David Einhorn Favoring Retail Over Tech

In the second quarter, David Einhorn’s Greenlight Capital sold tech stocks in order to buy retail shares, according to a public filing of its holdings as reported in a recent article in Barron’s. The article notes that the filing is merely a snapshot of the fund’s holdings at a moment in time and is therefore “an imperfect picture of Einhorn and Greenlight’s investing thesis.” But the fund’s second-quarter purchases of Gap, Best Buy, and TJX Companies,… Read More

Ritholtz: Index Funds Can Weather Cruel Markets

In an article for Bloomberg, columnist Barry Ritholtz  debates the claim that passive investors will bear the brunt of an equity slump. Specifically, Ritholtz refutes the argument presented by Times of London columnist Ian King citing the dot-com bubble-burst as evidence of “a salutary lesson to those who preach the virtues of index trackers in offering low-cost, low-risk exposure to the stock market.”  Ritholtz characterizes the argument as a “bizarre anecdote, more along the lines… Read More

Market Wisdom from Howard Marks

In a recent podcast, author Tim Ferris interviews Howard Marks to discuss the Oaktree Capital co-founder’s views on investor psychology, his new book Mastering the Market Cycle: Getting the Odds on Your Side, and macro issues related to the economy. The lengthy discussion spans Marks career, life lessons, and how to navigate an uncertain and random world. Here are some highlights: Marks emphasizes the importance of knowing your limitations as an investor. The phrase, “I don’t… Read More

Hulbert’s Observations from Tracking Investment Newsletters

A recent article in the AAII Journal outlined an interview with Mark Hulbert (of Hulbert Financial Digest) in which the MarketWatch senior columnist shared lessons learned during his years of tracking investment newsletters. Here are some highlights: One of the biggest lessons learned, Hulbert said, was that the “prospect of making money is so alluring that investors are willing to suspend all their rational faculties.” With regard to tracking the performance of model portfolios, Hulbert… Read More

Investors as Bullish on US Stocks as in January 2015

Professional investors have turned bullish on U.S. stocks, their enthusiasm “fed by an especially buoyant earnings season that is offsetting other concerns,” says an article in CNBC.com. “Domestic equities are holding the biggest portfolio weight since January 2015, according to the August Bank of America Merrill Lynch Fund Managers Survey, a look at where 243 pros who manage $735 billion are putting their money.” The pivot to U.S. stocks has occurred despite lackluster returns in 2018,… Read More

Larry Jeddeloh: New Era for Markets is Here

A Barron’s article from August outlines an interview with Larry Jeddeloh, founder of the Institutional Strategist newsletter and the research firm TIS Group, in which he shared insights regarding the risks and opportunities in what he sees as a “new era” for the financial markets. Here are some highlights: According to Jeddeloh, the Trump administration’s national defense strategy is “driving economic and trade policy. This is new.” He added that this poses significant risk to… Read More

Relative Performance of Growth vs. Value Stocks

A CFA Institute article poses the question: does the long run of growth stock outperformance suggest that value stocks must be due for an uptick? Although growth stocks have outperformed value since the end of the financial crisis, the article notes, the data could be misleading because of the “selective and short-term nature of the time frame.” If you look back to the bursting of the tech bubble in 2000, it argues, a different scenario… Read More

Economic Data Can Lead Us Astray

Short-term macroeconomic data can pose challenges for analysis of policy changes, according to an article in Bloomberg. “Every time a new macro data point comes out,” it says, “commentators rush to interpret it…Using these data points to do on-the-spot policy analysis is fraught with dangers.” The article outlines the following reasons: Government data is imperfect, since it depends on surveys that “may contain biases, noise, and incorrect assumptions.” Such data is subject to revisions, sometimes… Read More

Swedroe on Persistence in Active Investment Performance

In an article for ETF.com, Bam Alliance director of research Larry Swedroe summarized the findings published in the S&P biannual Indices Versus Active (SPIVA) reports which compare the performance of active managed equity funds to their appropriate index benchmarks. “The bottom line,” Swedroe writes, is that “there is no evidence of persistence in performance greater than randomly expected among active equity managers. Making matter worse is that a stronger likelihood existed of the best-performing funds… Read More

The Pitfalls of Back Testing

By Jack Forehand (@practicalquant) —   Active investment managers have a pretty dismal long-term record. Depending on which study you look at somewhere between 80% and 90% of managers underperform their benchmarks over the long-term net of fees. But what if I told you there was a way to turn those results upside down? What if there was a world where managers beat their benchmark 90% of the time? What if there was a world where managers… Read More