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Growth Style Returns Dominating Value Style Returns

 June 13 2017     David Templeton
Over a long enough period of time, value stocks tend to outperform growth stocks and this fact is causing some pain for the value oriented investor during this market cycle. In a Fidelity article that compares value versus growth performance, this has indeed been the case when going back over 25 years. The Fidelity article shows, however, that on a risk adjusted basis the growth style wins out. Th...

Investing for Cat People

 June 12 2017     Matt Woebkenberg
Factor investing has become very popular in the financial world.  It is basically rules based investing where trades are determined entirely by pre-determined factors.  For example, some value funds will buy if the P/E (Price to Earnings Ratio) drops below a certain point and sell once it rises above a certain point.  One Bloomberg columnist recently took this concept and did what the internet doe...

Friday Financial Terms: Mortgage-Backed Security (MBS)

 June 9 2017     Matt Woebkenberg
Mortgage-Backed Securities got a lot of publicity/blame in the housing crisis because they enabled the bubble to grow much larger than it otherwise would have.  It is interesting, however, to remember that they came to exist as a simple solution to a consistent problem.  While it is easy to blame the proliferation of the Mortgage-Backed Security for the financial crisis, I would rather use this bl...

Delayed Gratification

 June 8 2017     Matt Woebkenberg
Apologies to our regular readers for missing a few days of posts.  But have no fear...I'm going to make it look like I did that on purpose!  Today we are going to talk about delayed gratification.  Our regular readers who waited out the painful days with no posts exhibited a great tolerance for delayed gratification.  These readers will have better lives than those who couldn't handle the wait and...

NIPA Earnings Weakness Leads IBES S&P 500 Earnings Weakness

 June 7 2017     David Templeton
The equity market seems to know only one direction and that is up. The result of this type of pattern has been a downward trend in volatility with the VIX trading at a near single digit level. One characteristic of a low VIX reading and a higher trending market has been the absence of any significant equity market pullback. As Urban Carmel, author of The Fat Pitch blog notes,"SPX [S&P 500 Index] h...

Changes to Asset Allocation

 June 6 2017     Matt Woebkenberg
Diversification is great.  Everyone knows that.  Diversification acts as a stabilizer in your investment portfolio.  When some asset classes are suffering, others outperform.  This prevents dramatic declines in the value of your portfolio.  One of the first steps to investing is to set up a diversified strategic asset allocation that you believe will help you achieve your goals over the long run. ...

Business Succession Planning or Lack Thereof

 June 5 2017     Anna Pfaehler
I spent nearly a decade working in a sleepy suburb of New York City. The local diner was a go-to for many a work lunch outing. In standard diner fashion, the menu was huge. It had over 40 salads, we counted once. Often there was decision paralysis when ordering lunch – do I want the one with brie and grapes or should I go for the classic Greek? Luckily, the stakes were low and if you had lun...

Equity Market Climbing The Proverbial Wall Of Worry

 June 2 2017     David Templeton
The individual investor continues to express concerns for stocks when looking at their sentiment response. Yesterday's Sentiment Survey report from the American Association of Individual Investors showed a nearly six percentage point decline in the bullish sentiment reading to 26.92%. This pushes the bullishness reading one standard deviation below the average bullishness reading.Confounding inves...

Friday Financial Terms: Behavioral Finance

 June 2 2017     Matt Woebkenberg
Much of traditional finance is built on the assumption that people are rational.  For simple academic finance to be correct, all financial market participants must act rationally in their transactions.  This does not happen.  Investors routinely act irrationally, and when that happens, that presents an opportunity for savvy investors to profit.  This extra profit opportunity in excess of the marke...

Know What You Are Buying

 June 1 2017     Matt Woebkenberg
I've got a deal for you.  You give me $290, and in exchange, I will give you $200.  In fact, I will let you take this deal as often as you want.  We can trade over one hundred thousand times a day if you so choose.  Shockingly, I have not yet had any takers on my offer.  But, this is an actual deal that exists in the marketplace.  It is the Bitcoin Investment Trust (Ticker: GBTC).The Bitcoin Inves...
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