The financial media loves volatile markets. When the market drops, investors understandably become anxious. They have questions like: What is causing the decline? How low will the market fall? Should I sit on the sidelines until things “settle down”? Are there “defensive stocks” I should buy that will protect me during this period of uncertainty?…
Psst. Excuse me. I’ve got a secret. I feel like I should be talking really quietly right now, but first I need to warn you. This secret is going to seem incredibly obvious. You may even wonder why I’m going to tell you about it at all. The secret comes in two parts: 1. We…
In 1981, Sanjoy Basu’s paper, “The Relationship Between Earnings’ Yield, Market Value and Return for NYSE Common Stocks,” found that the positive relationship between the earnings yield (E/P) and average return is left unexplained by market beta. Then, in 1985, Barr Rosenberg, Kenneth Reid and Ronald Lanstein uncovered the positive relationship between average stock returns…
I’m a huge advocate of the “no shame, no blame” rule when it comes to money. But I think there’s some confusion about how the rule works. It’s not that you won’t feel guilt. It’s also not about avoiding responsibility. Instead, it’s about recognizing the zero-sum game of relying on shame and blame to make…
The financial media loves volatile markets. When the market drops, investors understandably become anxious. They have questions like: What is causing the decline? How low will the market fall? Should I sit on the sidelines until things “settle down”? Are there “defensive stocks” I should buy that will protect me during this period of uncertainty?…
The success of the Yale Endowment has been highly publicized, leading many endowments, foundations and more recently, even high net worth individuals, to consider adopting the so-called Yale Model. The Yale Model includes a focus on alternative investments and attempts to capture the liquidity premium available in illiquid investments (such as private equity). In addition…
The success of the Yale Endowment has been highly publicized, leading many endowments, foundations and more recently, even high net worth individuals, to consider adopting the so-called Yale Model. The Yale Model includes a focus on alternative investments and attempts to capture the liquidity premium available in illiquid investments (such as private equity). In addition…
There is an overwhelming body of evidence demonstrating that active management is a loser’s game when it comes to both stock and bond investing. The evidence led author Charles Ellis to call active management just that—a loser’s game—because while it’s possible to win, the odds of doing so are so poor that it isn’t prudent…
I love spending time in the mountains. So a few weeks ago, I jumped at the opportunity to join a friend, my son and seven of his friends on a trip into the Uinta Mountains. This range sits about an hour east of our home in Park City, Utah. We planned the trip to last…
Quick Take on Fixed Income September, 2015 Q: How do equity and fixed income markets differ? A: Most people are familiar with the equity markets and how they work. After all, anyone can turn on the television and see traders scurrying around the floor of the New York Stock Exchange, filling orders for their clients….
“Today’s investors find it inconceivable that life might be better without so much information. Investors find it hard to believe that ignoring the vast majority of investment noise might actually improve investment performance. The idea sounds too risky because it is so contrary to their accepted and reinforced actions.” So writes Richard Bernstein in his…
In my previous post, we reviewed the historical evidence on bear markets and financial crises, as well as the sources of the latest crisis. Today, we pick up by discussing reasons why all the bad news you’ve been hearing doesn’t mean you should reduce your equity allocation. Reasons Not To Panic First, all this news…
It has long been my view that much of the financial media serves as a shill for the securities industry. It stokes fear and anxiety in an effort to encourage investors to “do something” with their holdings. Activity means trading, and trading means higher profits for bloated brokerage firms. It’s really not more complicated than…
Despite Wednesday’s recovery from steep losses earlier in the week, the major U.S. stock averages are on track for their biggest monthly percentage losses in five years or more. That means your retirement portfolio, your 401(k)s and IRAs, may have lost value as well. But there may be a silver lining to this market slide….
Two of the most-well-known factors that help explain stock returns are the value effect (where equities with lower prices relative to metrics—such as book value, earnings, cash flow, sales and dividends—tend to outperform the equities with higher prices relative to those metrics), and the momentum effect (where assets that have outperformed in the recent past…
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