Corporate Debt and the Next Recession

A recent Bloomberg article features a debate between columnists Nir Kaissar and Noah Smith on whether U.S. companies have accumulated too much debt and whether it represents a risk to the economy. Here are some highlights: According to Smith, Bloomberg News data showed that “a lot of companies are so leveraged that they would have a junk label if credit raters weren’t being lenient.” “I don’t see much in companies’ financial statements to be alarmed… Read More

The Quest to Quantify Investing’s Culture

After decades of study, the firm Willis Towers Watson has built a framework to quantify corporate culture that includes more than 20 factors, according to a recent article in Institutional Investor. “In practice,” the article says, “it means interrogating organizations the same way consultants have always interrogated track records.” Nimish Srivastava, the firm’s global head of credit, meets with scads of asset managers annually, the article reports, “trying to determine who’s worthy of WTW’s clientele.”… Read More

Rotation from Growth to Value Might Not Be Imminent

Although some investors are making the case that “stock market leadership should be passing from excellent-but-expensive growth stocks to cheaper value stocks more tied to a strong U.S. economy,” any lasting rebound of value is likely to require a “period of tougher overall market performance for a good while longer,” says a CNBC article. The article asserts that growth stocks represent too large a share of the market to “retreat quietly while value moves to the… Read More

Active Bond Managers are Beating the Market

When it comes to bond funds, says a recent article in The Wall Street Journal, “bargain shopping may not be the best idea.” Higher-priced portfolios assembled by active money managers, it reports, are “handily beating the cheaper index-tracking competition, largely because they are doing a better job protecting their portfolios from rising interest rates.” Citing Morningstar data, the article notes that 70% of fund managers who choose intermediate-term bonds are outperforming their passive peers, adding,… Read More

Learning from the Hierarchy of Investor Needs

By Justin J. Carbonneau (@jjcarbonneau) —  The original “hierarchy of needs” model was developed by Abraham Maslow in 1943. Maslow proposed the hierarchy as a way to understand human motivation and later extended it to human curiosity. The hierarchy can be viewed as a pyramid with layers, which included things like “physiological,” “safety,” “belonging and love,” “esteem,” and “self-actualization”. Each part builds off the one below, and before one could move up the pyramid the… Read More

Most Read on Validea’s Guru Investor

Below are links to our most popular posts for this week on Validea’s Guru Investor blog.- [1] The Benefits of Base Rates [2] Ian Cassel: Investing is Hard [3] Biology Key to Surviving Adaptive Markets, Says Lo [4] Grantham on Why the S&P Melt-Up to 3,600 Didn’t Happen ——- Photo: Copyright: arcady31 / 123RF Stock Photo  

Buffett and Cooperman Agree Luck is Key to Investing Success

“Whatever success I’ve achieved, I think I’ve achieved it because I’ve been very lucky,” said founder and CEO of Omega Advisors Leon Cooperman in an October interview on CNBC. Cooperman echoes sentiment of Berkshire Hathaway CEO Warren Buffett, who has often said he was born with advantages that helped him along the way—which he refers to as winning the “ovarian lottery.”. In 2013, Buffett said, “The womb from which you emerge determines your fate to… Read More

Quants Searching for Alpha in Exotic Corners of Market

“The search for elusive alpha is sending a handful of computer-driven hedge funds trawling the remotest corners of financial markets,” according to an article in Bloomberg. A subset of these so-called commodity trading advisers (CTAs) are use a niche strategy to look for “uncorrelated returns and a little extra alpha in anything from cheese and Turkish scrap steel to obscure chemicals or eggs in China,” the article says, but warns that in the past such an… Read More

Buffett Repurchases Over $900 Million in Berkshire Stock

An article in The Wall Street Journal reports that Berkshire Hathaway repurchased $928 million in stock in the third quarter of 2018, calling it a rare move that indicated Chairman Warren Buffett sees a dearth of appealing investment options for his company’s large cash balances. This is the first repurchase since 2012, the article says, reflecting the “the scarcity of attractively priced projects and deals that can satiate yield-hungry investors and firms more than nine… Read More

Grantham on Why the S&P Melt-Up to 3,600 Didn’t Happen

In a memo in January of this year, GMO founder Jeremy Grantham suggested to clients that they “brace themselves for a near-term melt-up in stock prices that might take the S&P 500 to the 3,600 area,” according to an article in Financial Advisor. Citing a research paper published by Harvard University entitled, “Bubbles for Fama,” Grantham highlighted price acceleration as a strong indicator of bubble activity. For the three weeks following his memo, the article says,… Read More