2017

The Crazy Thing? Stocks Could Go Much Higher

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

22 Nov 2017

The Curve is Falling… The Curve is Falling!

The yield curve has been a very hot topic lately in the financial news media.  Multiple times a day, there are commentators pointing to the yield curve as a sign that markets are on the verge of imploding.  Is it time to panic? The Federal Reserve has continued to push short term rates higher throughout 2017.  Long term rates have responded by falling 10 bps.  This has led to a… Read More