Category Archives: Uncategorized

Diversification, Adaptation, and Stock Market Valuation

Looking back at asset class performance over the course of market history, we notice a hierarchy of excess returns.  Small caps generated excess returns over broad equities, which generated excess returns over corporate bonds, which generated excess returns over treasury … Continue reading

Posted in Uncategorized | Leave a comment

A Value Opportunity in Preferred Stocks

The current market environment is made difficult by the fact that investors have nowhere that they can go to confidently earn a decent return.  There are no good deals to be found anywhere, in any area of the investment universe. … Continue reading

Posted in Uncategorized | Comments Off on A Value Opportunity in Preferred Stocks

Asset Markets as Banks

Let’s suppose that you have money on deposit in a bank, in some kind of checking or savings account.  It’s paying you 2.5% per year, which isn’t something you can easily get in 2017, but something that would have been … Continue reading

Posted in Uncategorized | Comments Off on Asset Markets as Banks

The Paradox of Active Management

In this piece, I’m going to introduce a simplified model of a fund market, and then use the model to illustrate certain important concepts related to the impact of the market’s ongoing transition from active to passive management.  Some of … Continue reading

Posted in Uncategorized | Comments Off on The Paradox of Active Management

The Value of Active Management: A Journey Into Indexville

The growing popularity of passive investing provokes a series of tough questions: What necessary functions does active management perform in a financial system? What is the optimal amount of active management to have in such a system, to ensure that … Continue reading

Posted in Uncategorized | Comments Off on The Value of Active Management: A Journey Into Indexville

The Impact of Index Investing: A Follow-Up

The prior piece received a much stronger reaction than I expected.  The topic is complicated, with ideas that are difficult to adequately convey in words, so I’m going to use this piece as a follow-up.  I’m going to look at the … Continue reading

Posted in Uncategorized | Comments Off on The Impact of Index Investing: A Follow-Up

Index Investing Makes Markets and Economies More Efficient

U.S. equity index funds have grown dramatically in recent decades, from a negligible $500MM in assets in the early 1980s to a staggering $4T today.  The consensus view in the investment community is that this growth is unsustainable. Indexing, after all, is … Continue reading

Posted in Uncategorized | Comments Off on Index Investing Makes Markets and Economies More Efficient

In Search of the Perfect Recession Indicator

The downturn in the energy sector and persistent economic weakness abroad has caused the investment community to become increasingly focused on the possibility of a U.S. recession.  In this piece, I’m going to examine a historically powerful indicator that would … Continue reading

Posted in Uncategorized | Comments Off on In Search of the Perfect Recession Indicator

Growth and Trend: A Simple, Powerful Technique for Timing the Stock Market

Suppose that you had the magical ability to foresee turns in the business cycle before they happened.  As an investor, what would you do with that ability?  Presumably, you would use it to time the stock market.  You would sell equities … Continue reading

Posted in Uncategorized | Comments Off on Growth and Trend: A Simple, Powerful Technique for Timing the Stock Market

Trend Following In Financial Markets: A Comprehensive Backtest

“My metric for everything I look at is the 200-day moving average of closing prices.  I’ve seen too many things go to zero, stocks and commodities.  The whole trick in investing is: ‘How do I keep from losing everything?’  If … Continue reading

Posted in Uncategorized | Comments Off on Trend Following In Financial Markets: A Comprehensive Backtest