Bidder Wins Lunch with Warren Buffett for $3.3 million

The annual charity auction for lunch with Berkshire Hathaway CEO Warren Buffett raised $3.3 million from an anonymous bidder, up from $2.6 million last year. This according to a recent article in The Wall Street Journal. The event has raised more than $25 million for the San Francisco charity Glide (a cause favored by Buffett’s first wife Susie), which offers free meals, health care and other services to the city’s low-income and homeless people. The… Read More

Pimco Expects U.S. Treasury Yields to Peak at 3.5%

As the Fed continues to raise rates, Pimco’s Robert Mead (co-head of Asia-Pacific) says U.S. 10-year Treasury yields will stay in the 3 to 3.5% range for the rest of the year. This according to a recent Bloomberg article. At the Bloomberg Invest summit in Sydney, Australia, Mead said the higher yields represent an opportunity for investors over the long term. The negative correlation between bonds and stocks, he said, offers diversification and volatility-adjusted returns.… Read More

How Companies Fool Investors with Profits Fad

Companies may be worth less than investors think, writes columnist Jason Zweig in a recent Wall Street Journal article. Zweig explains that investors look to earnings-per-share to assess corporate profits and that, over the past twenty years, companies have devised “newfangled” measures of such as Ebitda—earnings before interest and taxes, depreciation and amortization. He argues that this modified measure of cash flow can be misleading. “This charade,” says Zweig, “is meant to flatter profit by… Read More

Indexing Will Fail Investors in Coming Decade

A recent article in MarketWatch argues that equity investors are facing market conditions which will “no longer deliver acceptable returns”, even for index investors. “A fundamentally different, outside-the-box approach to investing will be required,” it says. Here are the reasons outlined, which “have the potential to create conditions resembling a perfect storm”: The current “debt super-cycle” is ending—servicing higher levels of debt ties up increasing amounts of capital which, the article argues, could otherwise be… Read More

CEO Pay and Performance Often Mis-Matched

“The best-paid CEOs don’t necessarily run the best-performing companies,” according to a recent article in The Wall Street Journal. The article explains that, although corporate boards try to link top management compensation to performance, the two “often don’t match up, and 2017 was no exception.” It cites data (from MyLogIQ LLC and Institutional Shareholder Services) showing that among S&P 500 CEOs who received raises last year, the 10% who got the highest bumps scored “in… Read More

Factor Performance in First Quarter

A recent article in Advisor Perspectives provides an overview of the performance of various factors in the first quarter of 2018. Noting several developments that led to increased market volatility (including tighter U.S. monetary policy and trade tensions), the article outlined the following points: Growth, small size and momentum factors were the best-performers in the first quarter. “Many investors expected tax cuts to benefit smaller stocks, which were viewed as less likely to be affected… Read More

Common Mistakes in Factor Investing

By Jack Forehand (@practicalquant) —   With the release of Michael Batnick’s new book “Big Mistakes: The Best Investors and Their Worst Investments” last week, the topic of mistakes in investing has been front and center on Twitter and on investing blogs. Many investors view mistakes as a topic they want to avoid. Most of us don’t want to admit when we’re wrong and we certainly don’t want to revisit it in the future and bring back… Read More

Buffett’s Proposed $3 Billion Uber Deal Crumbled

Berkshire Hathaway CEO Warren Buffett reportedly proposed investing $3 billion in Uber Technologies earlier this year, but disagreements over terms took the deal off the table. This according to a recent article in Bloomberg. The proposed agreement, the article reports, offered terms similar to those presented to Goldman during the financial crisis– a convertible loan that would protect Buffett’s investment should Uber hit hard times, along with significant upside if the ride-hailing company continued to… Read More

Rob Arnott on Indexing

A recent article in Barron’s outlines recent research by “modern-day Socrates” Rob Arnott, founder of Research Affiliates, which suggests “index-fund managers are willfully ignoring low-hanging alpha—the ability to beat the market—in order to slavishly hew as closely as they can to the capitalization-weighted indexes they track.” Arnott’s analysis of S&P 500 index data from 1989 to 2017 shows that the stocks added to the index underperformed those that were “kicked out” by an average of… Read More

Active and Passive Investors: Which Perform Better?

Morningstar’s director of global ETF research, Ben Johnson, recently shared research regarding the relative performance of active and passive investors with Christine Benz. Morningstar’s data on domestic equity cash flow-weighted returns for index fund versus active investors, says Benz, “makes index fund investors look pretty smart. According to Johnson, the research shows that index fund performance has a lower “return gap”—the difference between time-weighted and cash flow-weighted returns. That is, index investors set expectations for… Read More