Should Stocks Be Worth More Now Than They Used To Be?

“Strange things happened near the boundaries”- James Gleick Stocks are not cheap. The CAPE ratio is 28.46, above the long-term average of 16.73 and more expensive than 96% of all readings. But exactly how expensive are they, and what might this mean for future returns? The chart below from Star Capital shows that the more…

Getting Lucky & The Stock That Changed My Life

“Chance can be thought of as the cards you are dealt in life. Choice is how you play them.”- Ed Thorp This past week I was on a panel with Abby Joseph Cohen and Liz Ann Sonders. How the hell did that happen? I want to share with you some pieces of my story and…

Firearms Versus Bow and Arrows

“Every stock market system with an edge is necessarily limited in the amount of money it can use and still produce extra returns.” – Ed Thorp In the decade after Ed thorp launched Princeton Newport Partners, the fund gained 409%, annualizing at 17.7% before fees and 14.1% after. Not bad for a market neutral portfolio….

Influence, Temptation, And Persuasion

Robert Cialdini’s Influence: The Psychology of Persuasion, has removed any lingering doubt I had that we are reasonable creatures. Cialdini shares so many examples of experiments that at times I literally stood up in disbelief. Here’s a good one: More compelling evidence for the importance of similarity in determining whether we will imitate another’s behavior comes…

SPY, 24 Years Later

What started as an experiment has proved to be an unequivocal success. Twenty-four years ago today, SPY was listed on the American Stock Exchange. Today, there are more than 6,000 ETFs/ETNs, which give investors the ability to trade baskets of stocks all day, unlike traditional mutual funds. ETFs now hold $3 trillion in assets, with…

Sell Netflix, Buy Blockbuster

“The difficulty lies, not in the new ideas, but in escaping from the old ones.” Keynes There’s nothing wrong with ideas, new or old, but the problem is that once we come public with them, it becomes incredibly difficult to change our mind. To admit that what we once believed is no longer valid can…

Chasers Gonna Chase

Eric Balchunas shares smart-beta flows since the election. Breakdown of smart-beta flows since election. Value ETFs, so hot right now. Value ETFs. pic.twitter.com/ToO0bACLoL — Eric Balchunas (@EricBalchunas) January 19, 2017 Not surprisingly, this lines up pretty well with how these different risk factors have performed over this time. ETFs have given investors the perfect vehicle…

The Most Powerful Force In The Universe

Anyone can solve the equation 6+6+6+6. But ask somebody to calculate 6x6x6x6 without a machine and they’re going to look at you cross-eyed. The human brain was designed for linear, not exponential processing. The other day I joked about the Dow reaching 2,000,000 by the year 2099, a one hundred fold gain from today’s prices. I was…

The Final Results Are In

Last week, Morningstar published their Asset Flows Commentary for 2016. As you can see in the chart below, active funds have had more outflows in each of the last two years than they did in 2008. Below, I pulled some of the notable numbers (emphasis mine). Among U.S. equity funds, passively managed funds–led by Vanguard’s offerings–took…

The Ignorance of The Future

“Three causes especially have excited the discontent of mankind; and, by impelling us to seek remedies for the irremediable, have bewildered us in a maze of madness and error. These are death, toil, and the ignorance of the future” – Charles Mackay People spend a lot of time thinking about the future, it’s part of…