Category Archives: Strategy

The Consequences of Concentration: 3 – Higher Costs

Some active managers argue that the remedy for widespread active underperformance is more aggressive, more concentrated portfolios.  If this is the correct prescription, it has a number of adverse side effects — for example, risk is likely to increase, and the relative importance of skill and luck in decision making is likely to shift in luck’s favor. A Read more […]

Party like it’s 2007

House sales and prices are rising.  Home sales in June were 5.57 million at annual rates, the highest since February 2007 when national home prices peaked.  Currently prices as measured by the S&P/Case-Shiller National Home Price Index are climbing at a 5% annual rate and are a mere 3% from their all-time peak. What next?  Read more […]

The Consequences of Concentration: 2 – Luck Ascendant

Is the remedy for active managers’ well-known performance difficulties to become more active? Some observers think so, and argue that less diversified, more concentrated portfolios should be the wave of active management’s future.  But there are a number of adverse consequences to concentration — for example, risk is likely to increase.   A second consequence is that in manager Read more […]

Credit Cards and Retail Sales

This morning’s release of the S&P/Experian Consumer Credit Default Indices showed that default rates for bank cards – such as VISA, MasterCard or others – climbed year to date while other categories of consumer borrowing such as mortgages and auto loans did not. Even though the bank card rate at 3.11% is 61 basis points Read more […]

The Usual Suspects

Yesterday’s close brought the S&P 500 to another new pinnacle – the seventh new high reached since June 30th, when the market surpassed its previous peak from July 20, 2015. In the context of the market’s recent bullish run, a number of commentators have remarked on the surprising outperformance of defensive strategies and sectors. But Read more […]

The Consequences of Concentration: 1 – More Risk

Most active managers fail most of the time, at least if we regard their underperformance of passive benchmarks as indicative of failure.   This fact is so well known and widely documented that even staunch advocates of active management acknowledge it. What remains in dispute is what should be done to improve performance.  Some argue that active Read more […]

Remember Inflation

This morning’s CPI report for June looked like the last few reports showing inflation at about one percent in the last 12 months. However, beneath the surface things are shifting around and giving hints that a year from now prices could be noticeably higher than they are today. A modest rise in inflation over the Read more […]

Bouncing Off Brexit

After yesterday’s record close for the S&P 500, memories of last month’s Brexit panic seem far away.  (In fact the U.K. referendum to leave the European Union took place only 19 days ago as of this writing.)  In the immediate aftermath of the referendum, global markets fell sharply, while low volatility indices mitigated the impact of the Read more […]

Indicizing Income

This morning’s Wall Street Journal described one aspect of the “Brave New World” occasioned by ultra-low (or negative) interest rates: Tellingly, strategists at Citigroup have created a basket of stocks for what they call “bond refugees”—investors who want yield but without the big swings in prices associated with equities. To do so, they looked for stocks Read more […]

Looking at the Low Beta and Value Legs of the S&P GIVI® Japan

The spread between the returns of the S&P GIVI Japan and its benchmark index, the S&P Japan BMI, comes from three sources: the excess return of the S&P Low Beta Japan Index; the excess return of the S&P Intrinsic Value Weighted Japan Index; and a residual effect that comes from the sequential approach to the Read more […]