December was a brutal month for the stock market. Here are the daily returns through Christmas Eve (losses of 1% or worse in red): Not only was the S&P 500 down almost 15% for the month at this point, but it was in the midst of a bear market that began in late-September: Then a…
The Joke Should be the Outlier
“I’m a contrarian.” – Everyone Sportscenter was by far my most watched show growing up as a youngster. I would watch the same episode five times a day and wait patiently for a specific highlight or the Top 10 at the end of the show. I even loved the commercials about the show: …
Edges That Won’t Go Away
One of the most frustrating parts about the markets is the fact that edges tend to be ephemeral. Strategies that worked beautifully in the past can stop working from increased competition, changing market dynamics or more informed investors. I wrote about this idea earlier in the week using legendary investor and gambler Ed Thorp as an…
Animal Spirits Episode 69: Denominator Blindness
This week’s Animal Spirits with Michael & Ben is sponsored by YCharts: Mention Animal Spirits and receive 20% off your subscription price when you initially sign up for the service. We discuss: Flipping your home using Zillow How accurate are Zillow’s house price estimates? Why auto loans are not the canary in the coal mine Why everyone wants…
First Mover Alpha
Ed Thorp is arguably the best investor who never gets mentioned on the lists of history’s best investors. The investment strategies he developed at Princeton Newport are widely copied today but were new and innovative at the time. A researcher at his firm stumbled across the idea for statistical arbitrage in 1979, a strategy employed by…
Auto Loans Are Not the Next Subprime
The latest macro worry from the past week deals with auto loans. According to the Federal Reserve Bank of New York there are more than 7 million Americans who are 90 or more behind on their car loan payments. That’s a million more people than at the end of 2010. This has led a number of…
What’s Up With My Tax Refund?
A reader asks: I’ve seen a number of social media and other reports about people being upset that their tax refund was lower than in previous years. I haven’t seen any analysis around whether this was just a withholding issue or their total tax actually went up. Do you have any data on this? I’ve seen…
The Dreaded Earnings Recession
Earlier this week, Morgan Stanley equity chief Mike Wilson told CNBC an earnings recession has arrived and the market is not ready for it: “We are increasingly convinced that consensus earnings expectations for 2019 have further to fall and that the optimistic uptick currently baked into fourth-quarter 2019 estimates is unlikely,” Wilson wrote Monday. “A modest…
Animal Spirits Episode 68: The Rich Man’s IRA
This week’s Animal Spirits with Michael & Ben is sponsored by YCharts: Mention Animal Spirits and receive 20% off your subscription price when you initially sign up for the service. We discuss: Why is money flowing out of SPY? How can index fund firms differentiate themselves? Should you decrease the number of stocks you own at the outset…
How to Wreck a Pension Plan in 3 Easy Steps
It’s hard to find many investment books since the turn of the century that don’t include the research paper from Roger Ibbotson and Paul Kaplan called Does Asset Allocation Explain 40, 90, or 100 Percent of Performance?1 The study was meant to decipher whether it was asset allocation or market timing and security selection that…
