“If every stock you own is on the new high list, you’re a momentum guy. If every stock you own is on the new low list, you’re out of business.” – Leon Cooperman Mean reversion is one of the most powerful forces in all of finance. Above average performance is eventually followed by below average performance….
My Experience with CDOs & The Real Estate Bubble
In early 2006 I was in the market for a new job. A friend from college worked for one of the largest banks and asked if I’d like to interview for a spot in his group.
Would a Repeat of the 1987 Crash Really Be That Bad?
“The intelligent investor realizes that stocks become more risky, not less, as their prices rise, and less risky, not more, as their prices fall.” – Jason Zweig If you’re in the business of fear-mongering, one of the go-to moves to try to scare investors is to predict that the markets are looking eerily similar to…
What is a Bubble?
“The term bubble should indicate a price that no reasonable future outcome can justify.” – Cliff Asness There’s been a steady stream of bubble talk since the financial crisis. Everything that goes up in value ends up being called a bubble — stocks, bonds, gold, IPOs, biotech, Silicon Valley, etc. Most investors seem surprised more…
An Education From Guy Spier
“I’m trying to manage myself, not just my portfolio.” – Guy Spier
Enduring Lessons From the Financial Crisis
When asked what people would learn from the financial crisis, GMO’s Jeremy Grantham replied: In the short term a lot, in the medium term a little, the in the long term, nothing at all. That would be historical precedent. As they say, we don’t want to let a crisis go to waste. Here are some…
Mutual Funds From Good to Great
“The paradox of skill says that when the outcome of an activity combines skill and luck, as skill improves, luck becomes more important in shaping results.” – Michael Mauboussin I recently wrote a post about how size is the enemy of outperformance. My main point was that extreme levels of outperformance become nearly impossible to pull…
Excuses for Underperforming the Market
Earlier this month the Wall Street Journal posted an excerpt from a letter written by a hedge fund manager to his investors stating the reasons (see also: excuses) he had to close down his fund. Here’s part of the rant: Post-2008 monetary policies have rewarded the beta investor who’s gone “all in” on market risk and themes,…
How Often Do Stocks and Bonds Decline at the Same Time?
Earlier in the year many investors were under the impression that something had to give because stocks and bonds were both rising. I looked at the historical data on positive stock and bond returns to show that this is more common than most investors assume: Since performance has been so strong in both stocks and bonds…
How to Preserve Capital During a Bear Market
A few weeks ago I took part in a webcast with MarketWatch on long-term investing that was partly spurred on by a post I wrote about my idea for a TV show about investing. MarketsWatch’s Victor Reklaitis ran the show while I was joined by Tim Strauts from Morningstar and Chuck Jaffe of MarketWatch to…