Cost, Price, and Value

By | 2017-07-17T12:21:40+00:00 October 12th, 2016|Global Market Update|

“A cynic knows the price of everything and the value of nothing.” Lady Windemere’s Fan, Oscar Wilde Photo: Napoleon Sarony, 1882. Source: Metropolitan Museum of Art Full disclosure: I am a financial professional who manages money. So my comments are slanted. After all, where you stand often depends on where you sit. And I sit where I can manage individual and institutional portfolios, using—mostly—individual stocks and bonds. I avoid using mutual funds because of the conflicts that are inherent in their business model. What [...]

The Importance of Big

By | 2017-07-17T12:21:44+00:00 September 8th, 2016|Global Market Update|

It’s easy to underestimate big things. Can you guess who’s the biggest? Source: IMF We hear a list of 4 or 5 items, and we tend to average them, treating them alike. But things aren’t all alike. In the global economy, the United States and China dominate every other nation. Together, our two countries total 40%. The next largest country is about 5%. Clearly, if we want to understand what’s going on the economy, we need to focus on the US and China. Or [...]

Consider the Alternatives (Part 4)

By | 2017-07-17T12:21:44+00:00 September 2nd, 2016|Global Market Update|

What are liquid alternatives? Lobate ctenophore, a deep-sea animal. Photo: Marsh Youngbluth. Source: NOAA Liquid alternatives are alternative investment strategies that are available through conventional investment vehicles, like mutual funds and ETFs. They’re provided for investors who are looking for the diversification of alternatives but want more liquidity than hedge funds, private equity, or direct ownership of alternative assets can provide. Typically, they’re oriented around a hedge-fund like strategy, like using futures contracts to short the equity market while buying stocks that could do [...]

Exchange Traded Creation

By | 2017-07-17T12:22:07+00:00 March 9th, 2016|Global Market Update|

Where did ETFs come from? Michelangelo: The Creation of Adam. Source: Wikipedia Exchange Traded Funds, or ETFs, have taken the market by storm. On average, SPY--the first (and largest ETF by assets)--trades over 150 million shares each day. That’s more than the 20 most-traded stocks combined. There’s over $3 trillion invested in ETFs, shares that cover stocks, bonds, commodities, currencies, real-estate, limited partnerships, and so on. Once we got our smart phones, the go-to phrase was, “There’s an app for that.” Well, when it [...]

Flying Too High

By | 2017-07-17T12:22:19+00:00 December 14th, 2015|Global Market Update|

Have junk-bond investors flown too close to the sun? Artist Ceasare d’Arpino. Source: British Museum Icarus was the son of Daedalus, the master craftsman who built the Labyrinth for King Minos. In order to escape from Minos’s realm, he fashioned two pairs of wings out of wax and feathers for himself and his son, warning Icarus not to fly too close to the sun, nor too close to the sea—but to follow a middle path. Icarus couldn’t resist soaring high in the sky, however, [...]

Fishing for Beginners

By | 2017-07-17T12:22:40+00:00 August 7th, 2015|Global Market Update|

What do you need to start fishing? Photo: Natureworks. Source: Morguefile Not much: just a hook, a line, and a body of water. And the desire to catch a fish. I remember my 5-year old cousin wiggling her drop-line away from the sunnies approaching her hook, saying “No no fishy, you’re too small.” She was so cute that the adults in the boat barely noticed we were drifting dangerously close to a dam. As our desires grow, our gear gets more complex. There are [...]

Mutual Fun?

By | 2017-07-17T12:23:11+00:00 December 2nd, 2014|Global Market Update|

How do managers manipulate returns? Let me count the ways… Source: Bear Creek Fudge Factory Yesterday I noted how fund managers are conflicted. They want to look good so their firm can attract funds to improve their fee income. One way to look good is by gaming the system—fudging their returns. You’d think there would be rules about this sort of thing. But often, there aren’t. […]

Close to the Edge?

By | 2017-07-17T12:23:11+00:00 December 1st, 2014|Global Market Update|

What happened to active management this year? Source: Lipper The idea behind active management seems sound: hire experts to help you navigate the treacherous waters of the stock market and profit from their experience and know-how. Most people do this via mutual funds—a pooled investment account where small investors can hire a big money manager. […]

Bonds-a-Go-Go

By | 2017-07-17T12:34:14+00:00 September 29th, 2014|Global Market Update|

Will loyal investors swamp Bill Gross’s new venture? Source: Marketswiki On Friday Bill Gross rocked the investing world by leaving PIMCO, the two-trillion dollar asset management firm he founded, and going to work for a competitor. Gross is one of the best-known investors in the world. With his folksy charm and colorful commentary, Gross made investing in bonds cool, which is pretty tough. Bonds are inherently boring, or should be. If everything goes right, you get your money back; if something exciting happens, you [...]

Being Smart

By | 2014-04-18T10:06:03+00:00 April 18th, 2014|Global Market Update|

Is smart beta the future? Beta is a measure of risk. If a stock has a beta of one, it goes up and down by the same percentage, day-to-day, as the market does. Investment portfolios have a beta component, which corresponds to their general exposure to a broad market average, like the S&P 500. By definition, if you own an index of the entire market, your beta is one. Smart beta is a rules-based approach that reduces costs by limiting investment discretion. It is [...]