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Article Archive: 2020

The Stingy News Weekly: December 25, 2020
12/25/20   SNW
Merry Christmas!

Queen's Christmas message
12/25/20   Christmas
"Queen Elizabeth pays tribute to front-line workers, young people who helped their communities during the 'difficult and unpredictable times'" [video]

Music that makes Christmas
12/25/20   Christmas
"The selection below doesn't include any rarities, but it includes music that shows that the Christmas music tradition is an ancient and very much a living thing. Even as we close a year in which singing has been made impossible."

How capitalism saved Christmas
12/25/20   Christmas
"Everyone seems to complain about how Christmas has been commercialized. But without the business of gift-giving that sprang up in the 19th century, Christmas might still be what it once was for many people: a riotous bacchanalia in which drunken gangs brawled in the streets and bashed their way into houses demanding money and alcohol."

A Christmas Carol
12/24/20   Christmas
"Marley was dead: to begin with. There is no doubt whatever about that. The register of his burial was signed by the clergyman, the clerk, the undertaker, and the chief mourner. Scrooge signed it: and Scrooge's name was good upon 'Change, for anything he chose to put his hand to. Old Marley was as dead as a door-nail."

In defense of Scrooge, whose thrift blessed the world
12/24/20   Christmas
"Dickens and many Victorian authors were moved by a mass of poor people, who had been largely invisible in rural Britain but became all too visible as they surged into the cities to work in factories. Since the Roman Empire, no one had experienced anything resembling sustained economic progress. When wages had grown in the past after periods of pestilence, population surged and wages fell again. For all Dickens knew or could envision, the only hope for the poor was charity. Yet unknown to him and his contemporaries, a revolution was beginning at the moment 'A Christmas Carol' was published. The Market Revolution, funded by the thrift of Britain's Scrooges, was already enriching mankind."

The Stingy News Weekly: December 20, 2020
12/20/20   SNW
This week we have fixing, Charlie, selling, generation, Tesla, and more.

A generational moment
12/20/20   Markets
"While we can't predict the future, based on price and valuation, we are fairly certain young investors are not being presented with a generational buying moment. More likely, we believe investors are being offered a generational selling moment"

The Tesla bubble
12/19/20   Markets
"Tesla is entering the S&P 500 with a stupendously high valuation and will likely be ranked sixth in the index. Traditional cap-weighted indices, such as the S&P 500, are structured to buy high and sell low - and Tesla is a prime example of this maxim."

12/19/20   Markets
"And for each of them in aggregate to generate 15% annual returns over the next fifteen years, they would need a combined market cap of over $70 trillion. Not that it is a valid comparison, but in 2035, that will be greater than the combined GDPs of the US and Europe."

Tiny titans strategy
12/19/20   Value Investing
"O'Shaughnessy Tiny Titans screen looks for the 25 companies with the highest price strength over the last year after applying the market cap and value filters"

Charlie Munger interview
12/19/20   Munger
"Charlie Munger appeared for the first time since January on a public interview with Caltech faculty." [video]

Selling in January
12/19/20   Stingy Investing
"This year's winners now face a dilemma. The lucky Scrooges with piles of capital gains fuelled by the manic market might want to lighten up on their high flyers before the eggnog runs out. But taxes can make the timing tricky. They can sell now and pay taxes this year, or wait and defer their taxes into the new year." [$]

Simple fix for those facing CERB repayments
12/19/20   Taxes
"Self-employed CERB recipients who have filed their 2019 taxes should be able to easily amend their return by filing a T1-ADJ form on which they can reduce the expenses they claimed so that their net income rises above the $5,000 eligibility threshold, Rotfleisch says."

The Stingy News Weekly: December 13, 2020
12/12/20   SNW
This week we have bargain value, CPP, future returns, deep value, and more.

Q3 2020 GMO letter
12/12/20   Value Investing
"No matter how we define cheap stocks - whether on book, or free cashflow, or forward earnings - they look attractive relative to history. Ten of the eleven definitions of Value presented are cheaper than they've been in at least 90% of months since 1971"

The imposter
12/12/20   Crime
"Shaun MacDonald was an ambitious tech innovator whose start-up was going to revolutionize the crypto economy. His wealthy investors had no idea that their charismatic founder was really Boaz Manor, a notorious Canadian white-collar criminal. It was only a matter of time before they discovered the truth"

Tobias Carlisle interview
12/12/20   Value Investing
"Tobias Carlisle is a well known author. He's written extensively about value investing. In our view, Deep Value is one of the best investment books ever written."

Estimating future stock returns
12/12/20   Markets
"Welcome to Wonderland, boys and girls. At the end of the third quarter, the S&P 500 was priced to return 2.92%/yr for the next ten years, with no adjustment for inflation. You might say, 'But David, you've reported levels that low in the past, and you were concerned, but you never said 'Wonderland.' True, but the market has rallied further since the end of the quarter, and the level of the S&P 500 now is priced to return 1.79%/yr for the next ten years, with no adjustment for inflation. That's in the 97th percentile of valuations."

CPP at 60
12/12/20   Retirement
"The average Canadian who takes Canada Pension Plan benefits at age 60 rather than 70 can expect to lose more than $100,000 of income over the course of their retirement"

CPP timing
12/12/20   Retirement
"The 'standard' age to take CPP is 65. If you take it early, your benefits are reduced by 0.6% for each month early. This is a 36% reduction if you take CPP at 60. If you wait past 65, your benefits increase by 0.7% for each month you wait. This is a 42% increase if you wait until you're 70."

The Stingy News Weekly: December 6, 2020
12/06/20   SNW
This week we have honesty, McRibs, optimists, reversals, and more.

The reasonable optimist
12/06/20   Behaviour
"The ease of underestimating how bad things can be in the short run and how good they can be in the longer run is a leading cause of bad forecasts, bad decisions, and confused people. It's common because it's easier to go all in on either optimism or pessimism - having one foot on each side feels waffling. But straddling both sides is usually the best stance."

The McRib effect
12/05/20   Markets
"When the McRib is available, the S&P 500 has an average daily return about 7 basis points (0.07%) higher than on days when it is not available. To put that into perspective, when annualized, that difference would be 19% every year."

Civic honesty around the globe
12/05/20   Behaviour
"Civic honesty is essential to social capital and economic development but is often in conflict with material self-interest. We examine the trade-off between honesty and self-interest using field experiments in 355 cities spanning 40 countries around the globe. In these experiments, we turned in more than 17,000 lost wallets containing varying amounts of money at public and private institutions and measured whether recipients contacted the owners to return the wallets. In virtually all countries, citizens were more likely to return wallets that contained more money. Neither nonexperts nor professional economists were able to predict this result. Additional data suggest that our main findings can be explained by a combination of altruistic concerns and an aversion to viewing oneself as a thief, both of which increase with the material benefits of dishonesty."

Reversal stocks
12/05/20   Stingy Investing
"Pickings are slim in the bargain bin after the recent runup. Only 24 stocks in the S&P/TSX Composite Index suffered from declines of more than 25 per cent since the start of 2020 through to Nov. 30, while the other 198 stocks fared better with 122 of them gaining ground." [$]

Beyond yield
12/05/20   Bonds
"Credit ratings are to fixed income what valuation multiples are to equities. Most credit analysts focus on yield and duration while most equity analysts focus on growth and discount rates, but in our view, the true drivers of return are changes in rating for bonds and changes in multiple for equities."

The Q ratio
12/05/20   Markets
"Q Ratio is not a useful indicator for short-term investment timelines. This metric is more appropriate for formulating expectations for long-term market performance."

Relief for RDSP holders
12/05/20   Taxes
"The federal government has affirmed its timeline for removing the limitation on the period that a Registered Disability Savings Plan (RDSP) may remain open after a beneficiary becomes ineligible for the disability tax credit (DTC)."

The Stingy News Weekly: November 27, 2020
11/27/20   SNW
This week we have thoughts on saving, early retirement, envy, and more.

11/27/20   Behaviour
"We begin our lives as growth stocks, but end our lives as value stocks."

11/27/20   Retirement
"So that's my verdict after four years of early retirement: boring."

11/27/20   Behaviour
"For me, enough is acknowledging the line between satisfaction and excess."

11/27/20   Behaviour
"We all like to think we're independent thinkers who weigh the evidence and reach our own conclusions - and yet there's ample evidence that our views are heavily influenced by those around us, whether we're choosing presidential candidates, bottled water or mayonnaise. This extends to financial matters, sometimes with grim consequences."

The Stingy News Weekly: November 22, 2020
11/22/20   SNW
This week we have horses, homes, value, legal tender, and more.

Canadian bills lose legal tender status
11/22/20   Markets
"The Bank of Canada issued a reminder on Thursday that hundreds of millions of $1, $2, $25, $500, and $1,000 bank notes will have their legal tender status removed as of Jan. 1, 2021."

Delaying CPP
11/22/20   Retirement
"Delaying CPP and Quebec Pension Plan (QPP) payments is the surest way to secure lifelong income, MacDonald said, but very few Canadians are taking advantage. More than 95% of Canadians start taking their CPP/QPP benefits at 65 or earlier, and fewer than 1% wait until they're 70."

Day traders lose money
11/22/20   Markets
"Large increases in Robinhood users are often accompanied by large price spikes and are followed by reliably negative returns."

Great company, wrong price
11/22/20   Markets
"The one thing he would point out is his strong belief that there is a difference between a company and its stock price. He believes that when a stock price underreacts to great things, or overreacts to terrible things, this creates opportunities. He also believes that you can pay too much for a good company. He believes this, because as mentioned above, he covered tech stocks during the tech bubble and its aftermath."

Don't count out value
11/15/20   Stingy Investing
"The announcement buoyed the market and value stocks in particular. I've been investing for almost three decades and don't remember a time when several of my stocks gained more than 20 per cent in a single day. But it happened on Nov. 9, when advances north of 5 per cent seemed to be the norm for value stocks." [$]

Homes in a bubble
11/14/20   Real Estate
"The bad news is all previous history came at higher mortgage rates. The average 30-year fixed mortgage rate fell below 3% for the first time in August 2020, and rates are close to the lowest possible levels given the credit risk and costs of writing mortgages. It's one thing to be a peak valuation, it's another to be at peak valuation with no discernable upside."

Locking it in
11/14/20   World
"Regardless of how long the current downturn lasts, we believe current oil prices are unsustainable as they trade below the breakeven price of most major producers."

Horses for courses
11/14/20   Value Investing
"Had you bet on large growth in the early '60s after it had built up a lead on small value over half a decade, you would have missed one of the best opportunities to bet on the opposite horse. Had you done it again in 1974 when large growth had really pulled ahead by double digits, you would have missed out again. Same for the early '90s and, of course, March of 2000. Today, large growth is way ahead of small value."

A work-from-home tax
11/14/20   Taxes
"One economist thinks there are negative externalities and even net costs to the individual in working from home; the other thinks it is an inarguable optimum"

Sequence risk
11/14/20   Retirement
"Financial planners are keenly aware of, and routinely warn clients about, sequence risk; that is, the possibility of facing a sequence of low returns early in retirement that may force retirees to scale down the plans they had made. This really is a scary scenario, but one that the evidence here shows that retirees are not very likely to encounter. A new and refined definition of sequence risk is advanced in this article, linking this type of risk to the sustainability of a withdrawal strategy. Furthermore, three ways of assessing sequence risk are proposed, among them one that enables a retiree to monitor the sustainability of his withdrawal strategy periodically and to introduce adjustments when necessary. The ultimate message of this article is that retirees should be informed, but not obsess, about sequence risk."

The Stingy News Weekly: November 8, 2020
11/08/20   SNW
This week we have hobbits, zombies, plans, pairs, and more.

There and back again
11/08/20   Stingy Investing
"COVID crashed into the market this spring and appears to be returning for a second round. It's only natural for investors to worry that the market may plumb its March lows again. While some concern is warranted, I'm going to flip the pessimistic view on its head and seek stocks that fell hard in the spring but came back again." [$]

The dead versus the living
11/08/20   Markets
"In this short research note, we will explore the current state of the zombification of stock markets across the globe as this is bound to change dramatically over the next few months and years. More zombies will emerge, and they will haunt the living."

ETF pairs for tax-loss selling
11/08/20   Indexing
"A quick recap: effective tax-loss harvesting with ETFs involves selling a fund to realize a capital loss and immediately replacing it with a similar fund that would not be considered 'identical property.' According to the Canada Revenue Agency, two index ETFs are identical property if they track the same benchmark."

The risk-free asset
11/08/20   Markets
"Blitz found strong evidence that the risk-free rate used in asset pricing models is misspecified, as the empirical evidence provides support for intermediate-term Treasuries as the more appropriate benchmark. In addition to the empirical evidence, economic theory posits that the one-month rate is not a riskless rate for investors with horizons beyond that term. His findings help explain at least part of the equity risk premium puzzle. In addition, the evidence helps explain the performance of low-beta stocks."

The Global Market Portfolio
11/08/20   World
"The global market portfolio realizes an average compounded real return of 4.45%, with a standard deviation of annual returns of 11.2% from 1960 until 2017, gross of trading costs, taxes, and/or management fees."

One-page plan
11/08/20   Retirement
"Going through the one-page plan process helps you shift your mind into this idea that it's about setting a course and having tools to course-correct."

Emerging concerns
11/08/20   World
"While the U.S. isn't perfect, many emerging markets countries have policies that should give investors pause. Some have authoritarian regimes. Others exhibit little respect for intellectual property and have shown a willingness to confiscate or nationalize businesses. Corporate governance and accounting rules are more lax."

The Stingy News Weekly: November 1, 2020
11/01/20   SNW
This week we have indexing, value, profitability, unfortunate social distancing, and more.

Unfortunate social distancing
11/01/20   Behaviour
"experts said it's more conversation - not less - that's needed, if the nation is to heal its blistering divide. But it has to be healthy, productive conversation. And Israel, who runs the workshops on civil discourse, said the first step must be to take it off social media and talk in person instead."

Better than expected
11/01/20   Travel
"Las Vegas visitor traffic was down 51% YoY"

Ads move online
11/01/20   Media
"While internet advertising has increased over the years, more traditional forms have nose-dived in percentage terms. For instance, ad spend on directories reached $6 billion in 2012. By 2024, they're projected to generate merely $68 million in revenue. Like directories, newspaper and magazine spend have seen significant drops since 2012, with projected decreases on the horizon."

Value waves the white flag
11/01/20   Value Investing
"I'm not giving up. My principles have a strong theory behind them. My efforts are not just value, but deep value, and I have gotten my share of kicks to the gut as a result. At some point the tide will turn, even if it is private equity absorbing value stocks out of the market. The investment math is hard to break. If companies are cheap on net worth and earnings, they will appreciate."

Look under the hood
11/01/20   Indexing
"Because of S&P's discretionary power, some stocks aren't included in any of those three indexes. One such stock: Tesla, which has been left out in the cold. The index committee won't let it into the large-cap index. But because of its size, it isn't eligible for the mid-cap or small-cap index, either."

Combining value and profitability
11/01/20   Value Investing
"Adding profitability on top of a value strategy reduces the strategy's overall volatility."

The Stingy News Weekly: October 24, 2020
10/24/20   SNW
This week we have trends, market crashes, failures, tragedies, and more.

Global trend following
10/24/20   Momentum Investing
"The bottom line is that, given the diversification benefit and the downside (tail risk) hedging properties, an allocation to trend-following strategies does merit consideration. Note, however, that the generally high turnover of trend-following strategies renders them relatively tax-inefficient, and they can be susceptible to whipsaws. Thus, investors should strongly prefer to hold such strategies in tax-advantaged accounts and focus on the long-term benefits of trend following."

Memory gets in the way of a jolly market
10/24/20   Markets
"So if you are old enough to remember the 1987 Crash, memory will serve you well as you judge what kind of risk is appropriate. If you aren't old enough, then you need to pay especially close attention to the academic studies which conclude that another crash is someday inevitable."

Hidden world of failure
10/24/20   World
"This hidden world of failure helps to create a deeply flawed understanding of the universe. By not seeing failure, we misunderstand the elements of success."

Overnight tragedies
10/24/20   World
"An important thing that explains a lot of things is that good news takes time but bad news happens instantly."

In defense of the IPO
10/24/20   Markets
"The handy rule of thumb is: if you need money, an IPO, for all its flaws, makes the most sense and is probably the best option; if you don't, a Direct Listing may be preferable; if you need money, speed, and certainty, a SPAC may be best."

Fizzy giants
10/24/20   Stingy Investing
"Problem is, giant companies have a hard time growing significantly. Compounding matters, growth that is slow, or slowing, can be a real issue when stocks trade at high multiples." [$]

The Stingy News Weekly: October 18, 2020
10/18/20   SNW
This week we have the 5% rule, world values, giving, and more.

Giving thousands to the homeless
10/18/20   Charity
"All 115 participants, ranging in age between 19 and 64, had been homeless for at least six months and were not struggling with serious substance use or mental health issues. Of those, 50 people were chosen at random to be given the cash, while the others formed a control group that did not receive any money."

Global valuations
10/18/20   Markets
"The TOPIX looks like a negative bubble, with the vast majority of stocks trading at less than 1x sales, while the NASDAQ looks like a classic bubble, with over 30% of companies trading at >9x sales."

10/18/20   Retirement
"While I continue to invest for a retirement that grows ever closer, I am no longer focused on trying to increase my net worth. There is nothing more I want."

The 5% Rule?
10/18/20   Retirement
"I wouldn't be recommending 4.5%, I'd probably be recommending 5.25%, 5.5%, something like that, which is even going to enrage people even more because it's higher than the 4.5%. But that's what history has demonstrated."

The Stingy News Weekly: October 11, 2020
10/11/20   SNW
This week we have FANMAG driven hyper-inflated ads and more.

Microtargeted ads don't work
10/11/20   Media
"In one experiment, they used six different advertising platforms in an effort to reach Australian men between the ages of 25 and 44. Their targeting performed slightly worse than random guessing. Such research indicates that, despite the extent of surveillance tech, a lot of the data that fuels ad targeting is garbage."

Game over
10/11/20   Bonds
"I'd stop thinking of bonds as a source of yield or as a diversifier for stocks. Instead, think of them as way to generate cash if the stock market is in the toilet."

10/11/20   Markets
"It is difficult to look at growth multiples today and make a valuation argument based on history. In our view, the data we have shown screams overvaluation. All great bubbles are built on compelling stories, and the FANMAG story is compelling. But all great bubbles are also built on unrealistic expectations, and we believe that those unrealistic expectations are already in the growth stock prices."

Hyperinflation and me
10/11/20   Markets
"October 1993 brought the now-infamous 500 billion dinar note. I remember my father reporting this note with 11 zeros was worth 'roughly one cabbage' at the time of issue. The data seem to back this up. By 31 December 1993, one US dollar was worth 1,775,998,646,615 Yugoslavian dinars. At that rate, the dinar was no longer useful as a medium of exchange."

The stock-market disconnect
10/11/20   Markets
"The best explanation for why stock markets remain so bullish despite a massive recession is that major publicly traded companies have not borne the brunt of the pandemic's economic fallout. But having been spared by the virus, they could soon find themselves squarely in the sights of a populist backlash."

Look to the long term
10/11/20   Stingy Investing
"If you bought the index at the end of a randomly selected month in the study period, there's a 62-per-cent chance it climbed the following month. Conversely, you'd have lost money the other 38 per cent of the time. The odds of a happy result increased over longer periods. If you checked in on the index every year, there was a 73-per-cent chance it was up over the prior year's result. If you checked every two years, the chance of success climbed to 83 per cent. The chance of success shot up to 98 per cent by the five-year mark." [$]

The Stingy News Weekly: October 3, 2020
10/03/20   SNW
This week we have the driving down the low-return high-leverage dream and more.

Expected 10-year returns
10/03/20   Markets
"The S&P 500's total return over the next decade will be just 1.9% annualized - including reinvested dividends."

The F-150 retirement crisis
10/03/20   Retirement
"The difference between the monthly payment on a $45,000 vehicle and a $20,000 vehicle is basically enough to max out your IRA in a given year. The monthly payment difference between a new $70,000 truck and a $20,000 used model would be enough to fund nearly 60% of the way towards maxing out your 401(k). And a new vehicle depreciates the minute you drive it off the lot while your retirement savings grow over the long-term."

Seems so easy
10/03/20   Behaviour
"Figuring out what we should do with our dollars is typically straightforward: We should save regularly, diversify broadly, rebalance occasionally and so on. Instead, the tough part is getting ourselves to do what we intellectually know is right."

Financial leverage risk
10/03/20   Bonds
"The leverage of US stocks has been increasing over the last four decades. The most leveraged stocks did not generate higher returns than the least leverages ones. However, they were also not riskier."

Stealthy government debt liquidation
10/03/20   Bonds
"Debt is not necessarily a bad thing: it might help governments smooth consumption, finance projects that require lumpy initial cash outflows, or help supplement demand gaps during recessions/depressions, etc. However, overwhelming debt is an issue because you can run into financial distress and bankruptcy predicaments. Governments eventually realize they are going bankrupt and devise schemes and methods to liquidate the government debt."

Years away from self-driving cars
10/03/20   Tech
"Flash forward to today, and precious little has changed about our daily driving. You probably hear a lot less about self-driving cars than you did a few years ago, and the prospect of safely dozing off behind the wheel on long drives remains a distant fantasy"

The Stingy News Weekly: September 26, 2020
09/26/20   SNW
This week we have 3.5% estimated returns, downward demographics, playing dirty, and more.

How sales growth and other factors explain returns
09/26/20   Markets
"TEV/sales multiples are high, but still below the nosebleed levels of 1999 and 2000. The primary driver of stock price returns is sales growth ..."

Estimating future stock returns
09/26/20   Markets
"At present, the S&P 500 is priced to return 3.51%/year over the next ten years. Now if you were buying some ten-year investment grade corporate bonds, you might expect something around 2%. Is that 1.5% over corporates worth it?"

Selling stocks for the long-term
09/26/20   Markets
"These demographic trends have both good and bad news for investors. Fortunately, most of the dramatic population declines are expected after 2050. Before that, only Japan is affected significantly."

A sleepy approach to dividend investing
09/26/20   Stingy Investing
"Many speculators trade frequently, but investors should focus on the long term rather than on the short term. Smart investors like to buy and hold for very long periods while their firms grow and pay dividends." [$]

Information in asset prices
09/26/20   Markets
"We investigate the informational content of prices in financial asset markets. To do so we use a large number of market experiments where the amount of information held by traders is precisely observed. We derive a new method to estimate how much of this information is incorporated in market prices. We find that public information is almost completely reflected in prices, but that surprisingly little private information - less than 50% - is incorporated in prices. Our estimates therefore suggest that while semi-strong informational efficiency is consistent with the data, financial market prices may be very far from strong-form efficiency."

Playing dirty
09/26/20   Crime
"You would imagine that one of the best players you've ever seen in your life would have no issues saying, Let's play then. I can't really figure out an answer to why he won't do that."

The Stingy News Weekly: September 19, 2020
09/19/20   SNW
This week we have momentum, small stocks, the value island, volatility, and more.

Hitting return targets
09/19/20   Markets
"For many decades the expected rate of return was close to that of prevailing interest rates so not only was it a simpler time to be an allocator, but an easier time. That relationship has broken down in recent decades."

Persistent high volatility
09/19/20   Markets
"A situation has been set up by the functional equivalent of the 'Wizard of Oz' where small changes to interest rates or economic activity will have big impact on stock prices. And so I am telling you, be ready for whippy markets."

09/19/20   Value Investing
"Running a Value fund is somewhat like being stranded on a tiny tropical island out in the ocean. You can't really run away and are exposed to the harsh forces of nature. If you're lucky, there might be a coconut tree or big rock providing some shade. But it will still be hot most of the day, regardless of where you're sitting, and often you have to watch out for falling coconuts."

There is no size effect
09/18/20   Markets
"Adding in lags to account for illiquidity takes the historically weak small firm effect and renders it non-existent."

The billionaire who wanted to die broke
09/18/20   Charity
"It took decades, but Chuck Feeney, the former billionaire cofounder of retail giant Duty Free Shoppers has finally given all his money away to charity. He has nothing left now - and he couldn't be happier."

Accruals and momentum
09/18/20   Momentum
"Summarizing, the evidence demonstrates that investors have been well served to either short or avoid (for long-only investors) high accruals momentum firms."

Why Buffett bought Japanese stocks
09/18/20   Buffett
"Japan is one of the few value investments available in today's global developed markets. Large caps in the United States have gotten dramatically more expensive compared to Japan in the last 10 years."

The Stingy News Weekly: September 11, 2020
09/11/20   SNW
This week we have failing bonds, the 60/40 downer, seasons, dividends, crowding, and more.

Government bonds are duds
09/11/20   Bonds
"But while the income side of the equation for bonds was clearly not what it once was, until very recently we have continued to assume that bonds could accomplish their other important task, providing capital gains in the event of an economic disaster. This winter, U.S. Treasuries once again did their hedging job admirably, providing substantial positive returns when riskier assets fell in the early stages of the Covid-19 crisis. But that success has come at a cost. At today's yields, U.S. Treasuries not only fail to provide a useful amount of yield to investors but also have likely lost their ability to hedge in the event of further economic trouble."

Settling the size matter
09/11/20   Markets
"We conclude that size is weak as a stand-alone factor but a powerful catalyst for other factors."

The 60/40 Portfolio
09/11/20   Markets
"The 10 year treasury yielded 2.2% at the outset of 1940. By the start of 1980 it was up to 10.8%. Today it's roughly 0.7%. The 60/40 portfolio will assuredly have lower returns over the next 40 years than it had over the last 40 years. That's simple math based on starting yields for bonds."

Drawdowns in wonderful companies
09/11/20   Markets
"Investors in the greatest companies faced a drawdown of 32.5%, on average, despite being one of the greatest decades of performance ever. That was just the largest drawdown, on average. It says nothing of the second, third, and so on drawdowns during the same decade."

Crowding in large tech
09/11/20   Markets
"I say to you 'lighten up on your large cap tech positions.' Those who own those positions have short time horizons, and may bolt. There is no way these companies grow into their valuations, so don't think you can hold on for years. This is just a mania, and as such, it will meet its end."

Dividend investing success
09/11/20   Stingy Investing
"The U.S. market generated annual gains of 11.4 per cent versus 10.2 per cent gains in Canada. It was a good period for stocks. Similarly, the high-yield portfolios outpaced the markets in both countries. The Canadian high-yield portfolio fared particularly well with gains of 14.1 per cent versus 12.4 per cent in the United States." [$]

Seasonal patterns in the Canadian market
09/11/20   Markets
"There is a January effect in Canada and, more importantly for this time of the year, a 'sell in May and go away' effect. In fact, the average annual rate of return over the last 60 years (1957-2018) would have been 17% had investors gone long in the equally weighted index in November-April and gotten out of risky securities altogether in the May-October semi-annual period and, over that period, invested instead heavily (and exclusively) in government of Canada bonds. It would have been 18% in the 1988-2018 sub-period."

Pleasures of sex and berries
09/11/20   Science
"Our ancestors have spent a few hundred years in cities at most. Before that, they spent a million years or more on what was essentially a perpetual camping trip, most of it in Africa. Little wonder then that people are more easily scared of snakes than cars, of deep water than speed, of spiders than guns. We are, to a significant extent, adapted to the environment we evolved in, rather than the one most of us now inhabit."

The Stingy News Weekly: September 6, 2020
09/06/20   SNW
This week we have Tesla, low returns, saving, indexing, and more.

The new normal
09/06/20   Markets
"I think the days of a simple 60/40 allocation or even something fancier like the All Weather Portfolio generating meaningful real returns are probably behind us for at least the next decade."

The game of Tesla
09/06/20   Markets
"This is the Common Knowledge Game in action. It is the power of the crowd watching the crowd. It is the power of - not what you think is true, and not what you think the crowd thinks is true - but of what the crowd thinks the crowd thinks is true."

Only a trickle
09/06/20   Markets
"The S&P 500 model is forecasting returns of 2.23%/year over the next 10 years. Even if you compare that to the 10-year Treasury Note yielding 0.66%, that's not enough of a risk premium. We are in the 97th percentile of valuations."

Save like a pessimist
09/06/20   Behaviour
"What Gates seems to get is that you can only be an optimist in the long run if you're pessimistic enough to survive the short run. The best way for most people to apply that is: Save like a pessimist, invest like an optimist."

Index Investors in the pandemic
09/06/20   Indexing
"Less than one half of one percent of Vanguard Investors moved to cash - thats less than 0.50%. This is at a time when the unemployment rate spiked up towards 30% and nearly 40 million people lost their jobs."

The Stingy News Weekly: August 30, 2020
08/30/20   SNW
This week we have dividends, value, small-caps, planes, and more.

The wildest insurance fraud scheme
08/30/20   Crime
"Over a decade, Theodore Robert Wright III destroyed cars, yachts, and planes. That was only the half of it."

Distorting the prices of small-cap stocks
08/30/20   Markets
"Our analysis here offers reason to expand our explanation for pricey stocks beyond exuberant expectations for growth: it seems that outsized passive ownership is contributing to a more general price inflation in low-float stocks."

The value premium in Canadian stocks
08/30/20   Value Investing
"The value premium is also strong for low-price stocks, varying from 11 per cent to 12 per cent during the period from 1983 to 2000, to between 5 per cent and 8 per cent from 2001 to 2018. Low-price stocks tend to be more obscure, are followed by fewer analysts and are typically less liquid than high-price stocks."

Expected returns for the balanced ETFs
08/30/20   Indexing
"Justin shows Canadian DIY investors how to calculate an expected rate of return for their Vanguard Asset Allocation ETFs (VEQT, VGRO, VBAL, VCNS and VCIP) and iShares Asset Allocation ETFs (XEQT, XGRO, XBAL, XCNS and XINC)." [video]

Falling dividend yields
08/30/20   Stingy Investing
"Yields have fallen for every group shown in the graph. Half of dividend stocks yield more than 2.9 per cent based on data from Aug. 20 and that's down from the 6-per-cent yields seen at the March lows and the 3.4-per-cent yields from the start of the year. Income seekers are suffering. Bond yields are at shockingly low levels with 10-year Canadian government yields near 0.6 per cent, according to the Bank of Canada. While most dividend stocks offer slightly higher yields, they come with big risks of the sort that were amply demonstrated just a few months ago." [$]

A strategic approach to rebalancing
08/30/20   Momentum Investing
"They provide two alternatives. The first is to include an allocation to trend following, as trend tends to perform well during extended market downturns. The second is to strategically rebalance based on trend signals - if the trend-following model suggests that stock markets are in a negative trend, rebalancing is delayed."

The Stingy News Weekly: August 22, 2020
08/22/20   SNW
This week we have centuries of value and reversals, bonds beating stocks, bankruptcy, tuna, marshmallows, and more.

Long-term reversal in equity returns
08/22/20   Markets
"Long-term reversal is an independent asset-pricing phenomenon, not subsumed by other well-established return predictors (such as the value effect). The effect is largely robust to alternative holding and formation periods and to the influence of calendar seasonalities (such as the January effect), and remains strong in different subsamples. The effect is particularly pronounced in periods of elevated market volatility and return dispersion. In fact, during periods of low dispersion, the effect is almost nonexistent."

Stocks didn't outperform bonds for 50 years
08/22/20   Markets
"if you combine the S&P 500 with a 20-year US Treasury (this Treasury roughly matches the long-term interest rate sensitivity of the S&P 500) then you can get a lot of short-term diversification between stocks and bonds while not reducing the long-term expected return of a pure stock portfolio."

Stocks that emerge from bankruptcy
08/22/20   Markets
"Our analysis found that post-reorg equities from 2008 to 2019 consisted of more losers than winners, but successful firms produced notably high returns. One year following emergence, the average return was 19.8%, with the Russell 2000 returning 11.2% during the same period."

2 decades of value with Chris Mittleman
08/22/20   Value Investing
"Chris Mittleman runs Mittleman Investment Management, an SEC-registered investment adviser. MIM employs a concentrated, long-term investment approach, typically holding between 10 and 20 positions." [video]

A nearly two century winning streak
08/22/20   Stingy Investing
"Value investing added more than 100 years to its winning streak after the recent unearthing of data from before the great crash of 1929. All told, value outperformed in the United States since 1825 with many ups and downs along the way. Alas, it is currently in its most dramatic down period on record."

Canned tuna got canned
08/22/20   World
"Price fixing is absolutely wrong, especially for a product that people depend on. That's the difference between them eating dinner and not eating dinner. That's canned tuna. We're not talking about bluefin toro that's served at Nobu."

New marshmallow test
08/22/20   Behaviour
"In a recent study, we wanted to find out how a cooperative context would affect kids. tendencies to delay gratification in a marshmallow test. Specifically, we wanted to know whether kids would be more or less likely to delay gratification when they relied on one another compared to the standard marshmallow test in which their waiting choices affect themselves alone."

The Stingy News Weekly: August 16, 2020
08/16/20   SNW
This week we have value investors eating cheese succumb to bedsheets, and more.

Cheese consumption vs. death by bedsheet
08/16/20   Montier
"Investing is always about making decisions while under a cloud of uncertainty. It is how one deals with the uncertainty that distinguishes the long-term value-based investors from the rest. Rather than acting as if the uncertainty doesn't exist (the current fad), the value investor embraces it and demands a margin of safety to reflect the unknown. There is no margin of safety in the pricing of U.S. stocks today. Voltaire observed, 'Doubt is not a pleasant condition, but certainty is absurd.' The U.S. stock market appears to be absurd."

U.S. stocks vs. world GDP
08/16/20   World
"With the stunning rise in big American tech stocks, the U.S. portion of this global equity market capitalization is nearing all-time highs. While there isn't necessarily a connection between stock values and economic output, it is a way to estimate sentiment and valuations."

Moar Income
08/16/20   Bonds
"You basically need to step out on the risk curve and start taking some stock market like risk or longer duration bond risk if you want some income. The worst part is, if inflation ticks higher the Fed has made it clear they won't raise rates any time soon. So you could get a form of yield curve control here where inflation is rising, demand for government debt is declining and the Fed insists on keeping rates low. Navigating the future of the bond market has probably never been harder than it is today."

The tab for the free lunch
08/14/20   World
"Today the tab for the free lunch has expanded well beyond the saver. The action of central banks committing to bail out capital markets on such a scale has stemmed market dysfunction but at the consequence of artificially shoring up asset prices, usurping the role of markets in pricing risk. New Age thinking of the sort currently proposed is on the cusp of a political takeover of the economy."

Times that try stock-pickers' souls
08/14/20   Value Investing
"As maddening as this behavior is, it is typical of investor psychology at peaks and troughs; and consequently, the 'price' of growth is higher than it has ever been."

The cost of free trades
08/14/20   Brokers
"Robinhood, and the rest of the online brokerage industry, rely on what's known as payment for order flow as their profit engine in lieu of commissions."

A victory for shareholders
08/14/20   Stocks
"a key highlight is the decision that shareholders in Delaware have an absolute right to know about management compensation and related party transactions"

Cross-asset signals
08/14/20   Markets
"Simultaneously positive momentum regimes in bond and equity markets predict better outcomes for the economy, with high industrial production growth, high investment, and decreasing unemployment over the next 12 months. In contrast, simultaneously negative momentum regimes predict negative industrial production growth, low investment, and increasing unemployment. Thus, time-series momentum and cross-asset time-series momentum are not just financial market phenomena; they also contain information about fundamental changes in economic activity."

Weaponized indifference
08/14/20   Indexing
"On essentially no volume, the live, trading price of DGAZF has shot from a net asset value - what the thing is actually worth - of around $125 to $25,000! Cats and dogs living together! 40 days and nights of rain!? The twitter hyperbole has been intense, so lets explain what's actually happening, and how it's possible."

The Stingy News Weekly: August 9, 2020
08/09/20   SNW
This week we have counterintuitive public wealth risks and more.

A counterintuitive recession
08/09/20   Economy
"Outstanding credit card debt fell from March to June as did the percentage of credit card bills that were past due. No one could have predicted this would happen during one of the worst economic contractions ever. Or how about the personal savings rate which briefly shot up to well over 30% and remains exceedingly high"

Wealth discipline
08/09/20   Retirement
"This is a measure of your financial discipline through both savings and investing. It's not just your savings rate, because it also incorporates how you use your savings to invest and increase your wealth."

Public to private equity
08/09/20   Markets
"Over the past quarter centurythere has been a marked shift in U.S. equities from public markets to private markets controlled by buyout and venture capital firms. This change has had reverberations for asset managers, investors, executives, and policy makers." [pdf]

Death and the demand for growth
08/09/20   Value Investing
"If history is any guide, 10 years from now, among seasoned (i.e., not recently IPO-ed) firms, approximately 1.4% of large firms and 19% of small firms will have died a bad death"

Risk ratings didn't prepare for the bear
08/09/20   Hallett
"The idea of summarizing an investment in a digestible document is a great idea. But Fund Facts and ETF Facts have never lived up to their full potential when it comes to communicating risk."

Rediscovered faith
08/09/20   Behaviour
"For the first year of my research, I collected examples of these kinds of paradoxes - where our intuitions about what an advantage or a disadvantage are turn out to be upside down. Why are so many successful entrepreneurs dyslexic? Why did so many American presidents and British prime ministers lose a parent in childhood? Is it possible that some of the things we hold dear in education - like small classes and prestigious schools who can do as much harm as good? I read studies and talked to social scientists and buried myself in the library and thought I knew the kind of book I wanted to write. Then I met Wilma Derksen."

The Stingy News Weekly: August 1, 2020
08/01/20   SNW
This week we have stranger moving momentum to value and more.

Moving average momentum
08/01/20   Stingy Investing
"The moving-average portfolio gained an average of 10.4 per cent annually from the end of 1994 through to the end of June, 2020. It beat a buy-and-hold investment in the stock index, which climbed 7.8 per cent annually over the same period. The bond index fared reasonably well but lagged both with annual returns of 6.3 per cent." [$]

Stranger things
08/01/20   Value Investing
"The stock market is noisy, and strange things can happen over three, five, even ten years. But over the long haul, investors eventually get what they pay for. Those who buy expensive equities at low yields usually realize low returns over the long run. And investors who buy cheap stocks at high yields can realize high returns - provided they stick with the strategy over the long haul."

Nate Tobik talks to Tobias Carlisle
08/01/20   Value Investing
"Nate Tobik is the Founder of CompleteBankData, author of the Bank Investors Handbook, and writes about deep value stocks in the Oddball Stocks Newsletter" [video]

Seasonality factor
08/01/20   Momentum Investing
"Different variations of dual momentum or trend following show similar results. Rebalancing during the first two trading days of the month gives better results than rebalancing on other days of the month or on a weekly basis."

Off the charts
08/01/20   Economy
"I would bet that when FDR created these bureaus whose divisions employs 1000s of economists, statisticians and mathematicians, none of them would have ever imagined off-the-chart economy like the one we are living through today."

The Stingy News Weekly: July 26, 2020
07/26/20   SNW
This week we have defaults, tail risk, bubbles, and more.

Tail risk hedging
07/26/20   Markets
"The common view that Put costs more but is a more effective tail hedge contains a kernel of truth but does not capture the full story. We will give a more nuanced picture, including practicality for investors, and end up preferring Trend over Put."

My four goals
07/26/20   Retirement
"I also want some income I'm guaranteed not to outlive. Research suggests our ability to manage money deteriorates as we age. Research also suggests that retirees with predictable income tend to be happier."

Down the rabbit hole
07/26/20   Markets
"There are only three things you need to know about private equity: leverage, leverage and leverage"

Surge in defaults
07/26/20   Bonds
"More than half of companies that defaulted in the second quarter are owned by private equity firms, Moody's said in a report this week."

The bubble 500
07/26/20   Markets
"Paying >10x revenue for exciting growth stories is historically one of the worst long-term investment methodologies ever. Our research on similarly priced, similarly unprofitable new-issue stocks with similar growth prospects suggests that this is because of their dramatically high failure rate and disproportionate risk of extreme multiple compression. And this is true even excluding the dot-com bubble. Bankruptcy-level losses occur at such high rates that the group of stocks has an actuarial price return risk equivalent to investing exclusively in tomorrow's levered defaulters."

The Stingy News Weekly: July 18, 2020
07/18/20   SNW
Micro momentum wins rent and more.

Bad momentum bets
07/18/20   Momentum Investing
"In factor land, one ugly myth, like a zombie that refuses to die in a B Hollywood movie, is that the market capitalization-weighted benchmark is a good Momentum bet."

Handling the crisis
07/18/20   Value Investing
"Of the firms we surveyed, 56% took measures to shore-up their liquidity position, 44% adjusted their workforce, and 16% adjusted wages and compensation."

Heads I win
07/18/20   Math
"Imagine that I told you that that couple has two children, and that one of them is a girl. What are the odds that their other child is also a girl?"

Fertility rate
07/18/20   World
"Researchers at the University of Washington's Institute for Health Metrics and Evaluation showed the global fertility rate nearly halved to 2.4 in 2017 - and their study, published in the Lancet, projects it will fall below 1.7 by 2100."

Workers cannot afford rent
07/18/20   Real Estate
"Full-time minimum wage workers cannot afford a two-bedroom rental anywhere in the U.S. and cannot afford a one-bedroom rental in 95% of U.S. counties, according to the National Low Income Housing Coalition's annual 'Out of Reach' report."

Value stocks are cheap
07/18/20   Stingy Investing
"There is a growing chasm between the haves and the have-nots of the stock market. The haves are represented by glamorous growth stocks such as the high-tech darlings powering the internet. Value stocks are the have-nots and include most everything else." [$]

Canadian micro
07/18/20   Markets
"Paul Andreola seeks fundamental cash flow and earnings in micro-cap and smallcap companies. Paul has 30 years of smallcap experience as the co-founder of two public companies and CEO and director of another in the technology space." [video]

The Stingy News Weekly: July 12, 2020
07/12/20   SNW
This week we have no yield reversal value and more.

Fight the Fed model
07/12/20   Markets
"This has the appearance but not the reality of common sense. The empirical evidence tells us the Fed model has no power to forecast long-term real stock returns. On the contrary: Traditional methods, like examining the market's unadjusted P/E alone, have been very effective."

A world with no yield
07/12/20   Markets
"Around 90% of developed countries have government bond yields of 1% or less. Almost 40% of these countries have negative yields. Rates are low for a reason. We're in the midst of a depression which is a deflationary force and central banks are doing their damnedest to keep rates down to be able to fund all of the government spending and keep borrowing rates low."

Momentum plus long-term reversal
07/11/20   Momentum Investing
"Two of most documented anomalies in the asset pricing literature are the momentum effect and the long-term reversal effect. Momentum is typically defined as the last 12 months of returns excluding the most recent month (i.e., months 2 - 12) because it tends to show a reversal, which some have attributed to microstructure (trading) effects in which securities that have outperformed recently tend to continue to outperform. The long-term reversal effect is typically defined as the returns from month t - 13 to t - 60, in which securities that have outperformed for a long time tend to see a reversal in performance."

Clifford Asness talks value
07/11/20   Asness
"AQR's Clifford Asness on fundamental value with Tobias on The Acquirers Podcast" [video]

Charlie Munger talks
07/11/20   Munger
"Charlie Munger talks at the Redlands Forum" [video]

The Stingy News Weekly: July 4, 2020
07/04/20   SNW
This week we have concentrated G-score momentum reversals and recoveries.

Value in recessions and recoveries
07/04/20   Value Investing
"Value, quality, and small-cap strategies all tend to perform well during recoveries regardless of the catalyst for the bear market and recession."

On the risks of concentration
07/04/20   Stingy Investing
"Investors inspired by Mr. Munger's success should think thrice before buying just a few stocks. Such portfolios tend to either do very well or very poorly, but the odds favour the poor side of the ledger. While performing poorly is unfortunate for billionaires, it can be devastating for those of us of more modest means." [$]

Beyond the zero bound
07/04/20   Value Investing
"Perhaps the most significant conclusion to draw from Japan's experience during ZIRP therefore is not about the special impact of a low-rate environment. As we see it, interest rates were relevant in predicting bond returns and the poor performance of bank stocks, but other asset classes were better predicted by relying on entry valuations and yields."

Partha Mohanram on his glamour G-Score
07/04/20   Growth Investing
"Partha Mohanram is the John H. Watson Chair in Value Investing and Area Coordinator of Accounting at Rotman. He has published extensively in the areas of financial statement analysis, valuation of growth firms, implied cost of capital and executive compensation." [video]

Momentum plus long-term reversal
07/04/20   Momentum Investing
"Combining the alpha momentum and reversal strategies into the blended signal produces a superior return predictive signal, outperforming the individual momentum and reversal strategies."

The Stingy News Weekly: June 27, 2020
06/27/20   SNW
This week we have Grandpa running from broken bonds and more.

The twilight of bonds
06/26/20   Bonds
"But with low, nil, or negative yields, how much can bonds still contribute to a portfolio? Has the QE Kryptonite permanently disabled their superhero powers?"

A top-heavy stock market
06/26/20   Markets
"To this point, charting the performance of stocks following the year they joined the list of the ten largest firms shows decidedly less stratospheric results. On average, these stocks outperformed the market by an annualised 0.7% in the subsequent three-year period. Over five- and ten-year periods, these stocks underperformed the market on average."

Grandpa stocks
06/26/20   Value Investing
"With a 30% FCF yield, grandpa doesn't have to live another lifetime to add a great deal of value to a portfolio."

Fred Vettese interview
06/26/20   Retirement
"Today, we get into a masterclass on retirement planning with a true expert in the field whose perspectives are distinctly evidence-based, Fred Vettese." [video]

Room to run
06/26/20   Value Investing
"The market today is a tale of two cities. Growth stocks are trading at very rich valuations as their prices have shrugged off any economic effects of coronavirus, whereas value stocks are trading at deeply discounted valuations that reflect significant fear about the pandemic's economic impact."

Broken asset classes
06/26/20   Markets
"In the five years after an asset class was declared broken, each roared back in a strong, and for many, swift rebound. All except one snapped back within one year, generating returns that ranged from 14% for US stocks to 68% for commodities. The sole dawdler, REITs, rebounded in 18 months, ultimately delivering a cumulative 86% return at the five-year mark - the weakest performance of the group."

Hedge fund performance fees
06/26/20   Funds
"Overall, investors collected 36 cents for every dollar earned on their invested capital (over a risk-free hurdle rate and before adjusting for any risk). In the cross-section of funds, there is a substantial disconnect between lifetime performance and incentive fees earned. These poor outcomes stem from the asymmetry of the performance contract, investors' return-chasing behavior, and underwater fund closures."

The Stingy News Weekly: June 20, 2020
06/20/20   SNW
This week we have micro, timing, donuts, and more.

Hertz donut
06/20/20   Stocks
"The stock of Hertz will, with high likelihood, go out at zero. Start with this: the firm has filed for bankruptcy. Stockholders mostly get nothing in bankruptcy. Sometimes they might get a little new stock or some warrants to help them save face, because they are delaying the reorganization, but this is usually a trivial amount of money, and implies a big loss to the stockholders."

Costs kill the overnight anomaly
06/20/20   Markets
"dissecting the data behind this supposed market timing strategy reveals that not only are any excess returns diminished by transaction costs, but the performance relative to buy-and-hold gross of costs has waned over the years."

Micro machine
06/20/20   Stocks
"Maj Soueidan on nano cap investing with Tobias Carlisle" [video]

Standing on the shoulders of giants
06/19/20   Stingy Investing
"He then launched his firm, Tidefall Capital Management, on Jan. 21, not long before the economy ran into the COVID crisis. The subsequent market decline came as bad news to most investors, but Tidefall's hedge fund climbed by a whopping 28.5 per cent from inception through to the end of May." [$]

The Stingy News Weekly: June 12, 2020
06/12/20   SNW
This week we have value, old age, Munger, and more.

06/12/20   Behaviour
"Talented amateurs who pay attention to both the science and the news seem to be better at putting accurate probabilities on key outcomes in this phase of the crisis"

Old age and the decline in financial literacy
06/12/20   Behaviour
"Households over age 60 own half of the discretionary investment assets in the United States and are increasingly responsible for generating income from these investments to fund retirement. Studies in cognitive aging show that older respondents experience a decline in cognitive processes closely related to financial decision making. We investigate whether knowledge of basic concepts essential to effective financial choice declines after age 60. Financial literacy scores decline by about 2% each year after age 60, and the rate of decline does not increase with advanced age. Results from regressions censored by respondent groups and financial literacy topic areas suggest that the decline is not related to cohort effects or differences in gender or educational attainment. Confidence in financial decision making abilities does not decline with age. Increasing confidence and reduced abilities can explain poor credit and investment choices by older respondents."

5 factor investing tips
06/12/20   Value Investing
"Value, generally represented by portfolios of cheap stocks, holds up well in the analysis. Enterprise multiples and price-to-earnings generate some of the strongest results, however, the practitioner favorite - book-to-market - while able to be replicated, certainly doesn.t yield the strongest results."

Charlie Munger talks
06/12/20   Munger
"Charlie Munger, Stewart Resnick, Dick Ridordan are the legendary investors of our life time. Having these 3 titans in one room to exchange ideas was a privilege for me and an honor to share the conversation." [video]

U.S. economy is in a recession
06/12/20   Economy
"The bureau's Business Cycle Dating Committee - the fat lady of economic opera - said the expansion peaked in February after a record 128 months, and we've been sliding into a pandemic-driven recession since."

The Stingy News Weekly: June 6, 2020
06/06/20   SNW
This week we have value, momentum, the 4% rule, and more.

Improving momentum strategies
06/06/20   Momentum Investing
"The results of going long the best 10% and short the worst 10% for the traditional 12-month momentum strategy are already impressive, but if one selects only the stocks that overlap and appear in both the 12-month and 6-month momentum strategies, it gets even better."

Michael Kitces on the 4 per cent rule
06/06/20   Retirement
"Michael Kitces on early retirement - and how the recent stock market movement affects the FIRE Community and the 4% rule." [video]

Two centuries of value and momentum
06/06/20   Value Investing
"Both Value and Momentum have crawled out of even deeper drawdowns in the past."

The bull market is back
06/06/20   Stingy Investing
"The extra effort paid off in the form of sizzling returns because the hot potato portfolio fried up average annual returns of 15.4 per cent from the end of 1980 to the end of May, 2020. It surpassed the passive potato portfolio by an average of 5.8 percentage points a year." [$]

Behind private equity
06/06/20   Markets
"After fees, investors in private equity funds earn exactly what they would have in public stocks, according to new research. But the high fees have not only created a new billionaire class, they're squeezing private equity-backed companies for unrealistic growth."

Do civilisations collapse
06/06/20   World
"The idea that the Maya or Easter Islanders experienced an apocalyptic end makes for good television but bad archaeology"

The Stingy News Weekly: May 31, 2020
05/31/20   SNW
This week we have volatility, value, flu, economics, and more.

Repetition economics
05/31/20   Behaviour
"I believe repetition is the key to understanding decision making. If you include repetition into the equation, human behavior becomes rational. Biases disappear. They are not needed."

Volatility and value
05/31/20   Value Investing
"Historically, as uncertainty abates, and spreads contract, value outperforms"

Diversification drag
05/31/20   Markets
"Diversification has been a drag on investor portfolios for a number of years now. In a world where one asset class (U.S. large-cap growth stocks in this instance) is far and away the best performer, diversifying into other asset classes or strategies will make you feel silly."

Clarifying book cost
05/31/20   Hallett
"Book Value (BV) or Book Cost is simply the sum of purchases, transaction charges, and reinvested distributions; minus the distributions. return of capital component. This is the same definition of an investment.s adjusted cost base (or ACB). Accordingly, another way to think of BV and ACB is as an average cost of acquisition."

Equity styles and the Spanish flu
05/31/20   Markets
"We study the performance of equity styles during the period around the Spanish Flu pandemic of 1918-1919 and other deep historical market corrections to gain a deeper understanding on the performance of different groups of stocks during crises. We extend the widely used CRSP database with hand-collected data on U.S stocks and examine the major pre-1926 market corrections. We find that low-volatility and momentum tend to reduce losses during sharp market selloffs. By contrast, smaller stocks with high yields (value) offer less protection, but perform well during the recovery phase. Over major market selloffs and subsequent recoveries combined equity styles added value."

Risks of 14 summer activities
05/31/20   Health
"It has been around two months of quarantine for many of us. The urge to get out and enjoy the summer is real. But what's safe? We asked a panel of infectious disease and public health experts to rate the risk of summer activities, from backyard gatherings to a day at the pool to sharing a vacation house with another household." [audio]

The Stingy News Weekly: May 23, 2020
05/23/20   SNW
This week we have markets value, liquid, coffee, innovative, grim, pizza, and more.

The death of a small business
05/23/20   Economy
"Parker had been spending $3,000 a month to keep the shop closed as the pandemic spread. Selling a few cups of 'no touch takeout' coffee on weekends would not be enough to make up those costs, let alone the additional expense of rehiring employees and buying supplies."

Value and interest rates
05/23/20   Value Investing
"We find no evidence that links the size of the value premium to the level of interest rates, and therefore our results do not support assertions that a change in interest rate environment is a necessary condition for value's recovery from the last decade. Neither do our results support assertions that interest rates or the yield curve have been a major driver of value underperformance during the sharp drawdown from 2017 to 2019 or over the past decade."

A good source of income
05/23/20   Dividends
"Stocks may be one of the best sources of income of any asset class. And that income may be more important than ever with bond yields on the floor."

Liquid net worth
05/23/20   Thrift
"Yes, I have heard that '61% of Americans couldn't cover a $1,000 emergency expense directly from savings,' but it is still difficult to know that so many households are struggling to make ends meet."

Pizza arbitrage
05/22/20   Markets
"If capitalism is driven by a search for profit, the food delivery business confuses the hell out of me. Every platform loses money. Restaurants feel like they're getting screwed. Delivery drivers are poster children for gig economy problems. Customers get annoyed about delivery fees. Isn't business supposed to solve problems?"

Grim times for dividend investors
05/22/20   Stingy Investing
"Investors are worried about their dividend stocks. Canadian dividend payers lagged the market in the recent downturn and companies are starting to trim their dividends. But low share prices offer the prospect of reasonable returns to long-term dividend investors." [$]

How innovation works
05/22/20   Tech
"Ridley's new book, How Innovation Works, chronicles the history of innovation and argues that we need to change the way we think about innovation, to see it as an incremental, bottom-up, fortuitous process that happens to society as a direct result of the human habit of exchange, rather than as an orderly, top-down process developing according to a plan." [video]

The Stingy News Weekly: May 16, 2020
05/16/20   SNW
This week we have markets, debt, trend following, flaws, and more.

Debt: the first 5000 years
05/16/20   Books
"Graeber's broader point is that all debt, especially interest-drawing debt, is intimately related to its enforcement mechanism. IOUs don't exist in a vacuum; they're made in societal context. In an economic system where money is fundamentally a unit of trust, the rules around recoupment and enforcement of debts are made in an environment where people generally know each other, so we see recurring features like strong creditor protection and pretty sophisticated dispute resolution. In contrast, when money is a hard, fungible unit of scarcity, enforcement isn't a matter of trust; it's a matter of force. When your enforcement mechanism is state-backed violence, lenders and debtors have a pretty different relationship."

Masks new social norm
05/16/20   Behaviour
"The tipping point for achieving enough critical mass to initiate social change proved to be just 25 percent of participants."

Acceptable flaws
05/15/20   Behaviour
"Life is a little easier if you expect a certain percentage of it to go wrong no matter how hard you try."

Trend following in growth and value
05/15/20   Value Investing
"Value returns appear to be inversely correlated to historic returns: the worse value's recent performance, the higher the expected return. Growth appears to be the opposite: the better the historic return, the higher the expected future return. Value is mean reverting. Growth trends."

Why the market isn't down more
05/15/20   Markets
"Instead, it appears this has been more of a 'risk off rally' with investors rapidly selling the stocks of smaller companies, those with weaker balance sheets and those with economically sensitive business models, and piling into stocks of larger companies, with strong balance sheets and economically defensive business models."

The Stingy News Weekly: May 9, 2020
05/09/20   SNW
This week we have value, flies, masks, death, and more.

Market roulette
05/09/20   Markets
"After all, where else can you find a game that will make you $0.05 a day (in expectation) for every $100 wagered? Where else can you earn $1 a month, or $12 a year, for every $100 at stake?"

The yield curve indicator
05/09/20   Markets
"Cam explained that this indicator - when Treasury interest rates on shorter-term bonds rise above those being paid on longer-dated bonds - has been successful at predicting recessions 7 out of 7 times with zero false signals along the way. This recession means it's now 8 for 8!" [video]

Mask up
05/09/20   Health
"There's compelling evidence that Japan, Hong Kong, and other East Asian locales are doing it right and we should really, truly mask up - fast."

The death algorithm
05/09/20   Government
"If there was ever a subject that required a difficult public conversation, the response to Covid-19 is it. How many people are we willing to let die in order to keep businesses working? And which people will we let die? By creating a secret model to inform such decisions, the Trump administration is taking these questions out of the public and scientific spheres, replacing data-driven ethical debate with a pseudo-mathematical political tool. This is bad news for science, and potentially terrible news for Arizona residents."

The real Lord of the Flies
05/09/20   Behaviour
"It's time we told a different kind of story. The real Lord of the Flies is a tale of friendship and loyalty; one that illustrates how much stronger we are if we can lean on each other."

Value investing is not dead
05/09/20   Value Investing
"We think the medium-term odds are now, rather dramatically, on the side of value, with no 'this time is different' explanation we can find (and we've tested a lot of them!) holding a drop of water and no other period in the 50+ year history matching today."

When the TSX escapes the bear
05/09/20   Stingy Investing
"There were nine occasions when it hit new historic highs as it emerged from bear markets. The index climbed by an average of 11.1 per cent, 23.2 per cent and 34 per cent in the 12-, 24- and 36-months after the new highs." [$]

The Stingy News Weekly: May 3, 2020
05/03/20   SNW
This week we have Buffett, value, small caps, abundance, and more.

Rob Arnott interview
05/03/20   Value Investing
"I had a chance to connect with Research Affiliates Founding Chairman Rob Arnott to talk about his most recent presentation, which deals with the economy, falling stock prices, valuations and the death of value investing." [video]

An anatomy of calendar effects
05/03/20   Markets
"This paper studies the interaction of the five most well-established calendar effects: the Halloween effect, January effect, turn-of-the-month effect, weekend effect and holiday effect. We find that Halloween and turn-of-the month (TOM) are the strongest effects fully diminishing the other three effects to zero. The equity premium over the sample 1963-2008 is 7.2% if there is a Halloween or TOM effect, and -2.8% in all other cases. These findings are robust with respect to transactions costs, across different samples, market segments, and international stock markets. Our empirical research narrows down the number of calendar effects from five to two, leading to a more powerful and puzzling summary of seasonal effects."

When Buffett was a quant
05/03/20   Buffett
"From 1957 to 1969, deep-value stocks went from trading at 3x price-to-cash-flow to over 7x price-to-cash flow, nearing the all-time peak valuation for value stocks. Buffett's return of 24.5% per year in his first decade was a virtually identical result to simply buying the cheapest 10% of stocks in the market (for context, during that decade, this decile of the market was about 75 stocks that averaged about $75 million in market cap)."

The Simon Abundance Index 2020
05/03/20   World
"The Earth was 570.9 percent more abundant in 2019 than it was in 1980."

Berkshire Hathaway AGM
05/03/20   Buffett
"Warren Buffett shares his unscripted views on the company, the markets, the economy, corporate governance, and a lot more." [video]

Tobias Carlisle talks micro
05/03/20   Value Investing
"Q&A with Tobias Carlisle, Acquirer's Fund at the Planet MicroCap Showcase Virtual Investor Conference 2020." [video]

The Stingy News Weekly: April 24, 2020
04/24/20   SNW
This week we have value, dividends, small caps, tailwinds, and more.

Hired to pound the table
04/24/20   Montier
"Montier he has used the 35% sell off last month to urge purchases of cheap equities. He observes that 'Emerging markets were looking really, really cheap' and 'Europe was looking pretty damned exciting as well.' The reason for his enthusiasm was valuation: 'This was one of those examples where prices and fundamentals were getting dislocated.'"

Dividends and inflation
04/24/20   Dividends
"Relative to market prices and earnings, dividends have been the least volatile and exhibited the strongest correlations with inflation"

Investing in bad times
04/24/20   Stingy Investing
"Looking back at the prior 25 years, it is clear that investors benefited from buying stocks in down periods. More than that, they didn't have to time their purchases to perfection to do quite well. Simply buying when others were fearful yielded good results for investors who had the fortitude to hold on through the storms that buffeted them." [$]

The American tailwind
04/24/20   Buffett
"I don't think we'll have a long-lasting Great Depression. I think government will be so active that we won't have one like that. But we may have a different kind of a mess. All this money-printing may start bothering us."

Rally isn't a real recovery
04/24/20   Markets
"In a recovery, value and dividend yield are winners followed closely by small cap securities. High volatility stocks are almost as good as value. In addition, the performance of momentum is lackluster or even negative. Growth and low volatility are losers, according to StyleAnalytics."

Historic opportunity in small caps
04/24/20   Value Investing
"Following extreme periods like this historically, small value outperformed large growth by 16.8% annualized over the following 10 years."

Dan Rasmussen on microcaps
04/24/20   Value Investing
"Dan Rasmussen talks about microcaps and value" [video]

The Stingy News Weekly: April 17, 2020
04/17/20   SNW
This week we have value, vol, momentum, leverage, reversion, and more.

Yesterday's profits
04/17/20   Value Investing
"Unless you were concentrated in extremely high-expectation large growth stocks, we believe it was a very bad call to get out of equities because earnings were forecasted to disappoint."

Cheap winners vs boring winners
04/17/20   Value Investing
"Should investors prefer boring over cheap winners? Based on this analysis, there is no clear answer. The Low Volatility factor had significantly lower drawdowns than Value, but both feature low correlations to Momentum, which creates attractive multi-factor portfolios. Cheap stocks have not performed well over the last decade, but are cheaper, per definition, and low-risk stocks exhibit interest rate-sensitivity."

Until growth goes away
04/17/20   Government
"We can't automatically assume we'll be able to grow out of Covid-19 debt like we did after World War II. A lot of things globally and demographically happened after the war that gave a tailwind to growth. Some of those forces are now headwinds."

Dear fellow investors
04/17/20   Funds
"Let us start by saying that in our entire careers, we have rarely seen an opportunity to add as much long-term value for our investors as we do right now. This isn't to say that we believe that things will start getting better tomorrow, as we have no idea how this situation is going to play out over the next few weeks or months. But we do believe that the long term is what really matters in investing, and our confidence level is much higher for the longer term."

Don't try to catch the bottom
04/17/20   Hallett
"Because our decision to rebalance is never based on our view of the market and when we think the tide will turn. Rather, rebalancing is based on where each client's portfolio sits relative to their target allocations (which in turn are based on generating the target return in each client's wealth plan while adhering to each client's tolerance for risk). Given that the losses so far are about average by historical bear market standards; most portfolios have not yet breached the minimum threshold for their allocation to stocks (or maximum for bonds & cash). But if losses deepen - say to 40% or worse - before a recovery takes hold; it's likely that most clients - if not all - will get triggered for rebalancing."

Day of Reckoning for Private Equity
04/17/20   Markets
"No set of companies across industries is more at risk than those owned by private equity firms. Leveraged buyouts - now euphemistically called private equity - have 'leverage' in their name for a reason. That financial tool works both ways, magnifying returns in good times and punishing results for equity holders when the tide turns."

The Stingy News Weekly: April 12, 2020
04/12/20   SNW
This week we have balance, bonds, bears, value and more.

An economist on epidemiologists
04/12/20   Academia
"Tyler Cowen muses about epidemiologists."

The Bond Offer You Can Refuse
04/12/20   Bonds
"People say that cash has an opportunity cost. But that opportunity cost is a function of what comparable investments can earn. Rarely has cash (without rate risk) had this low of an opportunity cost compared to Treasury bonds (with rate risk)."

Small Cap Value
04/12/20   Value Investing
"You can see the returns coming out of a crisis tend to be far stronger in small value stocks than their large cap brethren. In fact, the numbers have been substantially higher."

Priced In
04/11/20   Value Investing
"In our view, it's buying cheap securities that likely won't experience bankruptcy. In debt, we think the place to do that is higher-quality high yield. In equity, we think the place to do that is deep-value equities that are also statistically unlikely to go bankrupt."

Look to Balanced Bob
04/11/20   Stingy Investing
"Bob's experience should provide investors some solace in these hard times. A simple low-fee balanced portfolio survived despite being launched at the top of the 2000 bubble and suffering from three bear markets. While the current downturn is likely in its early stages, it would have to be truly epic in its size and duration to extinguish Bob's portfolio over the next decade." [$]

The Stingy News Weekly: April 4, 2020
04/04/20   SNW
This week we have indexing, advertising, DCAing, holding, and more.

The path ahead
04/04/20   Management
"Since then, things have slid further and faster economically than anyone could have imagined. As of today, we have been spared what was predicted in the more catastrophic medical forecasts, but what started as theoretical and distant feels dangerous and ever-present. I have two friends-of-friends in the ICU with it, the first COVID-19 death in Missouri was in Columbia last week, and you can't read about what's taking place in NYC and react with anything other than deep concern."

Vanguard investors holding steady
04/04/20   Indexing
"The typical trader is buying equities on the dips, but older, wealthier traders are moving modestly to fixed income. On balance, we believe these levels of trading indicate that the vast majority of investors are maintaining a long-term perspective despite the market turmoil."

Against all odds
04/04/20   Health
"The Winnipeg lab also had been working for years on an Ebola vaccine, one that looked tremendously effective in animal models. The lab had even produced human-grade vaccine in the hopes of testing it in people. But as of April 2014, that still hadn't happened. The vaccine had never been deployed in an outbreak."

Advertising apocalypse
04/04/20   Media
"Nearly three-quarters of those surveyed say the current ad downturn will be worse than the financial crisis in 2008. About a quarter of those surveyed by IAB have pulled all of their advertising through the second quarter. Another 46% are reducing their ad spend for the same period."

When dollar cost averaging matters most
04/04/20   Markets
"Even the contributions that were way too early or way too late in relation to the bottom look amazing in terms of their growth. Those contributions have had longer to run than the more recent purchases but that.s the whole point."

The Stingy News Weekly: March 28, 2020
03/28/20   SNW
This week we have bear markets, innovation, weirdness, bond ETFs, and more.

Buying during a crisis
03/28/20   Markets
"Nevertheless, there is a silver lining for investors who are buyers of equities right now. Every dollar they invest in the current market environment will grow to far more than one invested in months prior, assuming that the market eventually recovers."

How innovation works
03/28/20   Tech
"In this interview, Yaron Brook sits down with Matt Ridley to discuss innovation and the bottom up process which 'flourishes in freedom'." [video]

Prepare for more weird
03/28/20   Markets
"The market going down rapidly is less unusual than it going up rapidly. Typically the speed of down moves is twice as fast as up moves. For the current up moves to be so fast is astounding."

Bond ETFs are being dislocated
03/27/20   Indexing
"The chart below shows us the dislocation between the AGG and its benchmark. Clearly, things became dislocated on March 10th, 11th, 12th, etc."

The hardest part of buy and hold
03/27/20   Behaviour
"The hardest part of a buy and hold strategy is that for it to work as expected, you have to do both the buying and the holding when markets are falling too. It's much easier to both buy and hold when markets are going up."

Buying a bear market
03/27/20   Stingy Investing
"Perhaps most encouragingly, investors who bought at the start of bear markets generally fared well - provided they held on. On average, the market gained 13.3 per cent in the 12 months after moving into bear-market territory and 34.3 per cent over the 24 months from the bear's beginning. Subsequent bull markets usually added a great deal to these gains." [$]

The Stingy News Weekly: March 22, 2020
03/22/20   SNW
This week we have bear markets, valuations, thrift, and more.

After the fall
03/22/20   Markets
"Once stocks fall 20%, long-term returns start to improve with every painful leg lower. This is why it's so important to stay in the game. Nobody ever said you have to have all of your money in stocks, but you can't be all cash either because lower returns today plant the seeds for higher returns tomorrow."

Good decisions in uncertain times
03/22/20   Markets
"Over the full 24-month period, returns remained very strong, with small value earning positive returns in 100% of 24-month periods and having the highest absolute performance of these four categories. Small growth performed the next best, then large value, with large growth being the worst performer."

Letter from Ernest Buffett
03/22/20   Buffett
"For a good many years your grandfather kept a certain amount of money where he could put his hands on it in very short notice. For a number of years I have made it a point to keep a reserve, should some occasion come up where I would need money quickly, without disturbing the money that I have in my business. There have been a couple occasions when I found it very convenient to go to this fund. Thus, I feel that everyone should have a reserve."

Risky returns
03/22/20   Markets
"Many investors are experiencing the real downside of stockmarkets for the first time. Suddenly they're no longer placid, happy holiday resorts where riches gently roll to shore simply by waiting. A volcano has erupted and everyone is running around with their hair on fire stealing each other's coconuts and hoarding pineapples."

U.S. valuation
03/22/20   Markets
"median valuations in the US stock market: large, mid, then small cap"

The right time to buy
03/22/20   Markets
"Our country has experienced World Wars, inflation, deflation, stagflation, financial panics, and everything in between. We have come out of all of these events stronger than ever, and we will do so today. It's going to hurt like hell, but we'll pull through this."

An ill wind
03/22/20   Markets
"In other words, if investors see there's a path to health, they'll gladly welcome financial incentives that provide a path to restoring wealth."

The Stingy News Weekly: March 15, 2020
03/15/20   SNW
This week we have a bear bounce, restaurants, oil, retirement, and more.

Money back after a bear market
03/15/20   Markets
"So investors could be waiting a while before being made whole from the prior peak. But there is a silver lining here if you look at these numbers a different way. The last column in this table shows the gains necessary to be made whole from these different loss levels"

Assessing the oil shock
03/15/20   World
"if we look beyond these short-term jitters, a supply shock like the one we witness at the moment should only be short-lived in nature. Russia will eventually have to fall in line with OPEC quotas at which point, oil prices should rise to the levels we saw last week. In the meantime, the lower oil prices will provide a small benefit to economic growth in developed countries that helps alleviate some of the negative consequences of the Covid-19 epidemic."

Never retire
03/15/20   Retirement
"If you want to live a satisfying, long life, neuroscientist Daniel Levitin has some advice for you: Stay busy."

Decline in restaurant traffic
03/15/20   Economy
"There are some sectors that will be hit hard over the next several months: hotels, airlines, restaurants, movie theaters, sporting events, and convention centers. People will probably avoid these places as part of social distancing."

The downside of UBI
03/15/20   Economics
"UBI can be a hard sell because it is a koan of fairness, activating one's empathy and rage simultaneously. The income is meant to support people who desperately need it, but also to support wealthy hipsters who just don't feel like working. The one hand clapping begins to feel like a slap."

Federal Reserve cuts rates on Sunday
03/15/20   Bonds
"The effects of the coronavirus will weigh on economic activity in the near term and pose risks to the economic outlook. In light of these developments, the Committee decided to lower the target range for the federal funds rate to 0 to 1/4 percent."

The Stingy News Weekly: March 8, 2020
03/08/20   SNW
This week we have viral, generalists, value, momentum, and more.

Naval Ravikant talks about coronavirus
03/06/20   Health
"Scott Adams talks with Naval Ravikant about the coronavirus." [video]

Why generalists triumph in a specialized world
03/06/20   Behaviour
"Join bestselling author David Epstein in conversation with Malcolm Gladwell for an engrossing discussion about Epstein's book, Range: Why Generalists Triumph in a Specialized World." [video]

The valuesburg address
03/06/20   Value Investing
"It is for us the survivors, rather, to be dedicated here to the unfinished work which those who invested in cheap stocks (and the truly fallen who shorted expensive ones) have thus far so nobly advanced."

Who cares what Mr. Market thinks
03/06/20   Markets
"So, with the market down more than 12%, it is like the market is discounting no earnings for the next four years! Nuts!"

Simple and effective
03/06/20   History
"A recent MIT study estimates only 70% of people wash their hands after going to the bathroom. And 50% of those people aren't doing it right. They further estimate that just 1 in 5 airport travelers has clean hands. If we were able to simply bump that number up from 20% of travelers to 60%, that could potentially slow the spread of disease by nearly 70%. Even 30% of travelers with cleaner hands could reduce the impact of a disease by nearly one-quarter."

How to respond to COVID-19
03/06/20   Health
"In the past week, COVID-19 has started to behave a lot like the once-in-a-century pathogen we've been worried about. I hope it's not that bad, but we should assume that it will be until we know otherwise."

Momentum down
03/06/20   Stingy Investing
"Signs of a serious decline can be gleaned from the behaviour of momentum stocks, which often act like canaries in the market's coal mine." [$]

The Stingy News Weekly: February 28, 2020
02/28/20   SNW
This week we have Buffett buying, flexible retirement planning, taking a chill pill, and more.

Don't lose it
02/28/20   Behaviour
"if you were going to design a laboratory experiment to test investors' mettle, this past week would provide a nearly perfect template. Think about it: We have a virus without a vaccine that's spreading rapidly - but nobody knows how rapidly - which is damaging the global economy - but nobody knows how badly - at a time when many U.S. stock investors were already anxious after an extraordinarily long bull market that has pushed valuations to worrisome levels."

There is always enough time to panic
02/28/20   Behaviour
"Six business days ago, my estimate of future stock returns over the next ten years was 2.21%/year, the lowest I have ever seen it (and a new all-time high for the stock market). Today it is 4.40%/year. Quite a move. Also in the quite a move department is the 10-year Treasury note, whose yield went from 1.56% to 1.23%, a new all-time low."

2 hours of Buffett
02/28/20   Buffett
"CNBC's full interview with Berkshire Hathaway CEO Warren Buffett"

A more generous strategy
02/28/20   Stingy Investing
"Prof. Gagnon prefers his own 'variable percentage withdrawal' method instead. The basic idea is to figure out how much to take out of a portfolio over a set number of years, assuming long-term historical growth rates for a particular asset mix. The amount taken out each year varies both as the value of the portfolio changes and as the retiree gets older."

You will likely get the coronavirus
02/28/20   Health
"Most cases are not life-threatening, which is also what makes the virus a historic challenge to contain."

The Stingy News Weekly: February 22, 2020
02/22/20   SNW
This week we have Buffett's letter, small value, passive distortions, leverage, and more.

Berkshire Hathaway letter
02/21/20   Buffett
"Over time, we want Berkshire's share count to go down. If the price-to-value discount (as we estimate it) widens, we will likely become more aggressive in purchasing shares. We will not, however, prop the stock at any level." [pdf]

Dan Rasmussen interview
02/21/20   Value Investing
Dan Rasmussen talks private equity and value [audio]

Distorting the market
02/21/20   Markets
"On this week's episode, we speak to Mike Green of hedge fund Logica Capital, who argues that the trend is causing major market distortions that will eventually unwind with ugly consequences." [video]

Venial sin punished quickly
02/21/20   Value Investing
"The point is a simple one. Value has started 2020 with an extremely severe loss versus very long-term history, and, defined in a wide variety of ways, the worst loss yet (examining all of the same 6-week length periods) over the entire long 2010-2020 value drawdown."

I don't know
02/21/20   Behaviour
"It's easier to gain more respect for someone who speaks honestly and is humble enough to admit that they don't know the answer in the face of a tough or sometimes even simple question."

Equity returns don't compensate for risks
02/21/20   Markets
"If this doesn't give you pause, then you either haven't understood finance theory or these results. They are a direct contradiction of the most basic premise of finance and indicate that we get something fundamentally wrong about finance"

Levered long
02/21/20   Markets
"Stocks and bonds both have positive expected returns, so I understand why a young person with a high risk tolerance would find this appealing. But after looking at the numbers, it probably doesn't make sense to do it with your entire portfolio, if at all. It requires constant monitoring, and an iron stomach. Leverage can turbo charge your returns, but it can also wipe them out if you're not careful."

The Stingy News Weekly: February 15, 2020
02/15/20   SNW
This week we have Charlie, crashes, pandemics, and more.

Charlie Munger AGM
02/15/20   Munger
"Investing legend Charlie Munger, Berkshire Hathaway vice chairman and chairman of the Daily Journal, speaks to shareholders at the newspaper's annual meeting. Munger is best known for his steady role as the right-hand man of investing legend Warren Buffett." [video]

Crisis investing
02/15/20   Value Investing
"We have spent the past year studying every financial crisis in the US since 1970. We have done this work for your benefit, so that you will keep your head when all about you are losing theirs. When weak hands fold, when forced sellers liquidate, we hope this research will help you make good decisions."

Great to gone
02/15/20   Markets
"Success often contains the seeds of its own destruction, and not just when it comes to family fortunes."

Historical value
02/15/20   Value Investing
"While they may not have been known by the same names, many modern investment factors have historical roots stretching back centuries."

Sequence risk
02/15/20   Retirement
"Sequence risk is the risk that investment returns happen in an unlucky order. It can make or break portfolios"

Epidemics and market returns
02/15/20   Markets
"A global pandemic that killed 3% of the Earth's population only sent markets down 10% over a period of 4 months. This is a stunning result. The worst virus since the bubonic plague and markets go through a run-of-the-mill decline? I would not have guessed that beforehand."

The Stingy News Weekly: February 7, 2020
02/07/20   SNW
This week we have liquidity, wagers, lies, heresies, and more.

A personal finance lie
02/07/20   Thrift
"the biggest lie in personal finance is that you can be rich if you just cut your spending."

Liquidity and factor returns
02/07/20   Value Investing
"We observe that the performance of the factor decreased consistently as the minimum liquidity constraints increased. This result can be explained by cheap stocks frequently being small stocks, i.e. having exposure to the Size factor. Removing these small and cheap stocks led to lower factor performance."

The temptation of cash
02/07/20   Markets
"How long do you usually have to wait before you would reach the absolute lowest price for any given trading day? The median amount of time before hitting an absolute low is 184 trading days (~9 months), but the average is 508 trading days (~2 years)."

The wager revisited
02/07/20   Buffett
"The best yardstick for success isn't whether you beat a benchmark, or your neighbor, or your brother-in-law. Instead, the best measure of success is whether you meet your financial goals - while also sleeping at night."

Five investing heresies
02/07/20   Markets
"Dan Rasmussen proceeds to knock down five investing heresies" [video]

The Stingy News Weekly: February 1, 2020
02/01/20   SNW
This week we have bond addicts, cubicles crack heads, misspelled buffetts, and more.

Investors are hooked
02/01/20   Bonds
"If high-yield bonds were the OxyContin of private equity's debt binge, private credit is its fentanyl."

The open-office trap
02/01/20   Management
"He found that, though open offices often fostered a symbolic sense of organizational mission, making employees feel like part of a more laid-back, innovative enterprise, they were damaging to the workers. attention spans, productivity, creative thinking, and satisfaction. Compared with standard offices, employees experienced more uncontrolled interactions, higher levels of stress, and lower levels of concentration and motivation."

The boomer blockade
02/01/20   Economics
"This blockade is both a literal blockade, stopping people from reaching the senior-most levels of organizations and institutions, and a figurative blockade, holding people back from finding meaning from new narratives and myths of success in life and at work."

Baby boomers took their children's future
02/01/20   Economics
"The post-war baby boom of 1945-65 produced the biggest and richest generation in British history. David Willetts discusses how these boomers have attained this position at the expense of younger generations." [video]

VAH:Value vs Glamour
02/01/20   Value Investing
"How HEI ran 47,500%; Anti-FOMO Starter Size Rules; and Value vs Glamour" [video]

The economics of buffets
02/01/20   Business
"Like most restaurants, buffets operate on extremely thin margins: For every $20 in revenue, $19 might go toward overhead, leaving $1 (5%) in net profit."

The Chick-fil-A franchise
02/01/20   Business
"Food is the most competitive industry known to man: It has the highest investment level of any industry, the highest failure rate, and the lowest margins."

The Stingy News Weekly: January 24, 2020
01/24/20   SNW
This week we have real data for the Asset Mixer, bubbles, bonds, couch potatoes, and more.

50 years of industry data
01/24/20   Markets
"of the forty-eight industry portfolios considered on a value-weighted or market capitalization basis, only six boasted a higher Sharpe than the broad market: Smoke, Food, Beer, Guns, Drugs, and Utilities."

Down on the farm
01/24/20   Fun
"A stable of lesser known speculative manias including Japan's rabbit mania, poultry fever and the ostrich feather boom."

Dan McMurtrie talks to Tobias Carlisle
01/24/20   Markets
"Daniel McMurtrie, better known as FinTwit's @Supermugatu, runs a long/short hedge fund, a Bangladeshi venture fund and wrote the modern 95 Theses for millennial daters: The Dating Market" [video]

Bonds, bubbles, and biases
01/24/20   Bonds
"The single best predictor of future bond returns is their starting yield. The lower the starting yield, the lower the future returns."

Asset Mixer Update
01/24/20   Stingy Investing
We've updated our Asset Mixer to include real data for 2019.

Periodic Table Update
01/24/20   Stingy Investing
We've updated our periodic table of annual returns for Canadians to include real data for 2019.

Increasing risks of loan funds
01/24/20   Hallett
"The appeal of bank loans as investments is two-fold: i) they offer mid-to-high single-digit yields (because borrowers are higher risk); and ii) they typically bear a floating interest rate so immune to often-feared higher rates. But bank loans differ from high yield bonds in important ways."

2020 Couch Potato Model Portfolios
01/24/20   Indexing
"ETFs still aren't right for everyone, but the launch of 'one-fund portfolios' (also called asset allocation ETFs), combined with the low- and no-commission trades at several brokerages, have made them more appropriate even for small portfolios. For the vast majority of DIY investors, I believe these one-ticket solutions are the best way to build a diversified portfolio that balances low cost with ease of maintenance."

The Stingy News Weekly: January 17, 2020
01/17/20   SNW
This week we have value, predictions, allocations, and more.

Age-invariant asset allocation
01/17/20   Retirement
"In the present environment, the stock market is poised to deliver 2.52%/year over the next ten years. You can do better with an investment-grade portfolio of bonds."

Value's death exaggerated
01/17/20   Value Investing
"Over the last 12 years, the relative valuation of value and growth moved from the 21st percentile to the 97th percentile. This revaluation explains most of value's underperformance. Today, the relative valuation level is close to the most attractive valuation level in history at the peak of the tech bubble in 2000."

VAH: Akre
01/17/20   Value Investing
"S02 E02 Akre Never Sells, What Buffett Should Buy and Damodaran's Market Delusion" [video]

An inevitable market downturn
01/17/20   Stingy Investing
"There were 138 separate downturns in the S&P 500's inflation-adjusted record, based on Prof. Shiller's data. About 36 per cent of them lasted for one month and 67 per cent of them lasted for three months or less before the market moved up to new highs." [$]

O'Shaughnessy Q4 2019 letter
01/17/20   Value Investing
"our updated in-house 10-year point estimate for the U.S. market's nominal total return fell during the year, and now sits at ~1.5% annualized, which would mean a ~16% total return over the next decade."

The Stingy News Weekly: January 10, 2020
01/10/20   SNW
This week we have rebalancing, value, not selling, and more.

Rebalancing frequency
01/10/20   Markets
"My prior with most market-based analyses is that the patterns we observe are just noise and randomness. Given the conclusions found from those who have studied rebalancing previously, I am inclined to believe that this is true in this case as well."

Value's underperformance
01/10/20   Value Investing
"Critics of value investing have declared the death of value. However, the empirical analysis suggests it is unlikely because the size of the current drawdown, while painful, is not an outlier, and the pre- and post-2007 data suggest there have been no statistically significant changes in the two drivers of the value premium - migration and profitability. The simple explanation for value's underperformance is the relative increase in the valuations of growth stocks."

The art of not selling
01/10/20   Markets
"Of our most costly mistakes over the years, almost all have been sell decisions. The mistake, in virtually every instance, has been selling too soon."

The Stingy News Weekly: January 3, 2020
01/03/20   SNW
This week we have updates to the Asset Mixer and Periodic Table for Canadians, dividends, declines, optimism, and more.

How things go viral
01/03/20   Media
"Derek Thompson stops by The Compound to discuss how and why things go viral with Barry and Michael. Derek is a staff writer at The Atlantic and author of 'Hit Makers.'" [video]

What a time to be alive
01/03/20   World
"The difference between an optimist and a pessimist isn't usually over substance. It's the time frame they're looking at. Problems are easier to spot today, but progress is almost always more powerful over time."

The long suffering
01/03/20   Markets
"We know that stocks are risk assets, and that U.S. government bonds, specifically one-month T-Bills, are often referred to as risk-free assets. But the absence of risk can be very costly if your goal is to outpace inflation, which is why we take risk in the first place. Looking at this chart, one should conclude that risk-free is not only reward-free, but its the epitome of risk."

The power of reinvesting dividends
01/03/20   Stingy Investing
"The relative gains highlight the potential benefits of dividend reinvestment. The boost is so compelling that most investors like to use total returns rather than capital gains when studying the market." [$]

Asset Mixer Update
01/03/20   Stingy Investing
We've updated our Asset Mixer to include nominal data for 2019.

Periodic Table Update
01/03/20   Stingy Investing
We've updated our periodic table of annual returns for Canadians to include nominal data for 2019.

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