Jim O’Shaughnessy on the Psychology of Investing

In a September interview on the Off the Chain podcast, legendary investor James O’Shaughnessy shared insights on human nature, psychology, and how they manifest in investing decisions. Here are some highlights: On cryptocurrency, O’Shaughnessy explained that he doesn’t know enough to be a “bull or bear.” O’Shaughnessy believes that crytocurrency, which is based on a deflationary monetary model, has some appealing aspects and might represent a store of value if it saw less volatility. But… Read More

Vinik is Getting Back into Stock Picking

In an interview with CNBC earlier this year, former Fidelity Magellan fund manager Jeffrey Vinik said he’s resurrecting the hedge fund he closed in 2013, but not just to compete with the market and other managers. This according to an article in Bloomberg. Vinik said he also intends to outsmart the computers that are giving stock pickers a run for their money. “It’s a brave move,” the article said, adding that stock pickers have demonstrated… Read More

How ETFs Work – And Why All Investors are the Beneficiaries

By Jack Forehand (@practicalquant) — Wall Street has a reputation for enhancing itself at the expense of the individual investor. And that reputation is well deserved. It has been very common throughout history for firms on Wall Street to develop products whose primary goal is to make money rather than adding value for the investors who purchase them. So if you are looking for someone to defend the practices of Wall Street, I am not… Read More

Robert Shiller On What Investors Should Be Worrying About

At the Inside ETFs conference in Florida last month, Yale professor and Nobel laureate Robert Shiller talked about an impending recession, the threat of nuclear war and the importance of human narratives. This according to an article in Advisor Perspectives. Here are some highlights: Shiller characterized a recession as “inevitable” but didn’t pinpoint timing. “There has to be an elevated probability of a recession this year or next year,” he said, noting that the current… Read More

Charlie Munger Trusts Only Two Men with His Money

At the annual meeting of the Daily Journal Corporation in February, board chair Charlie Munger said that there is only one person, other than partner Warren Buffett, that he trusts with his money. This according to an article in Quartz. That person is Li Lu, founder and chairman of Himalaya Capital, a Seattle-based fund focused on investment in China. According to the article, Munger and others have called Li the “Chinese version of Warren Buffett.… Read More

A $3 Trillion Tsunami Looms

An article in MarketWatch warns that the mountain of corporate debt coming due by 2023—$3.3 trillion, representing 48% of all current outstanding commercial debt—could spell bumpy road ahead for the stock market. The article cites comments from industry veteran and Heartland Advisors chief executive Will Nasgovitz: “with interest rates low, the economy strong, and relatively easy lending standards, the thinking went that borrowing to buyback shares or finance acquisitions was a low-risk strategy. But the… Read More

A Hedge Fund Performs by Staying Small

Managers of the Netherlands-based Plethora Precious Metals Fund say that the “key to getting monster-sized returns in mining equities is to be small,” according to an article in Bloomberg. Compared to fund giants like BlackRock and Vanguard, Plethora’s $20 million in assets is small, but the fund isn’t looking to get bigger. The article reports that the fund invests in young mining exploration companies, mostly in gold. Its founder, Peter Vermeulen, said in an interview,… Read More

Lessons from a Quantitative Investing Conference – Part Deux

By Jack Forehand (@practicalquant) Last week, I had the privilege of attending Alpha Architect’s annual Democratize Quant conference for the second time. The conference brings together leaders in the fields of quantitative investing and asset management to talk about the state of the business, and to share ideas to help all of us learn and improve our investment approaches. Given how good last year’s conference was (my summary of that is here), they were going… Read More

Cost of Smart Beta Leads to Distorted Investor Expectations

An article in CFA Institute reports that, although academic research has touted the benefits of “smart-beta,” investing, this research “largely ignores transaction costs that reduce returns significantly.” The article offers data reflecting the “flood” of academic papers on factor investing, “which provides the theoretical foundation of smart beta allocations,” but adds that creating factor portfolios in academia is “very different from building investable smart beta exchange-traded funds (ETFs).” This is due in large part to… Read More

Investor Options When Star Manager Leaves

Using the example of Henry Ellenbogen’s departure from T. Rowe Price at the end of this month, an article in Barron’s speaks to whether investors should “take your money and run” when a star manager leaves. Although Ellenbogen is working toward a smooth transition with his successor, Josh Spencer, the article notes that “manager changes do pose risks to investors. For one, a new stockpicker may not execute the fund’s strategy as effectively.” Of more… Read More