Alibaba, Hedge Funds and Transparency

Alibaba appears to have seized the 2014 prize for the biggest IPO price jump – from $68 to $93 on the first trade – as well as driving more speculation about its possible membership in the S&P 500 than anything since Facebook.  Unlike Facebook, Alibaba is a Chinese company and is not eligible for membership in the S&P 500.  (It is likely to find its way into various S&P and Dow Jones Chinese stock indices at some point.)  In response to the questions about the S&P 500, S&P Read more [...]

What Ails Housing Starts

August housing starts, reported today, were disappointing at 956,000 units, a drop of 14.4% from July and 8% from August last year. Only twice this year have monthly reports of housing starts topped a million units at annual rates – from 1991 to the financial crisis in 2008, starts were never below one million.  To a large extent building houses hasn’t recovered from the financial crisis. If one uses the average number of houses started from 1995 through 2004 as a pre-boom-bust normal measure, Read more [...]

Keep Calm and Understand Scotland’s Oil Impact

Will Scotland vote to become independent? That's a big question, especially for the future of commodity indices.  This is since one of the largest commodities in the indices is Brent crude oil - the oil produced in the North Sea off of Scotland's coast.  If Scotland separates from the United Kingdom, there may be consequences for the oil that is the arguable benchmark of the world.  According the Intercontinental Exchange (ICE), since March 2012, ICE Brent has been the world’s largest crude Read more [...]

How Big is the Pan Asia Bond Market?

The S&P Pan Asia Bond Index tracks the performance of the local currency bonds in the 10 Pan Asian countries. The market value tracked by the S&P Pan Asia Bond Index has expanded three fold to USD 6.7 trillion since the index’s first value on Dec. 29, 2006. This rapid expansion warrant some attention as it is compared with the total size of the global debt securities, which is estimated to be over $90 trillion, according to the Bank of International Settlements.^ If we look at the market Read more [...]

Picking Factors Beats Picking Winners

If you were to ask a few commodity experts what is going on with precious metals (like an attendee did at our 8th annual commodities conference), the answer is long-winded since the story is different for each commodity.  A few years back, the answer was far more simple where it depended on the RORO environment that overpowered supply and demand models of individual commodities and spiked correlations. The quantitative easing caused all the commodities to move together, and the excess inventories Read more [...]

Benchmarking target date funds (TDFs) with market-driven indices ≠ performance chasing.

At their core, TDFs are professionally managed asset allocation policies. Questions therefore naturally arise around how (or even whether) they should be benchmarked with market indices. The investor(s) on whose behalf a particular policy is undertaken may have highly subjective criteria for success that have very little to do with outperforming market benchmarks. For example, if I have a specific goal toward which I earmark some assets, in any given year I probably care more about making progress Read more [...]

Market Myopia

As investors, we necessarily rely on history.  How we analyse that history is particular to each investor – some will look for technical patterns, some at fundamental data, still others will build quantitative models.  But all of us need data, and history is our only source. We may have to rely on history; we don’t have to fall prey to what the behavioural economists would call “recency bias.”  Indeed, taking a longer-term view can provide invaluable perspective.  Two popular views Read more [...]

SPIVA U.S Scorecard: Measuring the Effectiveness of Passive Equity Investing in the US

The SPIVA U.S Scorecard, published twice a year, is a de facto scorekeeper of the active versus passive debate. It measures the performance of the actively managed domestic equity funds across the various market capitalizations and styles. The results for the 2014 mid-year Scorecard are in and reveal very few surprises. Here are some of the key findings: The past 12 months have been quite a bullish ride for the domestic equity markets. The S&P 500®, S&P MidCap 400® and S&P SmallCap Read more [...]

Five-Year Itch in the Condo Market?

In a prior post, we analyzed the holding period of single-family homes using the S&P/Case-Shiller Home Price Index Series. We quantified the holding period with the rolling return for each period in question—10-, 7-, 5- and 3-year holding periods. In this post, we use the same holding period concept to look into whether the condo market behaves differently than the single-family homes market and assess whether the same pattern holds across the different cities. The cities investigated are Boston, Read more [...]

Beware The Bear: Turning Points Indicated By Mean Reversion

What a difference a summer makes. While many of us enjoy perfect weather, it is a nightmare for a long-only investor in agricultural commodities. Further, the drop in energy from easing supply disruptions in the middle east and slowing demand from China and the Eurozone have caused the Dow Jones Commodity Index (DJCI) to lose 7.3% in the third quarter and the S&P GSCI to lose 8.5%. This is a stark contrast from the first half of the year where the DJCI gained 5.4% and the S&P GSCI gained Read more [...]