We are nearly halfway through 2013 and the S&P 500 Total Return Index is on pace to deliver a return of over 47% for the year. In the last 188 years of stock market activity, the market delivered an annual return of over 40% just ten times. The last time it did so was 1958 and it is interesting that 1928 was one of the ten years.
The CEO of the CFA Institute discusses investors’ rights with the Wall Street Journal… Continue reading
I am a risk manager and credit analyst by training (actually, I think I was born that way), so when I created my hedge fund over three years ago, one of the first questions I asked the partner of (large, well-respected hedge fund) law firm who drafted my fund’s foundational documents was: “What happens if (very large, well-respected, money center bank) goes under? What assurances do I have that my investors… Continue reading
I do not think that Barron’s front page headline in this week’s magazine accurately reflects Howard Marks’ thinking.
Marks’ latest full-length memo (he is famous for his memos) seems to be a LOT more cautious and a LOT less sanguine about markets, especially debt markets, than the above headline. That memo, published on January 7, 2013, is titled… Continue reading
JME reflects on a conversation he had with Seth Klarman at a wedding. I love that he uses the term “genuine” value investors to distinguish them from the imposters. I have been using the term “true” value investors, but I may switch (and, yes, there are many imposters).… Continue reading
Jason is a favorite columnist of mine in part because of his affinity to Ben Graham and value investing, and in part because he is a great guy. His Saturday column, The Intelligent Investor, named after the Graham book that Buffett says changed his professional life, is must reading. But, Jason is a bigger fan of indexing than I am, so it is interesting that his latest column… Continue reading
Better late than never. I have updated the equity market annual return histogram for the 16.00% total return generated by the S&P 500 index in 2012.
As Michael Mauboussin says, when understanding an investment idea, we should try take an outsider’s big-picture view in addition to our own expert view of the minutiae of the idea. I first came across the equity market return histogram a few… Continue reading
Robert A. Haugen passed away Sunday, January 6, 2013 and I did not discover that until now. Haugen is perhaps best known for his book The New Finance in which he summarized important academic studies that proved that markets were not efficient all of the time and that its inefficiency could be exploited by value investors. Haugen then made the following analogy with respect to the… Continue reading
Jason is correct that many investors who place their capital with value investing firms will not stay with the firm long enough through multiple cycles in order to capture the value premium. Paradoxically, that is part of the reason that the value premium exists; when many abandon the strategy for greener pastures, such as now when markets rise regardless of fundamentals, it actually creates opportunities for patient, disciplined value investors… Continue reading
According to behavioral finance theory, Loss Aversion causes investors to sell winning investments quickly in order to “lock in” gains and to hold on to losing investments in order to get even, regardless of the underlying fundamentals, changes in circumstances, or overall merits of each investment. University of Chicago researchers have discovered that we lessen Loss Aversion’s affects when we think in a foreign language.
The… Continue reading
