Bloomberg has an article You May Regret Staying Parked in U.S. Stocks which made the case that there’s "widespread agreement" and "the answer isn’t in dispute" that foreign stocks will outperform going forward. Simplified version of my view of that statement.... c'mon

Jeremy had spent most nights over the previous 30+ years on this earth in search of the next big ETF. After all, you don’t “aspire to be at the forefront of innovative ways for marrying the benefits of the exchange-traded fund structure with goals that are associated with active managers” by

While there have been a few cyclical periods of rising rates over the past 40 years, we've largely been in one large downtrend... meaning that it has consistently paid to own bonds vs cash / take duration risk for nearly my / many investment lives. Now that we've moved away from a zero

Over the last few years, you’ve likely heard the following competing narratives: ­ “Credit spreads are tight, a sign of exuberance among investors that are willing to overlook risk. This will end in tears.” “Credit spreads are tight, reflecting an environment of high economic growth and low

Lawrence Hamtil recently shared a Vanguard paper with me that was surprising given it indicated the trailing twelve month price-to-earnings ratio "TTM P/E" was nearly as strong a predictor of forward 10-year equity returns as the cyclically adjusted price-to-earnings "CAPE" ratio

When we tell our investors to invest for the long run, we have to make sure the short run doesn’t kill them first… Investing for the long run isn’t bad advice, it’s just unrealistic. It doesn’t take into account human behavior. -Andrew Lo (HT: Andrew Thrasher) Trend following has

What an investors pays for an asset directly impacts the forward return an investor is likely to receive. The question for any investor given today’s high stock multiples AND low bond yields globally is how much this matters not only over an intermediate time frame, but over a period potentially

GMO's latest quarterly commentary is a must read, especially the second half where Jeremy Grantham attempts to model / answer the question "Why Are Stock Market Prices So High?". His first bullet point in the whole piece provides a good summary: Contrary to theory, the market P/E

The most recent "analysis" seemingly spreading like wildfire across the perma-bear community was performed by Horizon Kinetics in their most recent quarterly commentary. Their claim is that the price-to-earnings of the Nasdaq (or any index really) is much higher than reported because we

RCM Alternatives has a great piece (HT Tadas) out outlining what the VIX is, the market for VIX related products, and how to think about volatility as an asset class. It also happens to contain my new favorite quote for anyone thinking about trading volatility: Still, if you cannot see the VIX

Quick note... for those not already listening, my buddy Patrick O’Shaughnessy has one of the (if not the) best investing podcasts out there with his podcast Invest Like the Best. Each week he sits down with some of the best capital allocators, investment thinkers, etc... in the world and really

An 18th century British nobleman, Baron Rothschild, was rumored to have made his fortune buying during the panic that followed the Battle of Waterloo against Napoleon. He is behind the often quoted saying "Buy when there's blood in the streets”, which he continued “even if the blood is

I've read too many posts / articles that outline why a rise in rates is good for long-term bond investors (as that would allow reinvestment at higher rates). While this can be true depending on the duration of bonds owned and/or for nominal returns over an extended period of time, it is

Bloomberg Gadfly's Lisa Abramowicz (follow her on twitter here) outlined in a recent piece The Credit Boom that Just Won't Die the insatiable demand for investment grade credit. Last month, bankers and investors told Bloomberg's Claire Boston that they expected U.S. investment-grade

There are instances where I "borrow" an idea from someone (actually... most of my posts were at a minimum inspired by someone else). In this case, I am stealing the initial concept from Ryan Detrick who posted the following chart of annual U.S. stock returns going back ~200 years as there

Just how perfect do circumstances need to be going forward for an investor in the S&P 500 to make money? Let's take a look at one measure. The first chart plots forward 10-year returns for the S&P 500 at various 5 point "CAPE" valuation buckets (i.e. less than 10x P/E all the

ETF Trends (hat tip Josh) showed the following "quilt" of large cap factor calendar year returns in the post Low Volatility is Not a Buy and Hold Strategy. Author John Lunt's takeaway (bold mine): It is reasonable to conclude that low volatility is not a buy and hold strategy. This is

In a recent post, Long-Term Bonds Behave More Like Stocks Than You Might Think, Lawrence via Fortune Financial fame outlined: It shouldn't be surprising that long-term Treasurys exhibit almost the same degree of volatility as equities. After all, as we discussed in A Better Way to Think of

It has historically paid to be a seller of volatility for at least two reasons... 1) Volatility is typically overpriced relative to realized volatility The chart on the left shows the VIX index (predicted volatility) relative to the forward realized volatility of the S&P 500, while the chart on

Pensions and Investments wrote about the interest pension plans have shown in put writing (seemingly one of the more misunderstood investment strategies out there) in a recent article Funds Go Exotic with Put-write Options to Stem Volatility. I thought the article did a nice job of outlining the

One of my favorite Twitter follows @LadyFOHF shared the below scatter chart from Morgan Stanley that attempted to map areas of the global market that were both cheap (valuation ranks at the lower end of its 10-year history) and defensive (a low or negative correlation to global equities). One of the

Back in December I wrote that It's Generally Smart to Avoid Credit Risk outlining that more than 100% of credit's excess performance over time has come when the level of credit spread was extreme. What if the same were true for well known investment factors? Taking a Look at the Small Cap

A hedge fund is simply a go anywhere investment vehicle that attempts to provide excess returns to cash with a low correlation to traditional asset classes (i.e. vehicles that provide alpha). Hedge funds and liquid alternatives have taken a lot of heat recently, much of it deserved, but in this post

Mar Vista Investment Partners has a really interesting research piece out The Price You Pay which has a great table outlining the benefit of an asymmetric return profile (i.e. having more market exposure during up markets than down markets). It is a mathematical truism that superior down capture in

I made a recent short-term case for bonds in a recent post given my view that low rates may be disinflationary, despite my view that they have a "horrific risk / return profile" over the longer-term. This post will highlight that what matters over the longer term is the level of inflation

Charlie Bilello, one of my favorite follows on Twitter, analyzed the relationship between market valuation and future returns (over various time horizons) in a recent post Valuation, Timing, and a Range of Outcomes. The post contained some very insightful tables, such as the one below, where he

Think only a bear market can keep returns of a 60/40 near 0%... think again. Given the huge opportunity cost of allocating to cash or bonds at current yield levels, even generally optimistic return assumptions for stocks are enough to keep portfolio level returns near 0% real. The goal of this post

My friend Ben from A Wealth of Common Sense poses the interesting question, How Should Alternative Investments Be Benchmarked? Please go read his post for a number of interesting thoughts on that topic. In this post, rather than rehash his arguments, I'll go a different direction and will try

The analysis presented below combines two separate frameworks that were previously outlined: Avoiding Bear Markets to Improve Risk-Adjusted Returns The Case for Put Writing / Further Improving PutWrite Performance The first post outlined how avoiding bear markets (by only holding equities when they

Patrick O’Shaughnessy has a great post, The More Unique Your Portfolio, The Greater Its Potential, outlining how active share is what drives the level of potential before fee excess return for an active manager. If you allocate to active managers... go through it twice. As Patrick notes: If there

Josh Brown (i.e. The Reformed Broker) recently shared the aptly titled post How to Make Volatility Your Bitch highlighting how dollar cost averaging into a volatile market can lead to higher overall returns: Door number one – you spend 15 years putting $1000 into an investment every month for 15

Ben Carlson of A Wealth of Common Sense has a recent post, When Global Stocks Go On Sale, outlining that it is typically a pretty good time to be buying when the MSCI World stock index is in a 20% or greater drawdown. His insightful takeaway and chart outlining the historical drawdowns and forward

Which investment would you prefer to invest in to diversify your existing stock allocation? Asset A with an expected: 3% annualized return 3.5% annualized standard deviation 0.00 correlation with your existing investment Asset B with an expected: -5% annualized return > 50% annualized standard

I'll leave it to others to chime in whether forward P/E's are useful or not given the fact they typically overstate earnings and I'll ignore that earnings may be at a cyclical peak (more on the latter here). As an aside, technicals in the market are filthy, as most short-term signals

I've previously outlined that high yield credit risk is typically less ideal than simply gaining credit exposure through stocks and rate exposure through bonds. Now Larry Swedroe outlines the case for avoiding investment grade credit risk altogether. There are many well-documented anomalies in

While the underperformance of high yield bonds since my post The Case Against High Yield has certainly made high yield bonds more attractive (yields went from sub 6% to north of 8%), I still prefer the risk/return profile of a stock/bond allocation (more here). For those that are looking for a

I often read that valuations don't matter over the short-term (a case often cited against market timing). Over very short periods (hours, days, etc...) this certainly may be true, but while there can be a lot of variability around month-to-month or year-to-year performance, I completely

Bull thesis: 15-year S&P annualized returns ending 9/30/15 came in at just under 4%. The average forward return since 1915 when returns were that level (or lower) was 15.5% annualized over the next 15 years with a standard deviation of only 2% Bear thesis: the 15-year starting point came when

Ben Carlson of A Wealth of Common Sense blog (and author of a great book by the same name), had a recent post Playing the Probabilities outlining that time has been an investor's best friend (for those investors that have had in some cases quite a bit of time), pointing to the following table.

I have a ton of respect for the way in which GMO manages money (their guts to be massively contrarian if that is their view) and I think their thought leadership is about as good as it gets in the industry. That said, I have long had an issue in the way in which they think about investor behavior

Most investors know of the VIX Index, but not as many understand what information the VIX provides an investor. Here is my attempt to provide an initial outline of what it is and why the information embedded within the figure is so powerful. VIX Defined The CBOE has a white paper that provides a ton

Back in August I outlined why I thought the plain-vanilla value premium had been compressed to the point growth had and was likely to continue to outperform in my post Death of (Plain Vanilla) Value - Long Live GARP. This post is meant as a follow up and suggests a few frameworks as to how an

The below analysis was purely an accident. I was actually looking into periods the U.S. stock market "suffered" a 10% drawdown for the absolute opposite reason; to show that a buy and hold investor should likely ignore these regularly occurring events. How regular? The always interesting

The WSJ blog had a recent article The VIX Market Suggests It’s Not Yet Time to Buy the Dips outlining: Typically, longer-dated VIX futures are more expensive than VIX futures expiring in the current month, as there’s a greater chance of stock swings over a longer time period. That makes for a an

Back in May, I posted A Guide to Creating Your Own Hedge Fund outlining how the application of momentum to the two worst performing funds within the Morningstar Multialternative category over the previous ten years would have provided an investor with better risk-adjusted returns than the Barclays

Jesse Livermore of the always interesting Philosophical Economics outlines the case for writing puts in his recent post The World’s Best Investment For the Next 12 Months. Given this has been an area of focus for me professionally for the better part of the last 5 years (sneak preview... I love

Horrific Performance An initial investment of more than $450,000 to the ProShares Ultra VIX Short-Term Futures ETN (UVXY) at the open of its October 4th, 2011 inception date (the split adjusted opening price) would be worth just $87 at today's close (this after a more than 28% gain today and

Warren Buffett made news this morning, not just for making the largest acquisition of his career, but for making it at a relatively lofty 22x earnings multiple. Reuters reports: Warren Buffett is paying a hefty price for the biggest acquisition of his career, now that his Berkshire Hathaway Inc has

Following up on my previous post Is there a Relationship Between the Economy and Stock Market?, which outlined the relative performance of the U.S. stock market and underlying U.S. economy over time and market performance during economic expansions / contractions, the below provides further detail

Michael Batnick, Director of Research at Ritholtz Wealth Management, and blogger of the always interesting Irrelevant Investor, recently shared the historical performance of U.S. stocks when they fall below their 200-day moving average, something that occurred early last week (bold mine, quotes