Post Tagged with: "investing"
Don’t Fight the Last War: Lessons from the Battlefields of Risk Management
Our brains are not calibrated to deal with the unexpected. Most of us believe we are good risk managers but in reality we are not. Most of us trust that risk can always be quantified and expressed through some fancy modelling whereas, often, it cannot. The world is not normal, yet universities continue to teach our young students the wisdom of Markowitz and Sharpe which brought us modern portfolio theory and, more specifically, the capital asset pricing model. Garbage In, Garbage Out, as they say. One of the fundamental assumptions behind modern portfolio theory is that asset returns are normally distributed random variables. The return profile of US equities fairly closely matches that of a normal distribution with the exception of large negative returns. They have come about more frequently than one would or should expect
Goldman CEO Lloyd Blankfein on Bloomberg Television
Bloomberg TV spoke to Goldman Sachs CEO Lloyd Blankfein today in a much discussed interview. Below is the video and partial transcript of that interview. I provide it without comment
Chart of the day: Life insurers won’t meet nominal return targets
JPMorgan recently performed a study on the composition of portfolios managed by life insurance companies. The study looked at the top 20 life insurance firms using their regulatory filings. These are the portfolios set up to support projected policy claims. The reason it is important to measure the composition and the changes in such portfolios is that life insurance firms manage $1.9 trillion in assets. Here is the current breakdown
Graphite: Time to Invest, or Flavor of the Day?
Graphite has been getting a lot of buzz recently, raising bullish expectations among some investors and even talk of a future bubble. Why? The price has risen steadily over the past couple of years and attracted a lot of attention. Let’s have a look at why some market participants are excited about this mineral and see if it’s worth our investment dollars
Grantham: Missing a bull market is a dismissible offense
Jeremy Grantham: “The central truth of the investment business is that investment behavior is driven by career risk. In the professional investment business we are all agents, managing other peoples’ money. The prime directive, as Keynes knew so well, is first and last to keep your job. To do this, he explained that you must never, ever be wrong on your own. “
Kashkari: PIMCO doesn’t expect margin pressure
I thought I should present the somewhat bullish view of the margin issue we have been discussing here. PIMCO’s Neel Kashkaari is out with a note that underscores what the bulls are thinking about the issue
Testing the Swiss National Bank’s Resolve
Thus far the SNB has successfully blocked the Swiss franc’s appreciation relatively cheaply. Compare the bang it got from about CHF18 bln intervention last year with the record operations by Japanese officials. The SNB has various ways it can lean against the market and we expect it to do so. We would rather go with the SNB that fight it
Chart of the Day: Earnings Growth
This chart from the Wall Street Journal explains visually what worries me about the supercharged run up in the S&P500. While the index is increasing, earnings growth is not
Why Valuation Doesn’t Insure Against A Significant Market Decline
Given a clearly overbought market, the re-emergence of Europe’s sovereign debt problem and the Fed reducing the imminence of QE3, even the bulls concede that a correction is likely. Overall, however, investors remain optimistic, and are looking forward to any correction as a buying opportunity, maintaining that the economy is too strong and the market too cheap to decline very much. As we have written about in recent comments, we do not think the economy is anywhere as strong as many believe. Moreover, we do not accept the conventional wisdom that the market, at current levels is undervalued, a point we want to make in this comment
[Premium] Daily Commentary: Sell in May and Go Away
I continue to believe that US share prices are based on a benign if not an optimistic view of the macro environment. If we see anything less, I believe US shares will be the ones to pull back most as opposed to European ones
You Can’t Handle the Truth!
Remember the scene in A few Good Men where Colonel Jessup (Jack Nicholson) and Lieutenant Kaffee (Tom Cruise) trade insults? Following some pretty intense questioning, Kaffee yells at Jessup: “I want the truth”. With the deadly glare that only Jack Nicholson can muster, Jessop retorts: “You can’t handle the truth”. I was reminded of this rather famous moment in film history when a long time reader of the Absolute Return Letter asked me recently: Why don’t you tell the truth about the UK economy? Why don’t you tell it as it is – that the situation in the UK is worse than it is in the eurozone? I decided to take up the challenge from the reader. I am not sure that I actually agree that the UK is in a worse position than most eurozone countries; it is worse in some respects but better in others. More about this in a moment
Faber: Japanese stocks will outperform as US margins deteriorate
Here’s the latest from Bloomberg Television, Marc Faber, the publisher of the Gloom, Boom and Doom Report, thinks that Japanese equities are going to outperform this year. Why? For the same reasons I have been saying that a more defensive posture is warranted: “earnings may begin to disappoint” and “corporate profit margins could deteriorate.”