Long before Jim Cramer’s record was being dissected, Alfred Cowles was skeptical of the claims made by stock market pundits. Cowles, who later founded the Cowles Foundation for Research and Economics, spent years working on a paper published in 1933, “Can Stock Market Forecasters Forecast? His mission: “It seemed a plausible assumption that if we could…
Market History
Thinning of the Herd
There has been a lot of talk lately about the lack of participation; how only a few stocks are actually rewarding shareholders while so many have been burning them. Winners have been few and far between but it’s not as if the index is exactly on fire. While it’s true that without Amazon and…
Tis The Season
I tend to be on the skeptical side when it comes to investing based on seasonal trends. I’m almost always of the mind that less is more and seasonality encourages more decision making, not less. Making changes to your portfolio based on this type of study would probably not be in your best interest when…
The Upward Drift
Cliff Asness is out with a new interesting paper, “Market Timing Is Back In The Hunt For Investors.” In it, he discusses the efficacy of using valuations, specifically the CAPE ratio, to help time the market. One thing Asness addresses is the valuation drift upward which U.S. stocks have experienced over the last century. Here’s Cliff:…
When Is the Right Time to Sell Big Winners?
The largest gains are enjoyed by investors with the longest time horizons. Let’s take Amazon, obviously an extreme example. From the time of its IPO through the end of 2014, Amazon gained 12,600%. Even after such a remarkable run, Amazon is up over 100% through the first ten months of this year! However, the reality…
This is the Small Cap Secret No One Ever Told You
This is the small cap secret no one ever told you; You’ve probably heard about the small stock premium, the idea that over long periods of time, small stocks outperform large stocks. There are a bunch of different theories as to why this is the case. Some believe the additional returns are compensation for decreased…
Then, As Now
The Great Crash 1929 by John Kenneth Galbraith was poetically published in 1954, the first year that stocks would eclipse their 1929 highs. One of the most enjoyable aspects of reading about events that shaped history is getting a better sense of what actually happened. Ninety years later, the stories tend to morph into something…
Historic Underperformance
If Donald Trump were to weigh in on value stocks this year, he’d call them ugly losers. Growth stocks on the other, in particular the “FANG” names, have been been extremely rewarding to investors. Netflix is up 110% this year, Amazon is up 95%, Google is up 35% and Facebook is up 32%. What’s so impressive…
A Ninety Percent Decline
From 1929 through 1932, the Dow Jones Industrial Average would lose nearly ninety percent of its value. In this four year period, there were several nasty bear market rallies, lifting the hopes of the hopeful, only to be met with tidal waves of selling. Corporations were collapsing and individuals didn’t fare much better. Unemployment in…
Dry Powder
At sub two percent on the ten-year treasury, many investors are questioning why bother owning bonds at all. As ninety percent of the returns are derived from the starting interest rate, it’s fair to assume that bonds will indeed offer measly returns going forward. While it’s not realistic to expect the returns of the last…
