Posts Tagged ‘Academics’
Monday, July 9th, 2012
‘Inside Job’ provides a comprehensive analysis of the global financial crisis of 2008, which at a cost over $20 trillion, caused millions of people to lose their jobs and homes in the worst recession since the Great Depression, and nearly resulted in a global financial collapse. Through exhaustive research and extensive interviews with key financial insiders, politicians, journalists, and academics, the film traces the rise of a rogue industry which has corrupted politics, regulation, and academia. It was made on location in the United States, Iceland, England, France, Singapore, and China.
For up to date information for preparing for a financial collapse go to preppernews.net/
Tags: Academia, Academics, China Job, England, Financial Collapse, Full Length, Global Financial Crisis, Great Depression, Hd, Insiders, Jobs, Journalists, Matt Damon, Nbsp, Politicians, Recession, Singapore Job, Trillion, United States, Vimeo
Posted in Markets | Comments Off
Thursday, September 8th, 2011
In recent days, a number of market watchers have issued warnings about economic data and events that could roil markets this September. Investors might also want to consider an additional headwind: The seasonal pattern of equity market weakness in September.
While most easy-to-find seasonal patterns fall apart when subjected to a bit of scrutiny, this seasonal pattern does appear to be both statistically significant and fundamentally justified.
Most academics attribute the September weakness trend to a combination of tax-loss selling and “window dressing” ahead of the fiscal-year end. In other words, during September, many investors sell poor-performing holdings to help offset capital gains taxes, while some portfolio and fund managers may engage in trades to make their reported results look better before Sept. 30th, the last day of the fiscal year for many funds.
In recent years, other academics have postulated more exotic theories, including the argument that September’s weakness is related to an annual collective bout of Seasonal Affective Disorder (SAD). According to the SAD theory, the sudden onset of fall causes mass risk aversion and investors dump their risky assets.
Leaving the dopamine level of Wall Street traders aside for the moment, and regardless of the exact mechanism behind the seasonal pattern, a soft September has been well documented in many countries. In the United States, seasonal weakness in September has been evident for more than a century. Using data going back to 1896, the market’s average return in September is -1.12%, net of dividends. September’s average is significantly lower than the average monthly return of around 0.60%.
Consistent with the theory that this seasonal weakness results from tax-loss harvesting and window dressing, September losses have been even greater when the market is down year-to-date entering the month, as is the case this year. In years when stocks are down during the first eight months of the year, September’s average loss goes to -3.04% from -1.12%.
To be sure, while many investors pay attention to seasonal patterns to inform their investment decisions and market timing, such patterns are a somewhat frail foundation on which to build an investment approach. Still, investors should be aware of September’s impact on investor behavior, especially during years like this one when the market is weak. While I do believe that equities currently offer good long-term value, volatility is likely to remain high this year. Given ongoing sovereign debt problems, the lingering risks of another recession and calendar-related behavior, September is unlikely to offer much of a respite from that volatility.
Past performance is not indicative of future results.
Tags: Academics, Capital Gains Taxes, Dividends, Economic Data, Exact Mechanism, Fiscal Year, Fund Managers, Headwind, Market Weakness, Risk Aversion, Risky Assets, Scrutiny, Seasonal Affective Disorder, Seasonal Pattern, Seasonal Patterns, Seasonal Stock, Seasonal Weakness, Sudden Onset, Wall Street Traders, Year End
Posted in Markets | Comments Off
Thursday, November 11th, 2010
To those who have read GMO’s last letter bashing the Fed, “Night of the Living Fed“, there will be little new in Jeremy Grantham’s interview with Bartiromo to be aired later today. For those who haven’t, the GMO strategist does a terrific summary of how the Fed’s economic central planning (a function it should not have, and should merely focus on monetary policy) has destroyed the stock market: “The Fed has spent the last 15, 20 years manipulating the stock market. I think they know what they do has no direct impact on the economy, the only weapon they have is the so-called wealth effect: if you can drive the market up 50%, people feel richer, they feel a little more confident, and the academics reckon they spend about 3% of that. The problem is they know very well how to stimulate the market, but they step away when the market gathers steam, and resign any responsibility for moderating a bull market that may get out of control, and I fear that the market will continue to rise, it will be continuously speculative. As a consequence you get a boom and bust… I think the Fed should settle for just controlling the money supply, not controlling the economy.” Unfortunately, it is now too late, and the Fed, which in addition to lender of last resort, is the economic “controller” of only resort, now that fiscal policy is moot, will soon have to be overthrown for its disastrous effect on the US economy to be finally eliminated.
Much more in the interview below.
Tags: Academics, Bartiromo, Boom And Bust, Consequence, Disastrous Effect, Economy, ETF, Fear, Fiscal Policy, Gmo, Jeremy Grantham, Lender Of Last Resort, Monetary Policy, Money Supply, Steam, Stock Market, Strategist, Terrific Summary, Wealth Effect
Posted in ETFs, Markets | Comments Off
Monday, September 27th, 2010
Charles Brandes – Why Value Investing Outperforms (Part 1)
Charles Brandes, founder of Brandes Investment Partners (1974), which today manages over $50-billion in assets, globally, discusses why value stocks outperform growth stocks and bonds over the long term, with Dan Richards, Clientinsights.ca.
Dan Richards: We’re going to talk about some research that Brandes Institute team has conducted recently, on the role of expectations when it comes to stock market returns. Let’s start by talking a little bit about what the long term returns for stocks look like going back to 1920 or so.
Charles Brandes: Yes, well the long term return for stocks going all the way back after inflation has averaged about 6.5% to 7%.
DR: How would that compare to bonds?
CB: The return on stocks would be about 2 or 3 times the return on bonds, after inflation.
DR: Academics look at these results and they say, well, the reason, that stocks outperform bonds is because of something called a risk premium, that because are more volatile, riskier, they demand a higher return. What’s your view on the role of risk premium in explaining why stocks outperform.
CB: Well, risk, as the academics define it is wrong. For a long term investor, risk is having to do with how well companies do; the academics define it as just the price changes or volatility. That’s true for speculators, prices changes and volatility in the short term, that’s risk for speculators, but not for investors.
The academics’ explanation for why stocks outperform bonds is not the right explanation. The real simple explanation is that stocks which represent businesses that create goods, they create the wealth that can pay the bond interest. So they have to create more wealth than bonds create.
DR: Talk about the facts that stocks as a whole have outperformed bonds. Now, within stocks there are a couple of different categories; there are value stocks compared to what are called growth stocks. I think you call them ‘glamour’ stocks. Could you talk about the difference between value stocks and what you call glamour stocks?
CB: Yes, its just a definition of the price that they’re trading for, in relationship to the earnings of the company; so again, the glamour stock is the one whose price is high compared to the earnings of the company, because the market is anticipating the earnings are going to grow. They’re growth stocks; glamour stocks growth stocks.
Value stocks are where there is very little anticipation of growth, usually, and their earnings are high, compared to the actual price of their stock.
DR: So we’ve talked about the difference between those two categories of stocks, value stocks vs. glamour stocks. Talk about what the long term performance looks like for those two different kinds of stocks.
CB: If you take those categories and you look at the top glamour stocks vs. the top value stocks, the value stocks over a long period of time will outperform by as much as 5% or 6% per year. In some cases, some periods, you can see them outperforming by as much as 10% per year.
DR: So an academic might look at that and say, well, if you’ve got a category of stocks like value stocks that outperform to that extent, well the reason must be that they’re more volatile and riskier than those other categories of stocks. what’s your observation on that?
CB: Well, there’s a couple of problems with their conclusions. First of all, they’re not more volatile, as they define risk as volatility. So, that is not right. From the other risk standpoint, of how companies do over a long period of time, they’re also not more risky. They’re actually safer, you’re paying for it is a lot less price wise than likewise for future development.
END OF PART ONE
[CSSBUTTON target="http://www.clientinsights.ca" color="23238E" textcolor="ffffff"]Access many more Dan Richards’ interviews at ClientInsights.ca[/CSSBUTTON]
Tags: Academics, Bond Interest, Brandes Investment Partners, Cb, Charles Brandes, Going All The Way, Growth Stocks, Hana, inflation, Investor Risk, Little Bit, Price Changes, Risk Premium, Speculators, Stock Market Returns, Stocks And Bonds, Stocks Bonds, Term Investor, True Loop, Value Investing, Value Stocks, Volatility
Posted in Markets | Comments Off
Wednesday, August 18th, 2010
This article is a guest contribution by Robert Horrocks, CIO, Matthews Asia.
Risk and uncertainty are part of everything we do as investors. Much energy goes into trying to understand these elements, and many a computer keypad has been worn out in attempts to write about them. There is a vast body of academic literature that discusses risk and uncertainty. Describing their role in finance has earned more than one Nobel Prize. And yet there remains some distance between what the academic theories define as risk and what the experience of the practitioner is, particularly when it comes to how we think about risk when managing Asian equity portfolios.
From an academic point of view, risk should be something that varies in proportion to returns, the riskier something is, the higher return we should get for investing in it. Risk should also be calculable, in order to know what the trade-off between risk and return is, we have to be able to measure it. Risk that cannot be calculated is called uncertainty. Risk is what you can try to manage; uncertainty is what you can never fully know or calculate. Branching out from this theory, academics tend to treat risk as the volatility of returns, how much an investment’s prices “bounce around” its trend value. Simplistically, the more volatile the security, the higher return needed to justify buying it.
The only trouble is, it doesn’t seem to work that way in reality. Several studies have shown that volatility does not have this suggested relationship with returns. In my own work in the Asian context, investors are rewarded with better returns for taking on volatility only up to a point. After that point, returns to the highest volatility stocks on average can be worse than those for stocks of average, and even lower, volatility. So, it pays to push the risk curve only so far, and that point is somewhere a little beyond average volatility. Nor does it seem that high beta portfolios generate, on average, better returns than low beta portfolios.1
Seeing this problem, academics and practitioners have added other risk factors to their models. These began with market sensitivity (beta), company size (market capitalization) and value (book-to-market), but the list of risks was progressively expanded to include factors as diverse as leverage, volatility, size, valuation, momentum, return on capital, growth and earnings sustainability. This seems sensible at first sight, but is not that intuitive because in many cases it is not clear that taking on extra risk (as one would commonly define it) yields better returns.
Investing in smaller companies may be more risky and, therefore, investors should get a premium. But value? Why should I get an excess return from buying cheap stocks? Surely, if it is a risk factor, I should get the excess return from the risk of buying expensive stocks. The same can be said of many “quality” measures. I have found in Asia that financially sound companies do not return, on average, less than financially weak ones. Of course! (You might think.) But that is a problem for the theory of risk, surely, most investors feel they should be rewarded for taking on more risk and not for playing it relatively safe. Many of the risk models out there are actually return models, they describe what drives stock prices, rather than where the dangers are. If you think that focusing on cheap, high quality, small companies is a good generator of returns, you should be maximizing this exposure, not minimizing it.
Tags: Academic Literature, Academic Theories, Academics, Asian Context, Asian Equity, Attempts, Beta, BRIC, BRICs, Computer Keypad, Curve, Elements, Equity Portfolios, Investors, Nobel Prize, Point Of View, Proportion, Risk And Return, Risk And Uncertainty, Risky Business, Stocks, Volatility
Posted in Emerging Markets, Markets | Comments Off
Saturday, January 12th, 2008
DENNIS GARTMAN’S NOT-SO-SIMPLE RULES OF TRADING
1. Never, Ever, Ever, Under Any Circumstance, Add to a Losing Position… not ever, not never! Adding to losing positions is trading’s carcinogen; it is trading’s driving while intoxicated. It will lead to ruin. Count on it!
2. Trade Like a Wizened Mercenary Soldier: We must fight on the winning side, not on the side we may believe to be correct economically.
3. Mental Capital Trumps Real Capital: Capital comes in two types, mental and real, and the former is far more valuable than the latter. Holding losing positions costs measurable real capital, but it costs immeasurable mental capital.
4. This Is Not a Business of Buying Low and Selling High; it is, however, a business of buying high and selling higher. Strength tends to beget strength, and weakness, weakness.
5. In Bull Markets One Can Only Be Long or Neutral, and in bear markets, one can only be short or neutral. This may seem self-evident; few understand it however, and fewer still embrace it.
6. “Markets Can Remain Illogical Far Longer Than You or I Can Remain Solvent.” These are Keynes’ words, and illogic does often reign, despite what the academics would have us believe.
7. Buy Markets That Show the Greatest Strength; Sell Markets That Show the Greatest Weakness: Metaphorically, when bearish we need to throw rocks into the wettest paper sacks, for they break most easily. When bullish we need to sail the strongest winds, for they carry the farthest.
8. Think Like a Fundamentalist; Trade Like a Simple Technician: The fundamentals may drive a market and we need to understand them, but if the chart is not bullish, why be bullish? Be bullish when the technicals and fundamentals, as you understand them, run in tandem.
9. Trading Runs in Cycles, Some Good, Most Bad: Trade large and aggressively when trading well; trade small and ever smaller when trading poorly. In “good times,” even errors turn to profits; in “bad times,” the most well-researched trade will go awry. This is the nature of trading; accept it and move on.
10. Keep Your Technical Systems Simple: Complicated systems breed confusion; simplicity breeds elegance. The great traders we’ve known have the simplest methods of trading. There is a correlation here!
11. In Trading/Investing, An Understanding of Mass Psychology Is Often More Important Than an Understanding of Economics: Simply put, “When they are cryin’, you should be buyin’! And when they are yellin’, you should be sellin’!”
12. Bear Market Corrections Are More Violent and Far Swifter Than Bull Market Corrections: Why they are is still a mystery to us, but they are; we accept it as fact and we move on.
13. There Is Never Just One Cockroach: The lesson of bad news on most stocks is that more shall follow… usually hard upon and always with detrimental effect upon price, until such time as panic prevails and the weakest hands finally exit their positions.
14. Be Patient with Winning Trades; Be Enormously Impatient with Losing Trades: The older we get, the more small losses we take each year… and our profits grow accordingly.
15. Do More of That Which Is Working and Less of That Which Is Not: This works in life as well as trading. Do the things that have been proven of merit. Add to winning trades; cut back or eliminate losing ones. If there is a “secret” to trading (and of life), this is it.
16. All Rules Are Meant To Be Broken…. but only very, very infrequently. Genius comes in knowing how truly infrequently one can do so and still prosper.
Tags: Academics, Agriculture, Bear Market, Bear Markets, Blog, Bull Markets, Canadian Stocks, Carcinogen, Chart, Circumstance, Commodities, Complete List, Correlation, Currency, Dennis Gartman, Economics, Gartman, Greatest Weakness, Greenlight, Ground Experience, Illogic, Investment, Investment Strategy, Investment Wisdom, John Mauldin, Keynes, Markets, Mental Capital Trumps Real Capital, Mercenary Soldier, Miscellaneous, Paper Sacks, risk, Rocks, Simple Technician, Strength And Weakness, Trading, Trumps, Weakness Weakness, Winning Side
Posted in Commodities, Markets | Comments Off