Longer Lives Lower Interest Rates
Ever since the global financial crisis, the real interest rates of developed economies have remained in negative territory. Nominal interest rates hover near zero, and inflation rates, although quite low for historical standards, have remained positive (in most countries, at...
Compelling Employees to Make Bad Choices
I don’t want to rehash all the reasons for my view that investors should avoid actively managed funds, expensive, complex investment products and “alternative investments” like hedge funds and private equity. If you find these investments suitable, you have every...
Predictable & Skewed Returns
There has been a lot of research recently that investigates the link between stock returns and higher moments of the return distribution, specifically the skewness of returns. This link, unfortunately, is frequently ignored by more standard measures of market risk...
When an Expense Becomes a Wise Investment Choice
Ask someone how they invest, and you’ll probably get a pretty standard answer involving stocks, bonds and maybe some real estate or cash. But rarely will people mention something that is even more important: their investments in human capital. They...
The Federal Reserve and Rising Rates
With the recent spate of positive economic news, highlighted by the strong jobs numbers for both October and November, all signs point toward the Federal Reserve raising the federal funds target rate 25 basis points from 0–0.25 percent to 0.25–0.50...
Let Go of Irrational Fears
When we talk about the chances of something bad happening, people tend to fall into three general groups. The Numbers Don’t Matter No matter the odds, this group dismisses the statistics. People insist they can trust their gut. I suspect...
Ignore Liquidity At Your Peril
Liquidity is valuable to investors. Therefore, investors demand higher expected returns for less liquid stocks. The liquidity of an asset market refers to the ability of investors to buy and sell significant quantities of that asset, quickly, at low cost...
The Market Humbles Junk Bond Fund Managers
Do you remember the scene from It’s A Wonderful Life—only the best holiday movie ever—when George and Mary Bailey are cruising out of Bedford Falls on their well-earned honeymoon, only to notice a literal run on the banks (including the...
A Game You Shouldn’t Play
It seems like almost every week a new study appears to debunk the myth of active management. This week was no exception. Robin Powell, a U.K.-based journalist and financial blogger, discussed a recent study that covered 561 U.K.-based stock funds...
Wall Street Translation: Jason Zweig’s “The Devil’s Financial Dictionary”
Jane Bryant Quinn, a highly regarded and nationally syndicated columnist, once called much of the output of Wall Street and the trade publications that cover financial markets “investment porn.” She summed it up this way: “Americans are indulging themselves in...
