Search Results for: return on equity

My prior piece on asset supply has received significant interest, and so I feel an obligation to clarify.  The title, “The Single Greatest Predictor of Future Stock Market Returns”, was something of an intentional exaggeration, chosen not only to draw attention to … Continue reading →

Consider the following chart, which shows the average investor portfolio allocation to equities from January 1952 to December 2013: The metric in this chart takes no input from any variables traditionally associated with valuation: earnings, book values, profit margins, discount … Continue reading →

(Much thanks to the must follow @ElliotTurn for valuable help and feedback in the development of these charts and tables) In this piece, I’m going to present a series of charts and tables that seek to efficiently convey the state … Continue reading →

Why is the Shiller CAPE so high?  In the last several weeks, a number of prominent academics and financial market commentators have attempted to answer this question, to include the inventor of the valuation measure himself, Nobel Laureate Robert Shiller.  In … Continue reading →

In the previous piece, I addressed a popular argument for the necessity of profit margin mean-reversion grounded in the Kalecki-Levy profit equation: Profit/GNP = Investment/GNP + Dividends/GNP – Household Saving/GNP – Government Saving/GNP – ROW Saving/GNP I made three points. … Continue reading →

Mean-reversion in a system doesn’t happen simply for the sake of happening.  It happens because forces in the system cause it to happen.  With respect to profit margins, the following questions emerge: What are the forces that cause profit margins to … Continue reading →

In this piece, I’m going to share a mental exercise that we can use to increase the truthfulness of our thinking. The exercise is intended primarily for traders and investors, given their obvious (financial) reasons for wanting to think more … Continue reading →

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 →

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 →

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 →