Ben Carlson

Is Wall Street’s Ex Machina Moment Coming?

There’s a great scene in the movie Ex Machina where genius inventor Nathan describes how he was able to crack the code for creating artificial intelligence in a robot. (Not sure if this is a spoiler alert, but if you haven’t seen the movie yet and want to go in blind, skip this next paragraph.)…

Did We Just Witness the Best Risk-Adjusted Returns Ever?

Risk-adjusted return measures have been around for some time now, but following the financial crisis professional money managers and asset allocators zeroed in on these formulaic performance metrics like never before. One of the most well-known risk-adjusted return formulas, the Sharpe Ratio, is simple a measure of return per unit of risk. It takes the annual…

A False Sense of Security

Over an 18 year period Bernie Madoff claimed to offer his investors annual returns of nearly 11%, not too far from the average long-term gains in the stock market. The crazy thing about Madoff’s Ponzi Scheme was not that he was offering outrageously high (fake) returns to his unwitting investors. It’s that he was offering…

Unexpected Sources of Protection Against Inflation

Earlier this week I took a look at how inflation has affected market returns over the years. As you can see from the chart below, inflation has historically run in excess of 4% one out of every three years while it has been 2% or higher two-thirds of the time: The next logical question — which…

How Inflation Affects Market Returns

Isaac Presley wrote a nice market update recently on his Cordant Wealth Partners blog. He broke down stock and bond yields by comparing some real (after-inflation) and nominal indicators to show where they currently stand in relation to their historical averages and ranges.

Predicting the Next Big One

In Seeking Wisdom: From Darwin to Munger, Peter Bevelin has an interesting take on the frequency of extreme events: Statistics shows that the frequency of some events and attributes are inversely proportional to their size. Big or small changes can happen but the bigger or more extreme they get, the less frequent they are. For example, there…

Getting What You Pay For (or Not)

The investment industry can be a very backwards place in many respects. For instance, seeing the price of a product go on sale generally makes people happy and induces them to buy more of it. In the markets, when things go on sale from a market crash that’s when investors are the most scared and…

Avoiding Process Drift

We’re roughly seven months into the year and people are already starting to talk about how certain investment styles don’t work anymore. In the financial world, people act like seven months is considered statistically significant because everyone assumes that short-term trends trump all. The proliferation of a wide variety of new ETFs and mutual funds…