Public Issues, Private Issues

By | 2017-07-17T16:44:41+00:00 July 13th, 2017|Global Market Update|

What is private equity? Source: Wikipedia Private equity is an equity position in a company that isn’t publicly traded – that hasn’t been listed on a public stock exchange. For ordinary investors, there are two ways to invest in private equity. You can invest in a private equity fund, or you can give money to a friend or family member in exchange for a share of their business venture. Limited partners of Bain Capital’s Asia XI Fund are private equity investors, as are your [...]

Skewed for Success (Part 3)

By | 2017-07-17T12:21:16+00:00 June 28th, 2017|Global Market Update|

Small is beautiful. Illustration: Erin O’Leary Brown. Source: Positive skewness makes it hard to beat large cap stock indices, especially in bull markets. You have to hitch your wagon to a rising star and keep going—ignoring all those nasty risk-management nannies that say diversify, diversify. The growth darlings seem to defy gravity, and it appears that there is almost nothing that can stop them. So should stock-pickers just give up? Fortunately, large-cap stocks aren’t the only asset-class in town. Other assets display negative [...]

Skewed for Success (Part 2)

By | 2017-07-17T12:21:16+00:00 June 27th, 2017|Global Market Update|

Does skewness affect everything? Illustration: John Chase (1932). Source: Plymouth State University Large cap stocks are skewed to the upside, over the long run. That is, the bulk of their returns are provided by a few successful companies. This makes intuitive sense: these are the largest companies in the world, and their leadership is constantly shifting. But when a small company makes it big, it provides a huge boost to the average return – like EMC or Dell Computers in the late ‘90s, or [...]

Skewed for Success (Part 1)

By | 2017-07-18T11:01:46+00:00 June 26th, 2017|Global Market Update|

Why is it so hard to beat the market? Photo: Skirenn i Trysil. Source: Wikipedia I’m pretty competitive. I grew up ski racing, and kept racing after college. I like the discipline and personal excellence that competition demands. So it’s frustrating when I see the market move up more rapidly than my portfolio. I get buyer’s remorse: why didn’t I just buy the index and forget about it? This has been especially trying over the past five years. Except for a brief period in [...]

William Baumol, RIP

By | 2017-07-17T12:21:19+00:00 May 11th, 2017|Global Market Update|

Who was William Baumol? Source: Journal of Economic Perspectives, American Economics Association William Baumol was an economist who taught for years at Princeton. He died last week at the age of 95. He had a long and productive career, writing papers and books over the course of seven decades. He is perhaps best known for his theorem on wages, Baumol’s Cost Disease, which explains why cars and computers get cheaper while haircuts and college tuition get more expensive. Essentially, areas of the economy with [...]

Crossing the Tape

By | 2017-07-17T12:21:20+00:00 May 2nd, 2017|Global Market Update|

Do you love to win, or do you hate to lose? Photo: Public Domain. Source: Wikipedia It’s two different things. People who love to win are motivated by the big payoff at the end. They love the thrill of victory that comes from crossing the finish line first, standing at the top of the podium. They can be gracious, too, not minding if someone else climbs higher, later. But nothing takes away from what they’ve done before. People who hate to lose, by contrast, [...]