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Using Factors To Weather Storms

Date13 Oct 2014

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Today we’ll take a look at how the size and value premiums performed in 12 recessions, identified as such by the National Bureau of Economic Research, occurring in the post-World War II era. During that period, the average length of a recession was 11 months. Size Premium While the size premium from 1926 through 2013...

The Real Danger In Overstating Returns (Like PIMCO)

Date13 Oct 2014

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As if PIMCO needed any more bad press, The Wall Street Journal reported this week that the Securities and Exchange Commission is investigating whether the bond giant “artificially boosted the returns of a popular fund aimed at small investors.” While we should all be attentive to the results of this probe—because I’d bet my lunch...

What Predictions by Economists Can Teach You About Investing

Date13 Oct 2014

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An interesting article in Bloomberg noted that the recovery in this year’s Treasury market has been stronger than the rally predicted by every economist they queried in a recent survey. In mid-August, Bloomberg contacted 66 economists for their Sept. 30 forecasts on the 10-year yield for Treasury bonds. The 10-year yield closed on Aug. 28...

Problems With Technical Analysis

Date13 Oct 2014

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There is a wide body of evidence demonstrating the existence of momentum not only in stocks, but across asset classes. There’s also evidence that moving-average indicators provide higher risk-adjusted stock returns in recessions. On the other hand, while major data vendors, such as MarketWatch and Bloomberg, report daily on technical market indicators (for example, advance...

3 Contrarian Views About Investing

Date13 Oct 2014

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I am sometimes described as “contrary.” Actually, the more commonly used terms are “opinionated,” “arbitrary” and “judgmental.” There may be varying degrees of truth to all of them. Today, however, rather than temper or minimize my “contrarian” views, I’ve decided to embrace them. Some of the statements I’m told fall into this category are: 1....

Being Mindful Can Help Guide a Decision

Date13 Oct 2014

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We’re really good at telling ourselves stories. One story I told myself for a long time was that I needed to buy a lot of books. It’s my job to be on top of things, so I’d go to Amazon, read a sentence or two of a review, and buy the book. Over time, this...

Bonds And Premiums

Date13 Oct 2014

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Today we’ll turn our attention to the two risk premiums that help explain the performance of bond portfolios—term and credit. Unlike with the value premium, there’s no debate about whether these two factors earn premiums based on risk. They are not anomalies created by behavioral errors. The data covers the same 87-year period, 1927-2013, that...

Why it doesn’t pay to chase fund performance

Date06 Oct 2014

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One of the most important investment decisions you make is in determining your asset allocation, or how you choose to divide your assets between risky and safe investments. Another key decision concerns which strategy to use when selecting the funds to implement your asset allocation plan. Should you be a buy-and-hold investor? Or should you...

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