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New Rule: All Purchases Subject to a 7-Day Mental Quarantine

Date18 Jul 2016

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My wife and I are setting up a customs screening station in our driveway. No, we’re not starting an international airport. And it’s not for solicitors, strangers or gift-bearing guests. It’s for us and our stuff. From now on, before anything new comes into the house, resident buyers will need to answer a series of...

2016’s ‘Best City In The World’ Goes To…

Date18 Jul 2016

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Charleston, South Carolina. According to Travel + Leisure magazine, “Charleston is a remarkably dynamic place, so it’s no surprise that it has achieved its highest ranking ever in our survey as the year’s best city in the world.” It’s the first time a U.S. city has received the top honor, but Charleston ranked No. 2...

Mispricing Drives Value Premium

Date18 Jul 2016

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There’s extensive literature documenting that value stocks (the stocks of companies with low prices relative to a valuation metric, such as earnings, book value, cash flow or sales) possess a strong, persistent and pervasive tendency to outperform growth stocks. While there’s no debate about the existence of the value premium, there’s a major debate about...

When False Factors Are Exposed

Date18 Jul 2016

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The world of finance and asset pricing used to be fairly simple. At first, there was just the single-factor capital asset pricing model, with market risk (beta) as the sole factor to explain the differences in returns of diversified portfolios. Over time, the working model evolved into a still relatively simple four-factor model, adding value,...

Hope Deferred Makes the Heart Sick

Date18 Jul 2016

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“Hope deferred makes the heart sick, but a longing fulfilled is a tree of life.” So reads a Solomonic proverb penned in the 10th century B.C. Consider with me, however, a contemporary application of this ancient wisdom, especially in the realm of personal finance. Hope Deferred “We’ve got to apologize, Tim,” said a financial planning client...

Looser Regulation Harms Pension Returns

Date11 Jul 2016

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Defined benefit (DB) pension funds promise retirement benefits dependent upon an employee’s earnings history, tenure of service and age. When a DB pension fund is underfunded (when asset values are lower than the value of their liabilities, or the promised pension benefits), conflicts of interest can arise. This conflict can occur because a reported funding...

No, Really: Just Ignore Day-to-Day Stock Market Fluctuations

Date11 Jul 2016

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Early Friday morning, a friend texted me. Here’s what he said: “Will you come talk to my co-workers?! They are talking about stopping their 401(k) contributions because of what’s going on! Driving me nuts!” Still not quite awake, I replied, “What?” Within seconds, he replied, “Stock market fell 500 points this morning, Carl! It’s all...

Fama and Booth Weigh In On Brexit

Date11 Jul 2016

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When news of the Brexit vote broke, the financial media went into an overdrive of speculation bordering on hysteria. There was much talk about potentially devastating scenarios, including “turmoil“ to global markets. One investment “pro” counseled investors against buying stocks because “the Brexit selling is not over.” Read the rest of the article at The...

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