One of the biggest problems with the way many financial firms operate is that they prescribe before they diagnose. They first create a product or portfolio and then try to convince people to invest in it. They try to make a sale without first gaining an understanding of their potential client’s circumstances. It’s completely backwards….

In nearly every heist movie from the 80s and 90s, the bad guys would always talk about stealing enough money to find a place on the beach and live off the interest. Here’s a classic from Hans Gruber in Die Hard (h/t Meb Faber): “Sitting on a beach, earning 20%” isn’t going to happen these…

Earlier this year Michael Santoli asked a number of bloggers what we ‘know’ about investing but can’t prove with stats. This was one of my responses: Supremely intelligent investors are well suited to run a fund but not an entire portfolio. I’d rather have an Ivy Leaguer run a hedge fund for me than a portfolio….

Investors have been nervous about the possibility of rising interest rates for a number of years now. Since bond prices fall as interest rates rise, this possibility has many investors worried about their exposure to interest rate risk. A common refrain on reducing this risk that I have heard many times over the years goes…

There was a scary chart flying around a couple months ago showing how basically no asset class was working for investors. These numbers, provided by James Picerno at The Capital Speculator, showed that every major asset class or category showed a negative one year return through early September: This was pretty crazy — stocks, bonds…

The Ivy League endowment funds are some of the most closely watched institutional funds in the world. Whether they’re equipped or not, nearly every other institutional quality fund is trying to replicate what the best and brightest Ivies are doing in their portfolios. With this spotlight comes praise, but also scrutiny.

The investing cycle of good ideas goes something like this: Early adopters find an anomaly and exploit it for huge gains. More and more smart money begins to figure out this apparent loophole and competition means lower profits to go around. Next come the academics with their research papers that get published in the trade…

Last week I talked to a group of college students in a portfolio management class at one of the local universities here in Michigan. The topic was open-ended so I wanted to share with them a few of the things I wish I would have learned in school that weren’t taught or apparent to me…

I’d say once a month for the past 4-5 years I’ve seen some variation of the following prediction: We think there is now an increased risk for the possibility of an event similar to the 1987 Black Monday crash that saw stocks fall 20% in a single day. Here’s a prediction you will never see…

Last week I shared some of my thoughts on hedge funds. In a follow-up to that piece I want to discuss some of the reasons that institutions and wealthy individuals allocate money to hedge funds. I’m not so much concerned with Sharpe Ratios and non-correlated returns. What fascinates me most about the investment business is…