Links - Markets and Investing

QUOTE OF THE DAY

"The current low yield environment has turned every bond investor into a trader." -Cullen Roche.   

CHART OF THE DAY

MARKETS AND INVESTING

Bonds Aren’t as Wretched an Investment as They Seem, Zweig. WSJ.  

The Relative Irrelevance of Market Highs, Tim Maurer.  "My recommendation, therefore, is to exercise deliberate indifference. Receive the information you likely have no choice but to encounter and make an active decision to be passively indifferent."  

Small things add up, Phil Huber. "A few “bps” here and there may not seem like much, but compounded over an investing lifetime they can make a difference an order of magnitude higher than most people can fathom."  

Bond Returns: Don't Be Jealous, Be Worried, NewFound. "The danger is that at present levels, and without rates going negative, bonds may not have enough room to run to offset equity losses in the case of a crisis."  

The Folly Of Stock Market Forecasting, AlphaArchitect.  "The idea that one can predict stock market movements is somewhat insane. The major problem…is the lack of evidence that it is possible." 

Measuring Your Economic Wellness, AIER.  

Revisiting Price Compression – Long Bond Edition, Pragmatic Capitalism.  " But what happens when that bond generates 25% compound growth as it did between 2010 and 2014?  Well, that instrument is essentially pulling future returns into the present. Its future returns are compressing into the present. This price compression can create an environment where you’re likely to generate a very poor future risk adjusted return."  

Big Investors Seek Custom Solutions to Low Rates, Volatility, ThinkAdvisor.  " Examples of custom solutions include multi-asset-class solutions, outsourced chief investment officers, liability-driven investing and pension risk transfer."  

Where are the billionaire financial academics? www.financial-math.org  " According to the just-published 2016 Rich List of the World’s Top-Earning Hedge Fund Managers by Institutional Investor’s Alpha magazine, eight of the top ten earners fall into the “quant” category, and half of the 25 richest of the year are quants. The firms listed include the likes of Renaissance Technologies, D.E. Shaw, Two Sigma, Millennium, Citadel and Schonfeld, none of which engage in “smart beta” or factor-based investments. None of these firms apply the theories published by Economics Nobel laureates such as James Tobin, Eugene Fama, Robert Shiller and dozens of others. Instead, these firms rely on a combination of mathematics and computational technology."  

Paper: Limitations of Quantitative Claims About TradingStrategy Evaluation, Priceactionlab.com.  " The main idea in the paper is that while the quantitative evaluation of trading strategies is useful, especially in raising awareness about the perils of backtest overfititng and selection bias, it does little to address the more important problem of changing market conditions that practitioners constantly face."

What Exactly Is a Black Swan, Anyway?  CharlesSizemore.com