Running through a minefield, backwards
July 27, 2010
Before we get into today's Outside the Box I want to clear up a few ideas from this weekend's letter. There have been posts on various websites equating my piece on deflation with Paul Krugman. They say I am advocating kicking the can down the road and not reducing the deficit.
Wrong. What I have been trying to point out for several years is that we have no good choices. We are down to bad and very bad choices. The very bad choice (leading to disastrous - think Greece) is to continue to run massive deficits. The merely bad choice is to reduce the deficits gradually over time. As I try to point out, reducing the deficits has consequences in the short term. It WILL affect GDP in the short term. Krugman and the neo-Keynesians are right about that. To deny that is to ignore basic arithmetic.
I am not for kicking the can down the road. Not to begin to deal with the deficits, and soon, risks an even worse problem. But - and this is a big but - I don't want to stomp on the can, either.
Now, let's get into this week's Outside the Box. I offer you a very intriguing essay by those friendly guys from Bedlam Asset Management in London. They argue that Belgium's sovereign debt should be suspect, and is the country that could be a "sleeper" problem. This is a very interesting read, with a lot of history. It is not too long and very interesting. Enjoy. (www.bedlamplc.com)
Your thinking sovereign debt is the biggest bubble of all analyst,
A Closer Look at the Second Leg Down in Housing
June 28, 2010
Quickly, I will be on Larry Kudlow's show tonight (Tuesday, June 28), which is at 7 pm Eastern. Larry has promised that we will spend some quality time on some of the current issues facing us. See you there! And now, let's jump in to this week's Outside the Box.
Last January 2009, the Outside the Box featured FusionIQ's quant models that blend both fundamental and technical metrics to determine the strength of 8,000 equities as well as the overall markets (Trading With the Big Boys).
You may recall that CEO Barry Ritholtz, (and good friend and Maine fishing buddy) had been bearish throughout 2008, and was still negative on stocks back in January 2009. Relying mostly on the FusionIQ metrics, Ritholtz flipped bullish on March 2009, and stayed bullish the rest of the year. The firm began raising cash in Q1 of 2010, and by the time the first quarter was over, was only 50% long. They sold more stock in April, and in a bit of good timing that Ritholtz will tell you was "dumb lucky" went to 100% cash on May 5, 2010 – the day before the 1,000 point flash crash.
Some economists see the world from a 30,000 foot overview (that would be me); other analysts work bottoms up. The quants – mathematical analysts whose world view consists of granular data –crunch numbers to reveal what it may about markets and economies. Ritholtz is one of the few that combines all three. This has led to prescient economic and market calls that made his clients and readers money, and kept them out of harm's way when things got ugly. Indeed, Dow Jones noted that "many market observers predict tops and bottoms, but few successfully get their timing right. Jeremy Grantham and Barry Ritholtz sit in the latter category..." heady company indeed.
Regarding the market calls, Ritholtz said "We cheat. We use everything that we know works. Macro economics, technicals, fundamentals, valuation, quantitative – it all goes into the mix. That's our secret sauce." Ritholtz added "I don't know why other people limit themselves to just one discipline – the value guys never look at technicals, the fundamental analysts ignore macro cycles. It creates blind spots in their analyses. When we go over other research reports, they are obvious to see."
I have been intrigued by the Fusion system's ability to warn investors to get out of the way of dangerous stocks sectors, even the entire market – before trouble hit.
Dumb lucky or not, I have found over the last year and a half, looking over Barry's shoulder, that this system does seem to (in general) give some very interesting signals about the market. I wanted to catch up with Barry to see what the FusionIQ system was saying these days – about Energy Stocks, about Housing and anything else that he thought noteworthy. As you can imagine if you know Barry, I got an opinionated earful. (Barry is like me, often wrong, but seldom in doubt.) I asked him to put it in a letter for this week's Outside the Box.
What follows is his explanation as to why Housing fall still has further to fall. He included some charts that explain what stocks and sectors to look at and avoid.
His application of both the macro and micro views, combined with using FusionIQ "to cheat," as he puts it, is why institutions and high net worth individuals seek out the firm's investment advice.
As is my custom, I will give you a link to where you can find out more about their services. Visit their site to learn more about FusionIQ. Watch their demo. Outside the Box subscribers are eligible for a discounted rate (less 20%) on the monthly subscription. http://www.fusioniqrank.com/signup.php?a=1
One caveat. This system is for serious traders. Most of you shouldn't be trading. It takes discipline and time. That is not a knock on anyone. I don't trade or have any business trading, either. A man's got to know his limitations. So I find what Barry writes about below interesting and informative. But some few of you who trade should explore his system as another arrow in your quiver.
Your writing away on his book analyst,
What’s the point of macro?
June 21, 2010
I am back in Tuscany and will head to Milan tomorrow early, give a speech at the Bloomberg offices and then back home. But it is Monday and that means it is time for another Outside the Box. And I have found a most excellent offering. Dylan Grice from Societe Generale in London wrote on value for an OTB a few weeks ago, and he follows that up with more thoughts on the use of macro trends versus value investing. This is a real think piece, and worthy of more than one read.
I have to hit the send button, as my last dinner in Italy awaits (and real Italian food has been a revelation, and the wines! I am something of a chardonnay snob, and usually turn my nose up at Italian and French whites, but I found some local Tuscan chardonnays that were up to the best in California. And at reasonable costs.).
Your not wanting to leave Tuscany analyst,
The Ultimate Hedge in Economic Crisis
June 2, 2010
This week we have a really counter-intuitive Outside the Box. I was talking with the editor of Breakthrough Technology Alert, Patrick Cox about health care costs and he made some very interesting observations from new research about health care. It seems healthy people pay more for health care than sick people. I asked him to do a write-up for us. Despite the new health care bill that passed, health care costs are going to go up, not down. And that's a good thing, as Pat explains. You really want to read this.
Some of you may not be aware that a few months ago I wrote that I was buying stocks for the first time in 12 years, and specifically smaller, transformational biotech stocks. As I wrote at the time, I think that we could see a real bubble in biotech in the latter part of this decade, and just once, please God, I want to be at the beginning of a bubble.
Pat is one (and maybe the best) of my "go-to" sources for investment ideas in the biotech space. I have been very pleased with the results of his favorite plays in the last few months. And I am glad that some of my favorite companies have seen their prices come back somewhat in the last month or so, as I plan to be buying them for a long time.
Which brings up a problem and an opportunity. Pat's letter is just getting too big circulation wise for the typically smaller companies he finds and writes about. His publishers (Agora) decided last week to basically double the price (and it is not cheap to begin with!) to reduce the number of subscribers. They did a "final promotion" at the old price with a deadline of last week. I just saw that. I asked them to extend that offer for one week to my readers and they agreed.
So for the next week, you can subscribe at a discounted $699 before it goes to double that. Below is a link to the promotional site for the letter. And yes, I know it is very "hypey." I don't like that type of copy, but that is what sells and Agora is in the business of selling letters. My business is to find you good sources and to write about them. In terms of return on investment, this subscription has been a very good one for me. Find out more here.
If you did not get to read his first Outside the Box on the biotech space (and you really should!), and my rationale on why I think there will be a bubble in biotech, you can read that at this link. http://www.johnmauldin.com/outsidethebox/the-coming-biotech-bubble-4391
And without further ado, let's find out why health care costs are going up and why it's a good thing.
Your admittedly a biotech junkie analyst,
US stock market returns - what is in store?
March 29, 2010
It has been some time since we have looked at stock market valuations and expected future returns. I made a large point in Bull's Eye Investing that long term returns are closely correlated with the valuation of the stock market upon entry. In fact, I argue that secular bull and bear markets should be viewed in terms of valuation and not prices. The market clearly goes from high valuations to low and back to high again over very long periods of time. The average length of a secular bull or bear cycle is 17 years.
Based on valuations, we are still in a secular bear market. But clearly we are in a bull phase, which within long term secular bear cycles are quite normal. They make for good trading opportunities. But should you invest now with a view to holding for 10-20 years?
This week's Outside the Box from my friend Prieur du Plessis of Plexus Asset Managment looks at what long term return expectations might be from today's stock market valuations. He offers us a range of expectations which I think should help you in your investment decision making process.
Dr Prieur du Plessis is chairman of Cape Town-based Plexus Asset Management and author of the Investment Postcards from Cape Town blog: http://www.investmentpostcards.com (Subscribe to e-mail updates of new articles by clicking on "Subscribe to Updates" in the top right-hand corner of the blog site and providing an e-mail address.)
I am on my way back to Dallas from a quick trip to Washington DC. The cherry blossoms are beautiful, even if the weather is gray.
2010 Investment Strategies: Six Areas To Buy, 11 Areas To Sell
January 18, 2010
This week I am really delighted to be able to give you a condensed version of Gary Shilling's latest INSIGHT newsletter for your Outside the Box. Each month I really look forward to getting Gary's latest thoughts on the economy and investing. Last year in his forecast issue he suggested 13 investment ideas, all of which were profitable by the end of the year. It is not unusual for Gary to give us over 75 charts and tables in his monthly letters along with his commentary, which makes his thinking unusually clear and accessible. Gary was among the first to point out the problems with the subprime market and predict the housing and credit crises. His track record in this decade has been quite good. I want to thank Gary and his associate Fred Rossi for allowing us to view this smaller version of his latest letter.
If you are interested in his letter, his web site is down being re-designed, but you can write for more information at insight@agaryshilling.com. If you want to subscribe (for $275), you can call 888-346-7444. Tell them that you read about it in Outside the Box and you will get the full 2010 forecast with price targets, but an extra issue with his 2011 forecast (of course, that one will not come out until the end of the year. Gary is good but not that good!) I trust you are enjoying your week. And enjoy this week's Outside the Box....
The Coming BioTech Bubble
January 11, 2010
In last Friday's letter, I said that I had not bought any single stocks in the last decade, preferring funds and managers, and in general I still do. However, I am now going to start buying a specific asset class this month and currently plan to add to those holdings at least every quarter for several years. This is the high risk portion of my portfolio, so it will not be all that large a percentage. (Do not write and ask me what the right percentage is. It will be different for everybody. For some of you the answer will be none, as you need to be taking very little risk. Consult your investment professionals.).
Let me state emphatically that I am not going to become a stock picker. My regular letter will remain focused on the macro economic environment and investments in general. This is not my recommended advice to you but what I am doing as an individual investor. I simply know that many readers are interested in what I am doing personally and in my investment ideas. If this doesn't make sense to you, then by all means hit the delete button later. With that thought, let's dive right in.
In the 70s, we had a bubble in gold and commodity stocks. Some stocks had huge run-ups because of major gold finds coupled with the price of gold going up over 20 times over the period. A gold mine became a hole in the ground with four promoters standing around it telling you a story about why there was gold in the hole. Sometimes there was, but often the "gold" was the stock the promoters sold. I was too young and poor for that bubble, although I did get into a few (sadly too few) later winners.
Then we had the tech bubble. And the internet craze. Obviously, some of those stocks are still around and have been longer term winners, but the number of stocks that went public with crazy offerings, no revenues and valuations from left field eclipsed anything I have ever witnessed. I missed that bubble as well, as I was bearish about the markets in general and tech in particular, as I wrote in my first book (1998).
I think there is a potential for another bubble over the next decade. There will probably be several, but there is one I am particularly interested in and that is biotech, with an emphasis on stem cell and gene therapy and their allied kin. For reasons outlined by my friend Patrick Cox, writer of the newsletter Breakthrough Technology Alert, in today's Outside the Box, I think we are on the cusp of a decade of remarkable breakthroughs which will change the way we do medicine.
While some of these breakthroughs will come via large firms, others will be in smaller companies. Imagine cures for certain types of cancer. Rejuvenation of failing hearts? Livers? Genetic therapies for all types of diseases? The list of potential blockbuster therapies from current research is enormous and growing.
There are going to be some companies which will simply see their stocks explode. Of course, for everyone that has a large run, there will be failures which will go to zero. Or companies that seemingly have "the cure" only to have another company come along with something faster and cheaper, wrecking their share values. (Think of the dawn of the computer age and how many once high flying stocks went to zero. Biotech stocks are not bonds.)
But I think (personal belief here) that what will capture the imagination will be the large winners. Everyone will want to be in at the beginning of a new home run. As the decade goes along, we will see companies go public before they are really ready, just because they have a great story and people will want to fund that story.
It has the classic potential to become a bubble, because there is a deep reality - some substance to the stories of the winners - that will make people look for the next big winner. So far, we as humans have not proven ourselves able to resist bubbles. Maybe this will be the time we all become adults and there will be no bubble. Maybe. But my thought is that it will not be.
And as I have been ending my speeches recently, I have lived through a number of bubbles. I have never gotten to invest in one. This time, dear God, just once please let me be at the beginning of a bubble.
Now, I have no particular expertise in biotech stocks. I go to conferences, read articles and hear amazing stories. They all sound good to me. But for about a year I have been reading Patrick's newsletter, and have spent a lot of time talking with him (and others in the biotech industry). He does have expertise in looking at all types of breakthrough technologies (and not just biotech). He is one of my main sources for ideas in this space, and if you are interested in the tech and biotech world, you might consider subscribing to his letter (I will provide a link later). As an aside, he will be writing the chapter on biotech in my next book.
Starting this month, I will begin to buy some of the stocks in his suggested portfolio. I will start with four stocks and add to those positions and other stocks over the coming years. I think this is a long term play. My best guess is that the coming recession I predicted last Friday may hurt the value of these stocks, but I simply don't know. This is not a trade, nor will I be hedging (at least not for some time). I expect to be adding small positions for years.
Do not write and ask me which stocks I will buy. For lots of reasons, I won't do that, not least of which it is not fair to Patrick for me to use his intellectual work. I am building a portfolio, and I can almost guarantee you that some of those stocks will end up being dogs. Second, Patrick is not going to mention any specific stocks in this week's letter. It would not be fair to his smaller subscriber base to mention a stock to 1 million readers. Third, if you do subscribe and after some time reading and researching on your own, decide to buy a stock or two, do not chase the price. And I would suggest you do not buy all you intend to buy all at once. Space it out over time. These stocks can be very volatile and it is probably better to average in over time.
There are some other letters and analysts that I am going to introduce you to over time. There is no need to rush. Also, if you know of another writer I should be aware of, feel free to drop me a note with their name. Now, if after you read this week's Outside the Box you are interested in subscribing to Patrick's letter, you can do so here. The writing on the web site is fairly typical in it's over the top promotional style, but see through that to his actual work. And they are knocking off $300 off the regular price of $895 for my readers. I am a big fan of Patrick, and admire his thoroughness and work. If you want to invest in this sector, starting off with Patrick is a good way to go. Take your time, read, learn and then invest. Again, no hurry here. But do get started researching.
A couple of caveats. I may be completely wrong about there being a potential bubble in biotechs. Just because there may be similarities to previous bubbles does not mean there will be another. Past performance is not indicative of future results, as I say time and time again. Second, stocks you buy in the near future may really get hit in the next recession. You might consider waiting if that will make a big difference to you. Like I said, there is no rush. Consult with your investment professionals about this, and do not take large positions relative to your total portfolio. A stock that I could be convinced about today can be made obsolete by newer technology. Cautious optimism is always proper, with the emphasis on caution.
Finally, and as a reminder, this is a market and sector call by me. I have no idea on who the real winners will be in ten years, although I hope I get lucky and find a few. And for those of you who don't have enough money (yet) to buy into this concept but still like the idea, consider a small cap biotech mutual fund as a way to start. There are several.
Now, let's see what Patrick has to say about the coming new world of biotech.
Reckless Myopia
November 30, 2009
Long time Outside of the Box readers are familiar with John Hussman of the eponymous Hussman Funds. And once again he is my selection for this week's OTB.
This week he touches on several topics, all of which I find interesting. As he notes:
"We face two possible states of the world. One is a world in which our economic problems are largely solved, profits are on the mend, and things will soon be back to normal, except for a lot of unemployed people whose fate is, let's face it, of no concern to Wall Street. The other is a world that has enjoyed a brief intermission prior to a terrific second act in which an even larger share of credit losses will be taken, and in which the range of policy choices will be more restricted because we've already issued more government liabilities than a banana republic, and will steeply debase our currency if we do it again. It is not at all clear that the recent data have removed any uncertainty as to which world we are in."
Have a good week.
The Dash To Trash And The Grab For Growth
January 28, 2008
This week we look at a very thoughtful essay by an old Outside the Box friend James Montier. James is now working at Societe Generale in London. He is one of the truly great minds on the psychology of investing, as well as proving great research on how to structure your portfolio. IN this week's essay, entitled "the Dash to Trash and the Grab for Growth," James shows how investors tend to do the wrong thing at the wrong time in times of market volatility. This is a longer letter with lots of graphs, and there is an executive summary at the beginning, but I suggest you read then when you have 15-20 minutes to really concentrate. You will be a better investor when you do.
The Relative Performance Derby And Other Evils Of Modern Investment
June 25, 2007
This week in Outside the Box we take a gander at the always-insightful research of good friend James Montier, who poignantly addresses the pertinent topic of portfolio diversification and the pitfalls that ensue on account of benchmarking, wherein investors obsess over relative performance and their respective tracking error. James asks the question, why does the average US mutual fund hold 160 stocks, when diversification could be achieved with around 30-40 stocks. The answer in word, benchmarking.
James Montier posits that the average portfolio manager is focused upon short-term relative performance, paying scant attention to total portfolio risk, rather, the inclination of the average PM is to be primarily concerned with tracking error, that being stock specific or idiosyncratic risk. This misguided focus Montier suggests, leads the PM to manage very large portfolios in their attempt to control stock specific risk, holding nearly 4 times the number of stocks needed to meet diversification targets.
The solution you may ask? Montier suggests the utilization of Monte Carlo simulation to construct a universe of potential portfolios subject to construction rules that define your respective investing universe, thus permitting the measurement of skill to a comparable universe and impelling the manager to focus on absolute return performance.
Why the Big Money in Gold Shares Still Lies Ahead
June 11, 2007
This week in Outside the Box we take a quizzical gander at the gold market, its growth-to-date, and potential future investment opportunity. We have witnessed a significant rise in the gold market from a July 1999 price of $252 an once, to $653 an once today, an increase of 159%. David Galland, of Casey Research, provides an intriguing analysis of the gold market today and the inherit investment opportunity existent on account of severely curtailed research exploration, institutional obstacles, NGOs, and rising global demand, driven primarily from the emerging market economies.
I have known Doug and David a very long time. I made my first dollar on gold stocks back in the mid-1980s when Doug Casey personally called me up and told me to by a particular stock. It was quite a home run and I have paid attention to what Doug says on gold stocks ever since. They take their research on gold stocks very seriously, and have been quite successful over the past years. If you are interested in specific gold stocks and gold stock investing, I really suggest you subscribe to Doug Casey's letter. They will send you his recent update, which covers in-depth all the stocks he likes and a few he says to avoid. For more information on how to subscribe, please click here.
Asia: Hot Market or Frenzy?
June 5, 2007
The data from the companies which analyze where investors are putting their money tells us there is a lot of money flowing into international funds and especially Asia. This week's Outside the Box we look at a short but thoughtful piece by my good friend and partner Jon Sundt of Altegris Investments. Jon is personally bullish on Asia, but he offers us a graph and some thoughts of which you should be aware before you start putting money into the high flying Asian funds.
I will add a few comments at the end, but let's jump right into Jon's piece.
An Optimistic Route to a Poor Market Outlook
May 14, 2007
Value is a big and well-known strategy within the investment world. Many
analysts and investors alike rely heavily on the P/E ratio as a metric to
determine the value of a stock, indices or other form of security. But just as
with any other investment metric, the data can be skewed if not viewed within
the proper context. This week's Outside the Box is by John Hussman where he
discusses the importance of analyzing P/E ratios under the backdrop of the
earnings cycle. John shares his view on "normalized" earnings as well as
explains how he calculates the averages over a 5 year period.
Dr. Hussman is the president and principal shareholder of Hussman Econometrics
Advisors, the investment advisory firm that manages the Hussman Funds. He is
also the President of the Hussman Investment Trust. Prior to managing the
Hussman Funds, Dr. Hussman was a professor of economics and international
finance at the University of Michigan. He continues to write his "Weekly Market
Comment" that provides both excellent insight and analysis into the current
market climate.
I trust that you enjoy Hussman's research and find it to be valuable to thinking
"outside the box."
Household Wealth and the US Savings Rate
April 30, 2007
This week's Outside the Box is comprised of 2 smaller articles that I believe will, collectively, provide you with some interesting information to digest. The 1st article will be a follow up piece to last week's Outside the Box where I featured a commentary by Morgan Stanley's Chief Economist Stephen Roach titled "The Missing Link to Global Rebalancing." Kathleen Camilli, the President of Camilli Economics, has weighed in on some of Roach's views by providing a quasi-rebuttal of her own. While her article "Household Wealth and the US Savings Rate" does not address the structural current account deficit that Roach points out, it does address the low savings rate/Asset Economy issue. You can reach here at www.camillieconomics.com.
And secondly, I quoted some excerpts from Jeremy Grantham's latest letter to investors in my weekly publishing of "Thoughts from the Frontline." Many people have since expressed curiosity about this letter so we've decided to reproduce the whole letter for you to read.
Each article provides some thought-provoking commentary and insight that I believe you will thoroughly enjoy.
Meaty Beaty Big and Bouncy
April 16, 2007
Today's Outside the Box is by James Montier of Dresdner Kleinwort. Quite frankly, the research that James discusses surprised me. In his article "Meaty beaty big and bouncy," James dispels what he calls an urban myth that small caps tend to outperform large caps. If you disentangle the size and value effects the difference goes away! James goes on to say that even if you still believe in small cap investing, the fact that small caps are trading at a premium to large caps looks insane to him.
James is a highly intelligent analyst as well as a good friend of mine. He always provides a great perspective on the markets with his thought provoking research. For those of you unfamiliar with James and his firm Dresdner Kleinwort, they are a global investment bank with headquarters in London and Frankfurt.
Just as I have found James' conclusions to be fascinating, so I believe that many of you will find his analysis to be "outside the box" regarding portfolio allocation amongst market capitalizations. And for those wondering, the title of the article is from the name of a compilation album of the rock group "Who's" greatest hits.
How to Make Big Money: 11 Time-Tested Strategies
April 2, 2007
This week's Outside the Box will be one of the longer ones that have been featured, even despite the current length being approximately half of what it originally was. Now that's no cause for alarm, yet rather a measure of how important I feel this article to be. In his article "How to Make Big Money: 11 Time-Tested Strategies, "Gary Shilling writes about the methods people have used for wealth creation. We are talking about ways to actually make money.
This is one of the more interesting and thought-provoking pieces that I've come across as of late. Gary provides an excellent and comprehensive overview on many of the strategies that people have used to both create and grow their personal net worth. Some are common sense and some are insightful...but all of the points he makes are proven ways of which fortunes have been made. You can check out more of Gary's work on his website www.agaryshilling.com.
I trust that you will enjoy this exceptional piece.
MACRO-MARKETS: Gold Trading Boot Camp
March 26, 2007
I probably get as many questions about gold as I do any subject. The fascination with the yellow metal permeates all levels of investors, and opinions can be quite strong. But few are more informed than those of good friend and trader extraordinaire, Greg Weldon.
Greg has written a new book called "Gold Trading Boot Camp, how to Master the Basics and Become a Successful Commodities Investor." I highly recommend it for those wanting to get a grasp of how a successful trader's mind works. Greg is one of the best and maybe the most prolific commentators on market trends. Up well before dawn each day, he is a machine. Each day he produces 15-20 pages of in-depth commentary on a huge variety of topics, both fundamental and technical, that informs some of the top trading desks in the world.
I asked him to give us some idea of what his book is about and then give us a top down view of the market for gold as it stands today. For those of you who follow gold, or are merely curious, I think you will find this fascinating.
You can get the book at Amazon.com. It is very readable. Greg has an effortless, unique style that is fun, fast-paced and easy to comprehend with not a lot of technical jargon to make it hard for the beginner yet enough insights that the professionals will be taking lots of notes.
Get the book and enjoy this week's Outside the Box.
What is True Diversification?
March 5, 2007
This week we take a look at one of the more common problems I see as I counsel investors, a lack of diversification. Much of the time that stems from not having a philosophy of investing and defaulting to simple selections that over time can create problems when those selections run into a bit of volatility.
Good friend and successful money manager Gary Marks gives us some thoughts on diversification. Gary has written a book called Rocking Wall Street that is the first in what I hope is a series of books with the Millennium Wave imprint. I have written the forward to it. The book is extremely useful in helping you develop a philosophy of investing that will weather the test of time, as well as explain specific strategies and techniques for creating your own diversified portfolio that will help you balance the risk and rewards of the markets.
At least some brokerage firms are clearly not happy about Gary's book. A highly complimentary statement about Gary's strategies by a senior portfolio manager at a major brokerage firm led that firm's compliance department to issue a written warning to Mr. Marks not to use his quote to promote the book.
Why is this book rocking Wall Street? In this edited excerpt from the book, Gary touches on some of these controversial points, such as what if traditional diversification models were debunked as too risky
and ineffective?
You can (and should!) get your copy of this well written, easy to read book at http://www.amazon.com/exec/obidos/ASIN/0470124873/frontlinethou-20.
And now, let enjoy today's Outside the Box.
Destitute At 80: Retiring In Secular Cycles
February 12, 2007
Does the concept of retirement sound scary? If it does don't feel that you're alone. A lot of issues and concerns come along with the subject, the most familiar of which is financial freedom. Even after you have saved a substantial nest egg, it can be difficult to plan out your withdrawal strategy when presented with several unknown variables such as life expectancy and rate of return.
Today's Outside the Box is by my good friend and the always fascinating analyst, Ed Easterling. Ed has written a very well researched article on how to structure a portfolio and plan for retirement. How much of your retirement portfolio can you withdraw each year? It may not be as much as you think if you want to be sure that your money outlives you. Ed covers some of the inherent risks and describes several scenarios that people face. For those of you unfamiliar with Ed, he is the author of Unexpected Returns: Understanding Secular Stock Market Cycles, President of an investment management and research firm, and a member of the adjunct faculty at SMU's Cox School of Business. You can read more about him and his research at www.crestmontresearch.com.
Whether young or old, retirement is a point in life that we all must face. I believe that you will find Ed's article to be an engaging view on how to properly prepare for and plan out your retirement.
CAPM is CRAP, or, The Dead Parrot lives!
January 29, 2007
Within human nature there is a tendency to search for reasoning or logic to validate our own actions. This holds true in the academic sector as models are derived to provide an answer to a scenario, but sometimes such models do not translate well from the world of academia into that of the real world. This week's Outside the Box is presented by James Montier as he discusses his opinion on how the capital asset pricing model (CAPM) has affected the ways in which investors view and measure performance.
James is a good friend and the Director of Global Strategy at Dresdner Kleinwort Watterstein, a London and Frankfurt based investment bank. He is also a prolific writer and author of the book "Behavioral Finance - Insights into Irrational Minds and Markets."
In his article "CAPM is CRAP, or, The Dead Parrot lives!" Montier explains why he thinks the model is empirically bogus and how it has laid the groundwork for the modern day obsession with alpha and beta performance. He goes on to talk about how illogical it is to use relative performance as a metric when compared to measuring returns on an absolute basis.
This is an overall deep piece on the scale of thought but I trust that you will find it valuable in making investment related decisions.