| Covered calls: a devil's bargain |
| 09/22/25 | | Funds |
"The idea that covered calls generate income is financial bs. These strategies are mechanically expected to underperform their underlying equity, and increasingly so at higher targeted levels of distributions. For long-term investors, covered calls increase risk by leaving the downside unprotected while the capping upside, eliminating the mean-reverting behavior of stocks - an important feature of stock returns." [video]
|
| The 60/40 portfolio: a 150-year test |
| 09/21/25 | | Markets |
"It took the worst bond market in history to make investing in a 60/40 more painful during a market crash than holding all equities."
|
| Crowding into quality |
| 09/21/25 | | Markets |
"Similar to Coca Cola's stock in the 1990s, Walmart shareholders appear to be pricing in very strong growth and a nearly flawless future. While Walmart's earnings have grown during this cycle, the pace has been slow to moderate"exactly what we'd expect from a massive retailer. Like many mature market leaders we follow, its earnings growth has largely tracked nominal GDP. While there's nothing wrong with expanding alongside the economy, we believe Walmart's current valuation demands much stronger growth."
|
| Total concentration |
| 09/21/25 | | Markets |
"Based on the evidence from logic, math, and historical data, we believe the benefits of diversification stand on their own merits. And when the outcomes of diversified portfolios are compared against their hyper-concentrated peers, free from survivorship bias, it seems the case for diversification is self-evident."
|
| Retirees spend income, not savings |
| 09/21/25 | | Retirement |
"Prior studies find that retirees spend less from savings than life cycle models predict. Using data from the Health and Retirement Study, we explore how lifetime income, wage income, capital income, qualified savings, and nonqualified savings are used to fund retirement spending. We find that retirees spend far more from lifetime income than other categories of wealth. Approximately 80% of lifetime income is consumed, on average, versus only approximately half of other available savings and income sources."
|
| Driverless taxis records |
| 09/21/25 | | Tech |
"Trips stayed under half a million miles per month until mid-2024. But since then, growth has taken off. Within a year, usage multiplied eightfold, climbing past four million miles by May 2025, the latest data available."
|
| The illusion of compound returns |
| 09/12/25 | | Markets |
"Compounding is the King Kong of wealth creation, but it can be defeated by the Godzilla of limited capacity. Very successful investors, such as Warren Buffett of Berkshire or Jim Simons of Renaissance, eventually run into capacity constraints, and become unable to compound their wealth at high rates of return. Capacity always wins in the end."
|
| Intelligent concentration |
| 09/12/25 | | Buffett |
"Warren Buffett's diversification practices have been back in the spotlight over the past few years. Specifically, the level of concentration in his portfolio has come under scrutiny due to the size of the largest stock holding in Berkshire Hathaway's marketable equities portfolio. A historical review of Buffett's implementation of diversification and concentration in practice, as well as his perspective on these concepts, documents a long tradition of heterodox thinking and application. "
|
| Capex cycles |
| 09/12/25 | | Markets |
"Both Info Tech and Utilities are at the extreme end of their historical range of capital intensity, with Info Tech rivaling its peak in the dot-com era. ... We do not know what the ROI on the current capex cycle will be, but we have a sneaking suspicion that the management teams deploying hundreds of billions of dollars in pursuit of AGI don't know either. In this case, the best we can do is use history as our guide, and on that account the prospects for the current capital investment cycle should concern investors."
|
| Europe's small-cap golden age |
| 09/12/25 | | Markets |
"A paradox of the tariffs imposed by the United States this year is that, while they are filling the coffers of the US Treasury, the stock market winners thus far appear be international firms. ... Looking within Europe, we can see that the biggest gains have been among the continent's domestically oriented firms, which earn almost all of their revenue in Europe."
|
| What I learned from COVID |
| 09/12/25 | | Markets |
"I'm not saying that the U.S. stock market is currently a screaming buy. Perhaps the skeptics are correct and the market is like Wile E. Coyote looking down into the abyss. That's what I thought in 2020, but I was mistaken. The market was not Wile E. Coyote. The market was the Road Runner, who paused briefly, looked at COVID, and then sped away. Meep meep. It's not the economy, stupid. It's the stock market, and it does its own thing."
|
| The condo crash |
| 08/30/25 | | Real Estate |
"For years, low interest rates fuelled a big-city condo-flipping frenzy. Profits got bigger and condos got smaller. Now the bubble has popped, leaving behind thousands of unsellable, unlivable units."
|
| Why aren't markets freaking out? |
| 08/30/25 | | Markets |
"Whatever happens, Trump's campaign to take over monetary policy has shifted from a public pressure to personal intimidation of Fed officials: the attack on Cook signals that Trump and his people will try to ruin the life of anyone who stands in his way. There is now a substantial chance that the Fed's independence, its ability to manage the nation's monetary policy on an objective, technocratic basis rather than as an instrument of the president's political interests and personal whims, will soon be gone."
|
| Bearish on U.S. Stocks |
| 08/30/25 | | Markets |
"the P/S ratio of the S&P 500 hit an all-time high of 3.41 during the peak of the DotCom Bubble in December 1999. It hit another relative high of 2.98 in December 2021. And it's at around 3.2 today. I understand the flaws with such valuation metrics. I've written about them before. But I'm not arguing that the P/S ratio needs to return to its long-term market average of ~1.2 (or anything like that). I'm arguing that, historically, the market's P/S ratio hasn't stayed above 3 for any extended period of time."
|
| Risky business |
| 08/30/25 | | Retirement |
"In looking at the full set of asset allocation options, Bengen found there to be an optimal range: Allocating between 45% and 75% of a portfolio to stocks led to the highest long-term sustainable withdrawal rates. Why? Allocations below 45% caused portfolios to lag behind inflation. Allocations over 75%, on the other hand, ran into trouble because they couldn't recover from deep market downturns. But between 45% and 75%, Bengen found that an initial portfolio withdrawal rate of close to 5% would have been sustainable throughout a 30-year retirement."
|
| Time to dump US stocks |
| 08/18/25 | | Markets |
"Like Malibu Barbie, America has always promised an endless summer of affluence and good times. The rule of law, a resilient democracy, and a dynamic business culture, together with the tailwinds of globalization and the world's reserve currency, have generated immense wealth for generations of Americans and foreign investors alike. Despite its past and current challenges, America is deemed "too big to fail". Yet, it pays to pay attention: the citizens of Rome and passengers on the Titanic probably felt the same way. Students of history may conclude that it's better to leave the party too early than stay too long."
|
| Stagflation: shooting the messengers |
| 08/18/25 | | Economics |
"Sure enough, the jobs data released two weeks ago point to a significant economic slowdown, while the two inflation reports released this week - on consumer and producer prices - show clear fingerprints of the effects of tariffs on prices. To be clear, what we're looking at so far is probably a 1 or 2 point rise in inflation and a moderate rise in unemployment that might not be enough to be considered a recession."
|
| I Used to Be Cool |
| 08/18/25 | | Dividends |
"With stock buybacks and mega-cap investing soaring in popularity, we believe certain small-cap dividend stocks are being overlooked. We are grateful. While we don't know when they'll come back into favor, we're happy to collect their dividends while we wait. And who knows, if the Fed chickens out (F.A.C.O.) and cuts rates, investors may return to dividend-paying stocks sooner than expected. Regardless, we're not waiting for investor perceptions and allocations to change. We still think dividends are cool."
|
| Drawdowns and serial correlation |
| 08/18/25 | | Markets |
"There's a common belief that the main threat to your wealth is a huge one-day or one-month crash, a left-skewed 'tail event' that will destroy your wealth in the blink of an eye. That outcome happens sometimes, but it's not how the world usually works. Usually, disaster manifests as a sequence of bad days that sum up to a sequence of bad months, as opposed to one gigantic bad day. Your main concern should be a slow bleed, not sudden death."
|
| There Ain't No Such Thing as a Free Lunch |
| 08/18/25 | | Funds |
"Buffer funds by and large have sold investors the promise of comfort, cloaked in complexity, at the cost of risk-adjusted returns. Our paper shows there are simpler, less expensive, and more effective ways to deal with the risk of equity markets. Once again, Robert Heinlein and his TANSTAAFL, provides investors more value than a (growing) slice of our industry."
|
| Ignore the margin debt alarm |
| 08/18/25 | | Markets |
"Yes, leverage matters. But earnings, interest rates, liquidity, and sentiment matter more. Margin debt is part of the story, not the story. So the next time you see a chart of rising margin balances used to forecast a crash, remember this: margin debt reflects where we are, not where we're going."
|
| The illiquidity premium |
| 08/18/25 | | Funds |
"Advocates of large allocations to private equity often discuss the concept of an illiquidity premium. Investors willing to lock up their capital for long periods of time, the logic goes, should earn a premium return for their patience. But that illiquidity comes at a cost. An investor wishing to exit their illiquid private investments has to sell at an illiquidity discount in the secondary market."
|
| Little Rules About Big Things |
| 08/18/25 | | Behaviour |
"Certainty is so valuable that we'll never give up the quest for it, and most people couldn't get out of bed in the morning if they were honest about how uncertain the future is."
|
| Panic season |
| 08/03/25 | | History |
"For normal people in the U.S., August is about relaxing at the beach. But for grizzled practitioners of systematic equity strategies, August is the cruelest month. Ever since the 'quant liquidity event' of August 2007, we spend August compulsively checking our phones and having nightmares about screens full of glowing red numbers. Even if systematic equities aren't your thing, you need to be mentally prepared for an epic financial disaster over the coming three months. Historically, the period from August to October is when most U.S. financial crises have occurred, such as the stock market crash of October 1929."
|
| No country for short sellers |
| 08/03/25 | | Markets |
"We used to buy businesses. Not stocks, not beta, not 'The S&P'. We used to buy businesses that we believed in. Companies that made a profit and used those profits to pay dividends to shareholders. Businesses that made products or sold services that you could touch and feel."
|
| Does the 4 per cent rule still apply? |
| 08/03/25 | | Retirement |
"There are 70+ million baby boomers. Many of them are retired. Most of them will be in relatively short order as 10,000 or so people will retire every day between now and 2030. They are all trying to figure out the best way to spend down the financial assets they've managed to accumulate over the years."
|
| Goodbye, reliable economic data |
| 08/03/25 | | Government |
"And just like that, we can no longer treat BLS data as the gold standard. ... Maybe, just maybe, the staff at the BLS will hold to their principles and continue to report honestly. ... From here on, I'm going to be paying a lot more attention to private surveys. And when they tell a different story from the official numbers, there will no longer be a reason to take the official data more seriously. It's one more step on our rapid descent into banana republic status."
|
| Writing through policy depression |
| 08/03/25 | | Government |
"This past week, however, something felt different. Again, I don't think its personal depression. I think it's a professional depression. Because as someone who writes about and studies global political economy and American foreign policy, it's been a shitty week on top of a shitty month on top of a shitty year. ... Even if the GOP loses in the midterms and then in 2028 presidential election, can the damage be repaired? I have my doubts. The hard lesson of this century has been that institutions and norms can take decades to build up and months to be destroyed."
|
| The best and worst style factors since 1975 |
| 07/29/25 | | Markets |
"Value is a standout, while quality, momentum, and profitability all have Sharpe ratios above the equity market. Meanwhile, the negative returns and low volatility of high investment have made it an attractive factor to short (albeit painful over the last 5-10 years). Much ink has been spilled (some by us) about whether the value factor is dead. Undoubtedly, recent history has seen an inversion of the relative ranking of style factors. But the consistency of the historical record for the stalwarts of value, momentum, quality, and profitability and the laggards in turnover and investment is quite striking."
|
| Factor anomalies 1900 to 1925 |
| 07/29/25 | | History |
"To me, the key takeaways from this study are that momentum worked extremely well even before 1926, which reinforces the findings of this study. But the evidence for small-cap outperformance vs. large caps is more mixed. Small caps outperformed large caps by a wide margin in Amsterdam and London but underperformed in New York. In general, it seems to have worked with five out of seven markets showing statistically significant outperformance of small caps. Finally, when it comes to the low volatility factor, four out of seven markets show a significant outperformance of low volatility stocks over high volatility stocks."
|
| Risks of passive dominance |
| 07/29/25 | | Indexing |
"While media and advisors often focus on passive funds' low expense ratios, they frequently overlook the hidden costs associated with index rebalancing and structural inefficiencies. For example, research suggests that more efficient rebalancing strategies could reduce implementation costs by about 40 basis points per year - far exceeding the typical fund expense ratio. High-frequency traders and other active participants exploit these predictable trading patterns, further eroding returns for index investors."
|
| General theory of enshittification |
| 07/29/25 | | Management |
"Everyone loves enshittification. Not the thing itself, of course. But Cory Doctorow's neologism was an instant hit, neatly encapsulating the public's growing disappointment, sometimes bordering on rage, with what was happening to internet platforms. His pithy summary of the process was also brilliant: 'Here is how platforms die: first, they are good to their users; then they abuse their users to make things better for their business customers; finally, they abuse those business customers to claw back all the value for themselves. Then, they die.'"
|
| Pedantry: never crashing |
| 07/29/25 | | Markets |
"I know it sounds silly, but words matter, even if you are only talking to yourself. When you say, 'the market is crashing,' you've framed the situation to suggest that you can predict future prices. You can't. When you say, 'the market has crashed,' you've framed the situation more accurately. Something has already occurred, and you must deal with the aftermath."
|
| Volatility is a reliable proxy for downside risk |
| 07/21/25 | | Markets |
"Summarizing, Estrada's paper reassures investors and practitioners that, despite its critics, volatility is a solid and convenient proxy (a reliable summary) for downside risk. Thus, most investors can continue to use volatility as a primary risk metric with confidence, knowing it closely tracks the downside risks they seek to avoid."
|
| F.A.C.O. |
| 07/21/25 | | Bonds |
"Will the Fed cut rates in July? We're not sure. But we believe mounting fiscal pressure and Powell's desire to hold the market together will eventually force their hand. While many see the return of easy money as bullish, we believe it's unnecessary and risks causing additional asset inflation, bond market instability, and voter backlash. In the end, whether cuts are justified or not, we expect the Fed will cave. When it comes to letting free markets discipline Wall Street, speculators, and politicians, the Fed Always Chickens Out."
|
| Under pressure |
| 07/21/25 | | Markets |
"This carries a lesson for financial planning. There's no virtue in being contrarian simply for the sake of being contrarian. But in making a financial plan, it sometimes helps to consider viewpoints that differ from what everybody 'knows.'"
|
| Japan's dividend and buyback surge |
| 07/21/25 | | World |
"Public companies in Japan have made unprecedented strides in returning capital to shareholders over the past few years. As the Tokyo Stock Exchange (TSE) continues to pressure firms toward greater capital efficiency, dividends and buybacks have hit record highs. It is a transformation long overdue in corporate Japan, where bloated balance sheets and inadequate capital allocation decisions have dragged down shareholder value creation."
|
| Covered call strategies don't shine |
| 07/05/25 | | Funds |
"Invesco's covered call ETF (PBP) has underperformed State Street's SPY (a simple S&P 500 Index ETF) by a mile over more than seventeen years - by nearly six percentage points per year. During the period closest to the flat market identified in the first set of tables above, Invesco's covered call ETF slightly lagged SPY's pure stock exposure."
|
| Telus International offer |
| 07/05/25 | | Markets |
"We contend that a 7-8 times adjusted EBITDA multiple is more appropriate for Telus International. This is not only justified by recent peer transactions, but also by the fact that Telus International represents a higher-quality business than many of its direct peers. "
|
| Reconsidering core bonds |
| 07/05/25 | | Bonds |
"In today's environment, with spreads near historic lows and credit risk offering very little reward, investors may want to reconsider whether the Agg still deserves its traditional role in the portfolio. Treasuries may offer a cleaner, safer, and more tax-friendly alternative for core bond exposure. And for those seeking more, there are smarter ways to pursue additional yield and return without taking on the asymmetric risks that come with credit-heavy bond allocations."
|
| Financial independence is overrated |
| 07/05/25 | | Retirement |
"I understand why people would chase financial freedom. The ability to quit a job you hate, the increased flexibility, and the greater financial security all make sense to me. But why do some people value the ability to never work again? Why is this singular benefit all that special?"
|
| Better for downside protection |
| 06/30/25 | | Markets |
"If you want return, you have to take risk. There is no avoiding this universal truth of investing. So while you may employ one (or more) of the strategies discussed here to limit your future downside, keep in mind that the possibility of downside is how we earn our long-term returns in the first place."
|
| 2024 private equity fundamentals |
| 06/30/25 | | Markets |
"Overall, PE portfolio companies are smaller, more leveraged, pay higher interest rates, and have lower margins than public companies. These are not great selling points for private equity as an asset class. Buying sub-scale, low-margin businesses with expensive debt hardly seems like a path to riches. So it's not hard to see why public companies have limited interest in making 'strategic acquisitions' and why PE investors aren't so jazzed about these companies going public."
|
| The Jevons paradox |
| 06/30/25 | | Economics |
"In a May interview, economist Daron Acemoglu, who recently won the Nobel Prize for his work on economic development, argues that AI will be able to replace only a fraction of jobs. But he adds, 'It's hugely uncertain, and it's very difficult to know because it's a very rapidly changing technology.' And that just may be the best way to think about AI. It's all very new and still uncertain. While Amodei worries about a potentially negative impact, that's just a guess. Economic history suggests it may very well go the other way."
|
| Publishers are facing an existential threat |
| 06/30/25 | | Media |
"Prince told Axios that 10 years ago, Google sent a publisher one visitor for every two pages it had crawled. Six months ago, the ratio was one visitor for every six pages, and now it's one for every 18. OpenAI sent one visitor to a publisher for every 250 pages it crawled six months ago, while Anthropic sent one visitor for every 6,000 pages. These days, OpenAI sends one visitor to a publisher for every 1,500 pages, whereas Anthropic sends one visitor for every 60,000 pages."
|
| The overvalued dollar |
| 06/22/25 | | World |
"The US dollar remains historically overvalued, even after its recent reversal. Structural factors, cyclical trends, and shifting macroeconomic risks all point toward the potential for further declines in the coming years. Investors with underweight to international equities either due to home country, or recency, bias might want to reconsider that underweight."
|
| Let's get happy |
| 06/22/25 | | Behaviour |
"Want to make sure you're among the 'very happy' group? There is, alas, no way to guarantee that. Still, the happiness research conducted by economists and psychologists can help us better understand why we're happy or unhappy - and it offers some insights into how we might improve our outlook."
|
| Eyes forward |
| 06/22/25 | | Indexing |
"For most investors most of the time, the data tell us that simplicity and low cost are the way to go. Keeping that in mind may be the best way to tune out whatever might be happening in the next lane."
|
| Defeating smallpox |
| 06/22/25 | | Health |
"The Plea is a data-driven documentary that tells the story of the first vaccine and the eradication of smallpox - a modern retelling of one of humanity's greatest triumphs." [video]
|
| Lost decades are rare |
| 06/16/25 | | Markets |
"Lost decades are periods where U.S. stocks generate little to no total return for roughly a 10-year period (or longer). The three most prominent lost decades in U.S. stock market history occurred in the 1930s, the 1970s, and the 2000s. In each of these periods, U.S. stocks declined by 50% (or more) and then took around a decade to recover. The good news is that lost decades don't happen too often. In the 10 decades from 1920-2020, only 3 of them would be classified as such. But, do you know what's even better? When we take into account how a typical person invests their money, these lost decades become shorter and less prevalent. "
|
| The institutional cost mirage |
| 06/16/25 | | Funds |
"Ennis develops a model correlating alts allocation with total expense ratios for public pension funds, demonstrating that portfolios heavily tilted toward alternatives can easily incur annual costs exceeding 3.6%. Compare this to the near-zero fees of public market index strategies, and the scale of value destruction becomes self-evident."
|
| The alpha model of Theseus |
| 06/16/25 | | Behaviour |
"To be human is to constantly choose between old and new. Should you listen to your favorite playlist or try some new music? Keep your current phone or update to the latest model? It's a tough call. On the one hand, individuals often exhibit conservativism and react too slowly to new information, a fact which plays an important role in some theories of behavioral finance. On the other, Warren Buffett has achieved great success using steadfast adherence to a few simple principles, and I doubt he listens to a lot of new music."
|
| Uncertainty |
| 06/16/25 | | Behaviour |
"The key message I want to convey is this: When you spot an opportunity, don't let uncertainty paralyze decision-making. That's the inability to take action when a big fat pitch comes at you. You must be prepared to strike when an opportunity arises. If you wait for perfect conditions, opportunities will have skate right past you. It will be too late."
|
| Very bad advice |
| 06/16/25 | | Behaviour |
"A boy once asked Charlie Munger, 'What advice do you have for someone like me to succeed in life?' Munger replied: 'Don't do cocaine. Don't race trains to the track. And avoid all AIDS situations.'"
|
| Good in theory |
| 06/16/25 | | Economics |
"Economics is not a perfect science. It describes relationships which are sometimes true, but can also change, sometimes permanently. For that reason, these models are useful to understand - but should never be taken as gospel."
|
| No longer a serious country |
| 06/08/25 | | World |
"Imagine yourself as a foreigner considering investing in the United States. You may well know that the One Big Beautiful Bill Act contains a 'revenge' provision that would allow the U.S. government to impose extra taxes on foreign investors whose home countries have policies America doesn't like. You probably know that one of Trump's advisers has suggested the forced conversion of short-term debt into century bonds. Once upon a time everyone would have dismissed these things as stuff that couldn't happen in America. Now? Who knows?"
|
| The best withdrawal strategy in retirement |
| 06/08/25 | | Retirement |
"According to this report, only 1 in 7 retirees (14%) end up touching their principal during retirement. The rest live on their income (or less than their income) in their golden years. When I first read this statistic I couldn't believe it. The financial industry spends so much time and energy doing all this complicated math and planning on how to spend money in retirement and, yet, the vast majority of retirees ignore it."
|
| Missing the market's N best days |
| 06/08/25 | | Asness |
"I think the advice to avoid market timing is, for almost everyone, quite good. But the reason to avoid it is that you're likely bad at it and doing it without skill is actually harmful, as you are randomly deviating from a properly diversified portfolio. If you're convinced you're good enough at it, you should do some, but nowhere near the radical asymmetric strategy of being 100% out for only a few months or days. Even if (a giant if) an investor is really good at market timing, nobody is even a small fraction of that good (and why you'd do it by asymmetrically only getting out and never raising the weight perplexes me)."
|
| It's affordability |
| 06/08/25 | | Markets |
"While macro data may point to an economy that appears resilient - with moderate nominal growth, low unemployment, and steady consumer spending - beneath the surface, an affordability crisis is building. Though it may spare those with inflated assets, it is marginalizing and demoralizing a vital portion of the U.S. population."
|
| Drawdowns and recoveries |
| 06/02/25 | | Markets |
"Long-term investors need to be aware of the pattern of drawdowns and be prepared to face them when they inevitably occur. The best investors and stocks suffer through large drawdowns, which can be considered a cost of doing business over the long haul. The median drawdown for the 6,500 stocks in our sample from 1985-2024 was 85 percent and took 2.5 years from peak to trough. More than one-half of all stocks never recover to their prior highs. Relative to smaller drawdowns, larger drawdowns, on average, take longer to occur, recover to the previous peak less often, and yet can provide attractive returns off the lows. Recoveries from drawdowns of all sizes have significant skewness, which means some stocks do extremely well relative to the pack. As a result, average returns from rebounds are higher than median returns."
|
| Generational wealth vs. enough |
| 06/02/25 | | Retirement |
"The concept of enough is perhaps best explained by Joseph Heller. Authors Kurt Vonnegut and Joseph Heller were at a party given by a hedge fund manager on a fancy island in New York. Vonnegut pointed out that the host had made more money in a single day than Heller had made with all of the sales of his popular book Catch-22 in his entire lifetime. Heller responded, 'Yes, but I have something he will never have"enough!' I'm pretty sure that speaker had never heard this story, or if he had, he thought, 'That's nuts, why would someone not want more?'"
|
| The lowest risk-free rate |
| 06/02/25 | | Behaviour |
"What is the lowest risk-free, after-tax, after-inflation rate of return you would accept in order to forgo all other investment opportunities for the rest of your life?"
|
| Is South Korea the next Japan? |
| 06/02/25 | | World |
"South Korea's equity market looks like an exaggerated version of the Japanese stock market. Japan has a massive pool of companies trading at below 1x price-to-book, but South Korea has an even larger share. And while Japan is famous for its “lost decades,” the Japanese market has taken a sharp upward turn, while the South Korean market continues to languish."
|
| How flows change factor performance |
| 05/20/25 | | Value Investing |
"What I find particularly interesting, though, is that the study also estimates cross-factor impacts. If more money flows into momentum stocks, the expensive stocks tend to get more expensive while the cheap stocks tend to get cheaper. This should increase the return potential for value investors. Indeed, the chart below shows that if 1% of the total market flows into momentum portfolios, then the return outlook of the value factor increases but 0.6% per year. Similarly, the return outlook for small cap investors increases as well, while quality factor portfolios see their return prospects diminished because quality factor portfolios have large overlaps with momentum factor portfolios."
|
| A price on mental freedom |
| 05/20/25 | | Behaviour |
"Today, I don't make active investments because you can't put a price on mental freedom. What I've realized about myself (and many others I've spoken to) is that when you buy an active investment like an individual stock, that investment consumes a lot of your attention."
|
| Buying the dip wins again |
| 05/20/25 | | Markets |
"Retail investors have won again. When trade tensions flared in early April and about $6.6 trillion in market value vanished from US stocks in just two business days - the fifth-worst two-day drop since the S&P 500's creation in 1957 - they didn't panic. Instead, they did what they've learned to do over the past 15 years: They bought the dip. Six weeks later, the US stocks benchmark has not only recovered but surpassed its pre-tariff levels, delivering a gain of about 17% from the lows to those who kept their nerve."
|
| Profitability retrospective |
| 05/20/25 | | Markets |
"rofitability subsumes all the quality factor, explaining both the performance of the strategies the investment industry market and the factors that academics employ"none of the quality factors generated significant positive alpha relative to profitability, the other Fama and French factors, and momentum. The pricing of the quality factors was primarily through significant positive loadings on profitability. Thus, instead of focusing on various quality metrics, investors can concentrate on a company's ability to generate profits."
|
| Will you need long-term care? |
| 05/20/25 | | Retirement |
"A recent update of these data show that only about a fifth of retirees will need no assistance at all during their lives and a fifth will need extensive services. The remaining 60 percent of seniors will have either low (25 percent) or moderate care needs (37 percent)."
|
| The rule of law |
| 05/20/25 | | Crime |
"It is only under the shelter of the civil magistrate that the owner of that valuable property, which is acquired by the labour of many years, or perhaps of many successive generations, can sleep a single night in security. He is at all times surrounded by unknown enemies, whom, though he never provoked, he can never appease, and from whose injustice he can be protected only by the powerful arm of the civil magistrate continually held up to chastise it. The acquisition of valuable and extensive property, therefore, necessarily requires the establishment of civil government."
|
| Mr Market rules |
| 05/12/25 | | Markets |
"The curious thing about financial markets is that they do not respond to what most of us would regard as news."
|
| Beanie babies + bimetallism |
| 05/12/25 | | Markets |
"Beanie Babies in the 1990s were a classic bubble involving small stuffed animal toys. The bubble featured a seemingly scarce commodity and an exciting new trading and communications technology, the internet. Early buyers were richly rewarded by price increases, attracting more buyers. Burton and Jacobsen (1999) estimate that the annual returns on Beanie Babies were between 159% and 176% from 1994 to 1999. But the bubble collapsed after 1999, perhaps because Beanie Babies offered no vision of social justice."
|
| US treasuries, deficits and credibility |
| 05/12/25 | | Markets |
"The damage has been done. How much? Aside from higher yield and a lower stock market it's hard to measure. You also have constant attacks on institutions. The next couple months will be very noisy. You have tariffs and trade talk, tax bill, inflation, a massive unsustainable deficit and an economic slowdown. Followed by midterms elections. Mistakes have been made and that increased pain for the people. This is about a country's reputation."
|
| Go for the gold |
| 05/12/25 | | Gold |
"There is no math that an investor can do to determine an appropriate price for gold. It's worth only what other investors are willing to pay for it, and that, in my view, is why its price can fluctuate so widely."
|
| Do it for the kids |
| 05/12/25 | | Books |
"Welcome to the Jonathan Clements Getting Going on Savings Initiative and the accompanying book, The Best of Jonathan Clements: Classic Columns on Money and Life. The savings initiative aims to get young adults started in the financial markets with $1,000 contributions to Roth IRAs, with those contributions funded by both direct donations and the royalties from the book. The book consists of more than 60 of my old Wall Street Journal columns."
|
| Berkshire Hathaway 2025 AGM |
| 05/05/25 | | Buffett |
"Warren Buffett presides over the 2025 Berkshire Hathaway annual shareholder meeting" [video]
|
| Be minimally extractive |
| 05/05/25 | | Thrift |
"The late Jack Bogle, founder of Vanguard, did more to help the individual investor than anyone in history. And since this week marks the 50-year anniversary of Vanguard's founding, I thought it would be nice to illustrate the unrivaled impact that Bogle had on the investment industry."
|
| Off the hook |
| 05/05/25 | | Government |
"After years of riding the wave of easy money and effortless asset appreciation, many sophisticated investors were caught off guard by the market's negative response. While tariffs may have been the catalyst for the recent decline in stock prices, they certainly aren't responsible for this cycle's elevated valuations. Investing in an asset bubble carries tremendous risks. Pay up and play along, and you assume the risk. We believe prices paid, not tariffs, will be the main source of investor losses when the current market cycle ends."
|
| Suffering in private |
| 05/05/25 | | Markets |
"Can you make money in a private investment fund? Probably. But I see it as an uphill - and unnecessary - battle."
|
| Got diversification |
| 05/05/25 | | Markets |
"Diversifying equity allocations outside of the United States seems like a prudent move in this macroeconomic environment, and, given valuations, international outperformance is a trend that could continue for years to come."
|
| The Kardashian of money |
| 05/05/25 | | Markets |
"the basis of this wealth is a self-perpetuating set of beliefs, as opposed to an independently valuable economic function."
|
| A historical analysis of tariffs |
| 04/27/25 | | Taxes |
"Our analysis suggests that, over the long-term, tariffs have had relatively minor impacts on GDP, inflation, and equity markets. Perhaps most surprisingly, they've had relatively minor impacts on trade imbalances. Perhaps the best way to think about tariffs, then, is simply as a tax like any other."
|
| No exception |
| 04/27/25 | | World |
"While it may be hard to remember, there have been multi-year periods when international stocks have outperformed the U.S. market. In fact, a chart of domestic vs. international stocks looks a little like a sine wave, with performance alternating over time. For that reason, I continue to recommend an allocation to international stocks."
|
| Tasting retirement |
| 04/27/25 | | Retirement |
"I'm trying my hand at retirement. It isn't going so well."
|
| Quantitative instability |
| 04/27/25 | | Markets |
"Fire sales by quantitative funds had a significantly larger destabilizing effect on markets compared to traditional mutual funds. For an equivalent-sized fire sale, the market impact of quantitative funds was more than eight times greater. In addition, it takes between one and three months longer for stocks sold by quantitative funds to fully recover."
|
| Germans are reluctant to invest in stocks |
| 04/27/25 | | World |
"But one result stood out to me in this qualitative research. During the interviews, when people were asked why they didn't invest in equities, they often said (one in three respondents) that equities were too risky. But by far the most common reason why people wouldn't invest in stocks (about half of all respondents) is that they thought it is too expensive and too tedious to set up a stock or fund portfolio."
|
| Why diversification is difficult |
| 04/21/25 | | Indexing |
"Diversification isn't about return, it's about risk. It's about smoothing out the financial ride over your lifetime. You know this already. That's the easy part. The hard part is sticking with it even as you underperform in most years. As Brian Portnoy brilliantly stated, 'Diversification means always having to say you're sorry.' And it's true. Most of the time you will feel sorry that you didn't do as well as your best asset class. You'll feel sorry that one (or more) of your positions lost money. And so forth. But this is to be expected. This is what we pay for the benefits of diversification. This is the price of peace."
|
| School is in |
| 04/21/25 | | Indexing |
"These policy shifts are a reminder that, even when everyone seems to agree, things can change. That's why I believe it's best never to go too far out on a limb with investment choices. Nothing is guaranteed."
|
| A quantum of confusion |
| 04/21/25 | | Markets |
"My view is that the quantum confusion of 2024 is a symptom of the general degradation of U.S. stock market quality, part of the 'Koreafication' process where the market becomes more retail dominated. I don't want to overstate the quantitative significance of this trend, because as shown in Figure 2, it's mostly confined to small-cap stocks. But it appears that bizarre pricing previously confined to pink sheet stocks is now visible in listed smaller names."
|
| Why a 4.4% yield might barely deliver |
| 04/21/25 | | Bonds |
"At first glance, a 4.4% bond yield seems attractive, especially after years of near-zero interest rates. But hidden beneath the surface, taxes and inflation are silently eroding your returns. By the time they take their cut, that 'safe' yield could leave you with nothing- or worse, less than you started with."
|
| Buy the bottomless pit |
| 04/13/25 | | Markets |
"A basic property of optimal decision-making is that you should act more conservatively when you have less accurate information. As of April 2025, we're confronted with a situation where we have very little historical precedent and the outcomes we observe are extremely volatile. As a logical consequence, we should be cautious in responding to events."
|
| Housel on the decline |
| 04/13/25 | | Behaviour |
"Napoleon's definition of a military genius was quote, the man who can do the average thing when everyone else around him is losing his mind. I'm gonna repeat that because it is such a ridiculously good quote. A military genius is the man who can do the average thing when everyone else around him is losing his mind. It is the exact same in investing to be a good investor over time. You don't need to make a lot of genius decisions. You just need to be merely average when everyone else is making bad decisions, as many people are."
|
| Here we go |
| 04/13/25 | | Markets |
"But whatever you are focused on, and whichever region you choose to invest in, our best advice is to chill. Don't panic. Don't overreact. Don't pretend like you know where things are immediately going. Don't think that you need to. You don't."
|
| When does the market recover? |
| 04/13/25 | | Markets |
"it's the perfect time to examine how long U.S. stocks typically take to recover from such a decline. Knowing this information can help you set the right expectations about what might happen next in the stock market. And, with the right expectations, it's much easier to stay invested for the long term."
|
| Don't push it |
| 04/13/25 | | Behaviour |
"We can control how much risk we take, the investment costs we incur, and our own buying and selling. But we can't control the behavior of other investors, as reflected in ever-fluctuating stock and bond prices."
|
| War on the world |
| 04/04/25 | | World |
"Dr. Rob Shapiro talks about Trump's trade war on the world." [video]
|
| Back to the bronze age |
| 04/04/25 | | World |
"Advanced economies, even those, such as Germany, with large trade surpluses, have seen a steadily declining factory share. Advanced economies do better focusing on higher-value jobs such as AI, and on the requisite education for their workers, not on repressing their strengths in a futile effort to return to a proto-Bronze Age. Moreover, manufacturers are customers for a large share of US imports, thus the Trump tariffs punish the sectors he imagines he is helping."
|
| US value trading at a discount |
| 04/04/25 | | Value Investing |
"While the future is unknowable, the best investors can do is to put the odds in their favor. And current valuations suggest the likelihood that value stocks will outperform over the long term."
|
| The acquirer |
| 04/04/25 | | Management |
"The story of how Hiroshi Nojima turned a sleepy family business into one of the top performers on the Tokyo Stock Exchange"
|
| Set for life? |
| 04/04/25 | | Retirement |
"Under what circumstances could you be 'set for life' with $2M at age 23, and under which circumstances would you not be. Let's dig in."
|
| Courageously losing your money |
| 03/30/25 | | Markets |
"I explain why concentration is bad and diversification is good. I start by assessing the arguments in favor of concentrated portfolios, including the deluded belief that concentration brings both high return and low risk. I review the extensive record of client wealth destroyed by overconfident concentrators, and then discuss the conceptual errors underlying the enduring appeal of concentration."
|
| Trend following is harder |
| 03/30/25 | | Markets |
"Trend following is not for the faint of heart. While it can reduce the overall volatility of your portfolio during extended declines, it can also create anxiety and stress with its constant false positives, missed recoveries, and delayed outperformance. Whether such a strategy fits into your portfolio and lifestyle is up to you."
|
| Just inside the zone |
| 03/30/25 | | Value Investing |
"In our opinion, the best time to buy a cyclical stock is when the company's profits are in decline and its industry is in recession. In effect, buy during the bust, not the boom. Of course, this is much easier said than done."
|
| Mad King Trump |
| 03/30/25 | | World |
"They expected a replay of the laissez-faire policies of Trump's first term - a lot of bombastic rhetoric but few real policy changes and a lot of small, quiet deregulatory moves. Instead, they got a very different Trump this time - one who's intent on breaking the American economy in the service of ideology."
|
| Waymos crash less than humans |
| 03/30/25 | | Tech |
"Based on insurance industry records, Waymo and Swiss Re estimate that human drivers in San Francisco and Phoenix would generate about 26 successful bodily injury claims over 25 million miles of driving. So even if both of the pending claims against Waymo succeed, two injuries represent a more than 90 percent reduction in successful injury claims relative to typical human drivers."
|
| Paying your tuition |
| 03/30/25 | | Indexing |
"The one thing about the stock market that's predictable is its unpredictability. New crises frequently come along, and each is different enough to give investors renewed anxiety. In dealing with these crises, what's most important? In my opinion, it's perspective. Good investors have a sense of market history that can help them navigate crises better than other investors."
|
| Rebuffed: options-based strategies |
| 03/24/25 | | Funds |
"By and large, options-based strategies have not been effective tools to achieve better risk/return outcomes. And this is unlikely some fluke of the past five years. Economic theory would argue investors should have expected this result, and that they should going forward, too."
|
| How bubbles grow |
| 03/24/25 | | Markets |
"As hedge fund manager Cliff Asness has commented about short sale constraints, 'Our problem wasn't that we couldn't short NASDAQ in 1999, our problem was that we could and did.'"
|
| Index three ways |
| 03/24/25 | | Indexing |
"What percentages make sense? I've long relied on research which finds that investors can pick up most of the diversification benefit of international stocks with an allocation as small as 20%. Thus, my preferred allocation to international stocks is just 20%. It's a matter of perspective, though, and there isn't one right answer." [US Based]
|
| Fairfax Week 2025 |
| 03/19/25 | | Value Investing |
"Check out this year's Canadian carnival for capitalists."
|
| Never root for a recession |
| 03/15/25 | | Retirement |
"Ultimately, recessions aren't opportunities to celebrate, they're challenges to overcome. And while such events can provide unique investment opportunities, the broader economic damage they typically cause outweighs such benefits. Therefore, instead of hoping for a market crash, make sure you are prepared for one."
|
| The Squid Game market |
| 03/15/25 | | Behaviour |
"I view Korean retail investors today as similar to Robinhood investors in 2021. While quantitatively insignificant relative to the whole stock market, in narrow areas they are a danger to themselves and possibly to others. And even if they don't impact prices, they might provide useful contrarian signals."
|
| The index inclusion effect is dead |
| 03/15/25 | | Markets |
"The index inclusion effect is being arbitraged away by the companies themselves and all that is left is for traders to speculate on what kind of announcements the index provider could make, which is much more uncertain and a far cry from the original arbitrage opportunity."
|
| The high-yield spread signal |
| 03/10/25 | | Markets |
"In previous research, we have cited 6.0% on the high-yield spread as the break point that defines a crisis. That level might now be slightly lower, given the ratings shift in the market since 2015. We estimate that the adjusted level would be 5.6%. But students of the high-yield spread will note that when the high-yield spread reaches that level, it usually does not hover there but moves right through on its way much higher."
|
| Why analyst forecasts are optimistic |
| 03/10/25 | | Markets |
"The result of this common practice is that the terminal value typically accounts for about 75% of the total fair value. And that share is remarkably stable, indicating that analysts really don't change their approach to modelling over time."
|
| UBS Yearbook 2025 |
| 03/10/25 | | World |
"With rising market concentration, the latest Global Investment Returns Yearbook reappraises the importance of diversification across asset classes to reduce portfolio risk."
|
| Valuations reflect exceptionalism |
| 03/10/25 | | World |
"US exceptionalism provided the same explanation for the outperformance of US stocks in the 1990s. However, that regime changed. From 2000-2007, while the S&P 500 Index returned just 1.9% per annum (underperforming riskless one-month Treasury bills by 1.3% per annum), the MSCI EAFE Index returned 5.6% per annum, and the MSCI Emerging Markets Index returned 15.3% per annum."
|
| The Globe's Dividend All-Stars 2025 |
| 03/02/25 | | Stingy Investing |
"Dividend stocks are loved by Canadians because they have a pleasant habit of paying tax-advantaged income that tends to grow over time with the possibility of capital gains along the way. But the Canadian stock market is stuffed full of dividend stocks and it can be hard to find the best it has to offer. That's why we're pleased to present the Globe's Dividend All-Stars for 2025. It provides a wealth of data and analysis on the largest 200 dividend-paying stocks on the Toronto Stock Exchange and includes a star rating for each one. The top 20 stocks get a full five out of five stars and make it into the team of Dividend All-Stars. We're happy to say that last year's team outperformed with gains of 29.4 per cent, including reinvested dividends."
|
| Massive spending: a red flag |
| 03/01/25 | | Markets |
"The ideal measure of forward-looking returns is not past capex, but future expected capex. As shown in Lamont (2000), if your goal is to predict aggregate U.S. stock returns in the coming year, capex plans work better than trailing capex. Thus as of February 2025, we expect low stock returns over the next 12 months. You could say that stocks are 'overpriced' or you could say they are 'fairly priced to deliver low returns,' but either way the forecast is for below-average returns."
|
| Four thoughts |
| 03/01/25 | | Behaviour |
"The unfortunate reality is, we'll never stop worrying. But perhaps we can at least deal with our big fears, so our stress level isn't quite so high, and sweat less over the small stuff. No, it doesn't much matter whether we rebalance every year or every two years, or whether we have 75% in stocks rather than 70%, or whether our credit card pays 2% cash back on restaurant spending instead of 1.5%."
|
| Hidden tail risks beyond the bell curve |
| 03/01/25 | | Markets |
"Measures like skewness and kurtosis can be helpful supplements to average return and volatility when thinking about the role that diversifying assets can play in a portfolio. Delving into skewness and kurtosis enables investors to uncover these nuances and build portfolios that are more resilient to unexpected market swings."
|
| Bubbleitis |
| 02/23/25 | | Markets |
"Well, let's see. Stock valuations are insanely expensive. Home prices are through the roof. ... Credit spreads are tight as a drum. And don't even get me started about zero-day stock options and leveraged ETFs! Oh, and with all this going on, the Fed says monetary policy is restrictive. You can't make this stuff up, Doc!"
|
| Why higher egg prices are painful |
| 02/23/25 | | Behaviour |
"Since 1947, the price of eggs has grown at an annual rate of 2.4%, more than one percent lower than the overall annual inflation rate of 3.5%. But over the last five years egg prices have gone up an en extraordinary 15.5% versus the overall inflation rate of 4.1%. Egg prices have more or less doubled in the past year."
|
| Trend-following still works |
| 02/23/25 | | Momentum Investing |
"These core statistics hold up out-of-sample (2005"2024), maintaining strong returns despite a modest decline in average trade profitability following the original publication."
|
| Never enough |
| 02/15/25 | | Behaviour |
"Accepting that we have enough and done enough might seem like worthy goals, a serene acceptance that's possible for those at peace with themselves and the world around them. Indeed, for many, “retirement” and “enough” seem to be pretty much synonymous, a declaration that the pursuit of “more” is over. But that isn't where my head is. Even now, I'm not sure I'll ever declare “I'm done,” which is weird, because I sure don't have the time to do much about it."
|
| Turn-of-the-month strategies |
| 02/15/25 | | Markets |
"As with many published anomalies, the classical Turn-of-the-Month (TOM) effect, originally defined as the period from the last trading day of the month to three days after, appears to have largely disappeared in the past decade."
|
| If you get a takeover offer, fight |
| 02/15/25 | | Markets |
"In short, if you are a company that is approached with a takeover bid, rule number one is to fight for a better deal. The chance of the bidder walking away is very low indeed and if the deal is modified, there is an 80% chance you get more money for the business."
|
| Still a lot of money |
| 02/15/25 | | Wealth |
"Whether we are looking at changes in prices or overall wealth, $1 million isn't what it used to be. Today, you'd need anywhere from $2 million to $4 million to have the same buying power as millionaires around the turn of the century."
|
| The unintended consequences of rebalancing |
| 02/15/25 | | Markets |
"Institutional investors engage in trillions of dollars of regular portfolio rebalancing, often based on calendar schedules or deviations from allocation targets. We document that such rebalancing has a market impact and generates predictable price patterns. When stocks are overweight, funds sell stocks and buy bonds, leading to a decrease in equity returns of 17 basis points over the next day. Our results are robust to controls for momentum, reversals, and macroeconomic information. Importantly, we estimate that current rebalancing practices cost investors about $16 billion annually-or $200 per U.S. household. Moreover, the predictability of these trades enables certain market participants to profit by front-running the orders of large institutional funds."
|
| Don't freak out |
| 02/10/25 | | Behaviour |
"If social media sentiment translated into market moves we would have seen a 1987-like crash on Monday. You had crypto prices crashing, equity futures falling, currencies moving and tons of speculation on what it all means. I don't know what it all means. No one does because we have no idea how long these tariffs will last or how punitive they will be. Investing would be a lot easier if there were no uncertainty."
|
| Bubbles might be likely to repeat today |
| 02/10/25 | | Markets |
"Bubbles do sometimes repeat within the span of a few years. Historically, the Mississippi Bubble in France ended around 1720 just as the South Sea Bubble appeared in Britain. And in the past few decades we've often see blatant overpricing that appears, gets corrected, and then promptly re-appears. In the lab, we can observe bubbles that occur in repeated experiments run with the same participants. All these facts are consistent with theoretical models that can produce recurring waves of bubbles."
|
| Taking it personally |
| 02/10/25 | | Behaviour |
"Today's discussions of risk are more nuanced, reflecting an awareness that the danger from misfortune is matched by the damage that can be done by our own behavior. Consider the typical stock-market cycle. Thanks to research by behavioral-finance experts, we now have a pretty good idea of how investors' thinking changes along with the market."
|
| The hidden costs of volatility drag |
| 02/10/25 | | Markets |
"Leveraged concentrated or non-diversified ETFs can be useful for short-term trading, but they are generally ill-suited for long-term investing. Their underperformance is primarily due to volatility drag - a natural result of compounding returns in volatile markets. This issue is amplified when leveraging highly volatile assets, as the drag increases disproportionately with higher leverage."
|
| AI and the Mag 7 |
| 02/10/25 | | Markets |
"a lot of investors have done very poorly betting against the scrappy innovators of Silicon Valley. But now that they are mega-cap behemoths run by mega-billionaires trying to outspend each other, maybe the Mag 7 will be outmaneuvered by their true heirs, another group of as-yet-unknown young innovators who are toiling away all over the world in garages far less expensive than the $1,700/square foot you have to pay to live in the cushy confines of Silicon Valley."
|
| When are tariffs good? |
| 02/10/25 | | World |
"Tariffs help domestic manufacturers by protecting them from foreign competition, but they hurt them by driving up the cost of their imported components. This is one of the two big problems with tariffs - the other one being that they drive up consumer prices.But does this mean tariffs are always bad?"
|
| U.S. floats idea of defaulting on treasuries |
| 02/10/25 | | Bonds |
"imagine thinking that by downloading a ton of data and having a few days to analyze it you could make the determination that a significant amount of the U.S. national debt wasn't real and didn't have to be paid."
|
| Tariffs on Canada and Mexico are bad news |
| 02/02/25 | | World |
"it's certainly America's dumbest trade war in living memory. There's really no upside for the country here - it's not going to help domestic manufacturing, it's not going to make Americans better off, it's not going to materially affect the fentanyl problem, and on top of all the economic risks it's going to piss off U.S. allies and make America look terrible. I still hold out hope that the tariffs will be quickly revoked after some sort of symbolic concessions. But if not, then we'll know that we've left the era where Trump just blustered and preened, and entered a more frightening era where he starts lashing out and breaking things."
|
| Trump gone soft |
| 02/02/25 | | World |
"Trump is imposing destructive (and self-destructive) tariffs on an ally that has done nothing wrong, while handling a rival and potential enemy with kid gloves. It is hard to believe that sheer stupidity - although there's plenty of that going on - can explain it."
|
| The fartcoin stage of the market |
| 02/01/25 | | Markets |
"I can't believe I'm saying this, but the current meme coin mania makes the bubble of 2021 seem like a relatively sober exercise in rational valuation. At least back then, Roaring Kitty talked about earnings, and crypto enthusiasts rhapsodized about use cases. They might have been delusional, but at least they were delusional about the right things."
|
| Shameless robber barons |
| 02/01/25 | | World |
"If swindling pays, then it will not stop. The definition of the good society is one in which virtue pays. I can now add a slight variation to this; you cannot have a good society unless virtue pays."
|
| International stocks |
| 02/01/25 | | World |
"This is why some have argued that U.S. stocks are experiencing DotCom Bubble 2.0. The euphoria surrounding AI today parallels that of internet companies in the late 1990s. While I see the similarities, the difference is that the earnings are much bigger this time."
|
| The inflation gamble |
| 02/01/25 | | Behaviour |
"we find that high inflation lowers risk aversion, strengthens skewness preference, and increases demand for investments that resemble lotteries. Due to increased gambling demand, lottery-type stocks become more overpriced and earn lower returns in the future. This negative relation is stronger for lottery-type stocks that have greater sensitivity to inflation and are harder to arbitrage."
|
| There is no fear priced into anything |
| 01/27/25 | | Markets |
"Valuations tell the tale. The current market's price-earnings ratio is top decile for last few decades. Credit-spreads are near record tights. There is no fear priced into anything at the present moment."
|
| Tariffs will not make america great |
| 01/27/25 | | Taxes |
"Unfortunately cutting taxes and replacing them with higher tariffs simply will not work. The only fiscally sustainable way to reduce the tax burden on working Americans is through spending cuts. Hiking tariffs in order to slash other taxes will do nothing to improve the plight of ordinary Americans and will almost certainly exacerbate their problems. Tariffs did not make America great and they will not make America great again."
|
| Explaining international valuations |
| 01/27/25 | | World |
"Were a larger percentage of the valuation gap explained by fundamentals, we'd expect such a gap to persist. But given that the valuation gap is primarily explained simply by the location of listing, we think there's a strong reason to expect a convergence - and therefore to favor international over US-listed stocks, despite their terrible relative performance over the past decade."
|
| Taking center stage |
| 01/27/25 | | Behaviour |
"It's the one asset we're all born with, and it pretty much defines our financial life. I'm talking here about our human capital, our ability to pull in a paycheck. That paycheck - or the lack thereof - drives our ability to save, service debt and take investment risk. It also dictates our insurance needs and how much emergency money we should hold. Put it all together, and our human capital should arguably determine how we manage our money over our lifetime."
|
| A recession is coming |
| 01/27/25 | | Markets |
"The 1960-61 and 1990-91 recessions are missed (although a 10yr-2yr disinversion might catch the latter), while a recession is predicted for April 2025. Of course, if the inversion failed to predict the 2024 recession, is there reason to believe the disinversion will predict well?"
|
| Valuation indicators to ignore |
| 01/19/25 | | Markets |
"Here I review four commonly used measures of market overvaluation that you can safely ignore. All four measures say the U.S. stock market is overvalued today. The market might well be overvalued today, but these measures are not good reasons to say so."
|
| Wealth or inflation |
| 01/19/25 | | Value Investing |
"Assuming financial assets remain inflated, we expect more companies will discover the rewards associated with higher-margin premium offerings. As businesses shift their mix to accommodate the higher end, we believe wealthy consumers will increasingly become the economy's price setters. Moreover, additional gains in household financial assets could lead to further increases in home prices and shelter inflation. If the bond market didn't have enough to worry about, we believe the days of booming asset prices coexisting with tame consumer prices are long gone. Asset inflation is leaking."
|
| Problems with passive investing |
| 01/19/25 | | Indexing |
"Passive investing has absolutely revolutionized the investment landscape for individual investors. Not only has it dramatically lowered the costs of asset ownership, but it has done so while delivering strong returns. What began as a radical idea to buy the overall market without worrying about picking the winners now accounts for 57% of all equity fund assets and over $13 trillion."
|
| 2024 in factors |
| 01/19/25 | | Markets |
"Looking at some of the biggest drivers of returns, the global equity factor had higher returns and lower volatility versus the historical average. Similarly, the large size factor, high-investment (AI-driven), and high turnover (lots of trading activity) all did quite well for style factors. Momentum and quality did well but were largely in line with history while value lagged."
|
| Trudeau was a poor steward |
| 01/13/25 | | Government |
"The fact is, no one seems to really know what's behind Canada's low productivity growth. Observers agree that low rates of corporate investment, including investment in R&D, are the problem, but no one seems to have a good explanation for why companies aren't investing. And no one seems to know whether Canada's especially bad performance since the pandemic is just an exacerbation of the existing negative trends, or whether some new problem has cropped up in addition."
|
| Seven pillars of market bubbles |
| 01/13/25 | | Behaviour |
"Charles Mackay wrote the lurid bestseller Extraordinary Popular Delusions and the Madness of Crowds, which discussed many historical bubbles. Despite publishing his book in 1841 decrying bubbles, in 1845 Mackay himself was caught up in the British railway bubble and advocated buying shares."
|
| Spending it |
| 01/13/25 | | Retirement |
"Retirees can pick from a host of withdrawal strategies, including the five popular choices listed below. You'd likely fare just fine with any of the five strategies - but that doesn't mean you shouldn't pick carefully."
|
| Stock market history, illuminated |
| 01/13/25 | | Markets |
"What particularly interests us is that - until the last decade - European and US stock markets behaved very similarly over many, many years. Given that many constituents in both markets are global businesses selling many similar products and services multi‐nationally to similar regions, countries and customers, this made sense."
|
| The TSX's gains over almost 69 years |
| 01/13/25 | | Stingy Investing |
"When pondering the future, I like to set my expectations by looking to the past, because it offers clues to the rewards, and risks, associated with investing in stocks."
|
| Looking back from 2035 |
| 01/05/25 | | Fun |
"Well, sitting here in the year 2035 and looking back at our endowment's returns for the last decade is not a pleasant task. World markets have been subpar and our performance relative to world markets has been simply terrible. Hard times are never pleasant."
|
| Simple formulaic investing |
| 01/05/25 | | Value Investing |
"Schwartz and Hanauer demonstrated that simple, easy-to-implement, systematic formula-based investing can still generate market outperformance, providing investors with efficient exposure to well-documented factor premiums."
|
| Why we struggle |
| 01/05/25 | | Behaviour |
"Why do some financial situations scare us, while others leave us unperturbed? Why do we spend time and money in ways we later regret? Why do we find our bad habits so difficult to change? Why do we admire some folks, while being jealous of others?"
|
| Self defense |
| 01/05/25 | | Behaviour |
"Using the 4% rule as a benchmark for a reasonable portfolio spending rate, Blanchett found that retirees spend, on average, just 2.1%. The upshot: They could afford to double their spending without materially jeopardizing their plans."
|
