Posts filed under “Investing”
“The term bubble should indicate a price that no reasonable future outcome can justify.”
Fridays are the day I like to wax philosophical about all things market related, with an emphasis on the failings of your wetware. This week is no different.
The motivation for this week’s musings comes from the quote above, courtesy of Clifford Asness, quant analyst and founder of AQR Capital Management. In the Financial Analysts Journal, Asness published a list of his “Top 10 Peeves.”
I often find myself both intrigued by and in disagreement with Mr. Asness, on matters of economics, politics, and central bankers. (See QE = Currency Debasement and Inflation). However, in his list of peeves, I found myself in utter agreement on the question of whether or not current markets are a bubble. Indeed, I especially found compelling his definition of how to define an equity bubble: “A price that no reasonable future outcome can justify.”
Now, before we proceed, allow me to share with you a few words about “Question Framing.” It is something every first year law student learns. In the art of rhetoric, a properly framed question wins the debate before it even begins. Hence, if you accept a definition of a bubble as defined by Asness, the discussion is more or less already over. Such is the power of framing.
Source: 361 Capital This chart comes to us via Blaine Rollins of 361 Capital. I find it provides great context for the current markets, especially given the amount of bubble chatter we hear these days. How common are double-digit equity gains? How often do we see markets up 20 percent or more in a…Read More
I spent the early part of this week presenting at several conferences in Belgium, in and around Brussels. I was the not-so-randomly selected person to give the American take on the state of the global economy and capital markets. Or, at least, an American take. I never want to misrepresent my own biased and conflicted…Read More
The S&P 500 hit 1709 a few weeks back and has since been dropping precipitously, we are now down roughly 3.7% from that level in a short period of time. Heading into today, we’ve been negative 4 days straight and have seen losses during 9 of the last 11 days on both the S&P…Read More
These bullet points were from a (much longer) Merrill Lynch research piece last week. “With most of our market indicators flashing green, we address the bear cases below to either debunk them or provide evidence that the risks are priced into stocks.” 1. “The 5-year bull market is long in the tooth” 2. “Everybody’s bullish…Read More
Use the news: How to get the most out of financial media Barry Ritholtz Washington Post November 17 2013 Last time out, our topic was the signal-to-noise ratio when applied to investing. We looked at how to reduce the noise you consume in your daily information diet. The goal was to help you…Read More
Source: Capital Spectator The most perplexing thing I read this week was an odd column by Paul Merriman at MarketWatch, “Why Rebalancing Could Be a Huge Mistake.” He makes the counterintuitive claim that portfolio rebalancing doesn’t really work: “Conventional wisdom holds that regular rebalancing is a sound practice to control investing risk. But…Read More
Robert Arnott is Chairman ＆ Chief Executive Officer of Research Affiliates, a global leader in smart beta and asset allocation strategies, and one of the originators of fundamental (as opposed to market cap weighted). His models now drive over $100 billion in assets in various funds, and an additional $75 billion at PIMCO. ~~~ …Read More
How often do you make a decision to sell something for a giant gain? Quite a few times across the arc of a career, if you are a half-decent investor. But how often is that sell decision a terrible mistake? Today, I want to tell the tale of Warren Buffett’s bungled profit-taking in Exxon. We…Read More