The markets have gotten more efficient and the alpha is gone. Active funds are having a tougher time making money. Why? Increased competition, stricter regulation (insider trading crack-downs), and the internet democratizing information.
Nice quote about mom and pop “main street” investors:
[Main street investors] have decided to take their ball and go home… and by ball, I mean capital, and by home, I mean low-cost index funds.
Don’t judge me, Mint
iPhone 4S is the last, truly well-designed iPhone. Glass front, glass back, metal band. The iPhone 5 was not bad, and certainly better than the 6. A camera that juts out in the back, and “what-were-they-thinking” antenna bands.
In that line of thought, I’m intrigued by these rumors. http://www.macrumors.com/2015/11/16/4-inch-iphone-mid-2016-ihs-kevin-wang/
Fun word to say out loud
Consumer holiday spending intentions (and by proxy consumer confidence?) at highest since 2007, pre-crash
A duo of charts – Hedge Funds not commanding the same premium they once did
“Small Stock Premium” – the idea that small stocks outperform large stocks, over time. Reason why? the additional premium compensates you for decreased liquidity & additional volatility.
But the out-performance isn’t as dramatic as some data/charts would lead you to believe. The reason is that the NYSE only recorded a small sample of small stocks before 1972. The sample was small and stocks chosen were beaten down large stocks, one which were more likely to outperform during a bounce back. The data is skewed.
Having said that, Small Cap portfolios (e.g., Dimensional Funds US Small Cap Portfolio) still out-perform large ones in more recent years:
Huge new gov’t budget deal extends the debt ceiling through 2017. After previous partisan fighting and showdowns over the budget, does this smooth-sailing signal the end of austerity? Is the tea party party and their influence waning?
[Or is this simply because Boehner is leaving office and he is conducting business in FU mode?]
Economic recession/downturn is now unlikely. Why? Periods of recession follows periods of excesses, but in the current economy, no such excesses exist (except in the federal gov’t).
- Bullish indicators:
- Housing is improving. Both real estate prices and Housing Starts have both risen moderately.
- Businesses have lots of cash. [But is this because they don’t have anywhere attractive to spend/invest in?]
- State & local gov’ts are doing well. Their finances are improving, have ceased laying off employees, and are hiring again.
- Households are doing better. Mortgage debt has been shed, net worth is up, average factory work week is up.
But, economic acceleration is also unlikely.
- Bearish factors:
- People are still scarred from the 2007-2009 crash.
- Federal Gov’t has passed sweeping laws that are confusing and disruptive. Including Obamacare & Dodd-Frank Financial Reform.
This one strikes closest to home. Also making me think the most about what the heck is going on. Where are we in the economy? Are we in a bubble? The kind that’s going to pop or is this the New Normal.
Related reddit discussion
- More Forward Guidance
- More Quantitative Easing – Feds buy more Bonds. It has been effective in the past, but the Feds already have $4.5 Trillion on their balance sheets.
- Negative Interest Rates – pushing rates below zero effectively means people will have to pay banks to hold onto their money. Creating incentive for people to spend/invest it instead. This has worked in parts of Europe with no downsides, but US could be different and negative rates will hurt small local banks (that depend on deposits)
A blog to record the dozens of articles I read daily.