By Jack Forehand (@practicalquant) — It is widely accepted in investing that process is more important than outcome. Investing strategies that have no long-term basis can work very well in the short-term, and strategies that have proven themselves over time can struggle for long periods of time. So the most readily available information to evaluate an investment process (short-term performance) is usually the least reliable. The balance of evaluating process vs. outcome is crucial to investing… Read More
By Jack Forehand (@practicalquant) — Value investing is full of pitfalls. It is easy to think that as a value investor all you need to do is buy cheap stocks and eventually the market will come around to your way of thinking, but that just isn’t the way things work in the real world. Many value stocks are cheap because they deserve to be. Some of them no longer have sustainable businesses, and as a result… Read More
If a U.S. recession is in the offing, analysts from JPMorgan Chase say it’s time to own Swiss francs, Singapore dollars, U.S. dollars or Japanese yen. This according to a recent Bloomberg article. The analysts, who used currency performance data from the last five recessions, said, “Recessions are when creditors get to ask for their money back,” adding, “Three of the top four currencies to own during a recession are those of countries that boast… Read More
Morningstar’s Katie Reichart recently interviewed David Herro, Manager of Oakmark International, to discuss how international investing has changed, or not, since the 1980s. Here are some highlights: Herro said that one of the biggest changes since he started his career in 1986 is “the pace at which information flows around the world.” He describes it as having both positive and negative repercussions: “I think all too often people may react too rapidly without thinking. They… Read More
When it comes to some popular investment products, people who compare Wall Street to a casino may not be too far off the mark. This according to a recent article in The Wall Street Journal. The article cites the example of one fund (Direxion Daily Financial Bear 3X Shares Fund), which “produces three times the inverse of an index of financial companies” and which posted strong gains during the financial crisis– which then quickly dwindled.… Read More
Last month, Berkshire Hathaway’s board announced that its removing a cap on stock buybacks, giving chairman Warren Buffett the freedom to dole out profits rather than continue his hunt for acquisitions. This according to an article in Bloomberg. The article reported that Buffett and Vice Chairman Charlie Munger can “now make repurchases whenever they both believe the price is below Berkshire’s intrinsic value, conservatively determined.’ ” The announcement led to a 3.9% rise in shares,… Read More
The yield curve—the difference between short-term and long-term government bond yields—is “perilously close to predicting a recession—something it has done before with surprising accuracy,” says a recent article in The New York Times. The article explains that in a healthy economy, the rate on longer-term bonds will typically be higher than that on short-term notes. “The extra interest is to compensate, in part, for the risk that strong economic growth could set off a broad… Read More
Below are links to our most popular posts for this week on Validea’s Guru Investor blog. [1] The Double Edged Sword of Avoiding Value Traps [2] Value Investing Advice from Mohnish Pabrai [3] Federal Debt on a Suicide Mission, Says Gundlach [4] Artificial Intelligence and Stocks ——- Photo: Copyright: arcady31 / 123RF Stock Photo
In a recent article for The Collaborative Fund, Morgan Housel reflects on the differences between information we retain and that which “expires” in short order. “It’s amazing how much of the information we consume has a half life measured in days or months,” Housel writes, pointing out how “expiring knowledge catches more attention than it should, for two reasons. One, there’s a lot of it, eager to buzz our short attention spans. Two, we chase… Read More
Some of the biggest commodity hedge funds are shutting down despite a rally in raw materials during the past year, according to a recent article in The Wall Street Journal. In 2017, the article reports, “closures of commodities hedge funds outnumbered launches for the first time in data going back to 2000 ” (data from Eurekahedge) and the trend has continued this year. Fund managers and traders say it’s happening because “investors who were… Read More
In an age when Wall Street seems to be “all-in on electronic training,” Credit Suisse is “taking a different approach to its trading strategy by ramping up on human capital,” according to a recent article in Forbes. Last year, the article reports, the firm hired one of Bank of America’s top traders to run U.S. cash equities training, adding that Credit Suisse’s most recent quarterly earnings showed an approximate 16% gain. “The results showed… Read More