Outside the Box, March 2016

Can “Smart Beta” Get You in Trouble?

March 30, 2016

I have been doing a fairly deep study of portfolio construction for the past two years, trying to figure out how to solve some of the most perplexing problems of the day: dealing with risk, volatility, performance chasing, and the ever-elusive challenge of actually figuring out where to find performance. One of the hottest topics in the literature and at conferences I attend is the concept of “smart beta.”

Smart beta is a rather elusive term in modern finance. It lacks a strict definition and...

Peter’s Perspective on Chinese Real Estate

March 23, 2016

My doctor and good friend Michael Roizen (head of the wellness center and a director at the Cleveland Clinic) has some 23 million books in print in scores of different languages around the world. He called me on Monday remarkably enthusiastic (even for him) about his recent trip to China.

While there, he was the weekend guest of an extraordinarily rich businessperson who read one of Michael’s books and credits the lifestyle and diet that Mike advocates with turning his life around, if not...

Whatever Happened to the Invisible Hand of Capitalism?

March 18, 2016

It has been an interesting week for Fed observers and markets. There is an odd disconnect between the data that we are told the Fed depends on and the press release and follow-on press conference that the FOMC conducts after its meetings. But clearly the market likes it that way. This week’s Outside the Box deals with the philosophical issue of the Federal Reserve setting the price of money. My friend and well-known value investor Vitaliy Katsenelson goes back to his youth in Russia, where some...

Japanese Policy Failure Means Disaster For Us All

March 9, 2016

This week’s Outside the Box is a little bit different. I’m going to start with a selection from Mohamed El-Erian’s latest note. Mohamed himself is soft-spoken and calm, and I tell you that because the piece that follows is as close to capitals, underlining, and bolding with lots of exclamation points as Mohamed can get. He continues to get more concerned about the direction of central bank policy around the world and its unknown and unintended potential consequences. I will just cut and paste...

If Only We Could Blame China

March 4, 2016

I regularly read Niels Jensen’s monthly letter, and this month’s edition is exceptional. Longtime readers will know that he has been featured in Outside the Box several times over the years. Today, Niels challenges the widespread belief that the steep drop in commodity prices is all about the economic slowdown in China. He also questions whether China is in fact more a victim than a villain of the recent plunge in global equity markets. He arrives at the conclusion that high and rising debt...