Picture Credit: Harper Collins, Simon & Schuster, with an assist from Pinetools.com || As is common with ChatGPT: explain this to me in a way that a five year old would understand. I have five grandchildren living near me. The oldest one is three, the second oldest is two. The two oldest ones are boys, and they love me. Grandpa is a lot of fun. I read to them, and play with them. I am slightly unpredictable to them, enough so that it makes them test me as they play with me. I never do anything their parents would not like, but the parents appreciate the way I take care of them. I even change diapers! But from my grandchildren, and remembering my children, I appreciate … [Read More...]
Unstable Value Funds (VII)
Picture Credit: Boston Public Library || When total systemic leverage is so high, you can’t tell what might go wrong Because of the fall in interest rates since the last post, the risks have declined with Stable Value Funds. That said, the FOMC still sounds hawkish, even though the yield curve is inverted. The FOMC needs fewer macroeconomists, and more economic historians. They are deluded by the bad models of the last fifty-five years, which lack any credibility outside of the sterility of academia. Here are the two equations that I left out of the last piece. How to calculate the premium/discount of a stable value fund: How to calculate the annualized yield to maturity: Here are the definitions: BV: Book value — the … [Read More...]
An Analogy for Some Facets of Crypto
Picture Credit: Kent Schimke || Ah, the downward spiral of cryptocurrency assets! What I am writing was sparked by what is happening with FTX, which reminded me of promoted penny stocks. Now, before I go on to that, let me mention what the results were regarding the promoted penny stocks that I wrote articles about the last one of which was written a little less than seven years ago. I only wrote about promoted penny stocks when I personally received a promotion, whether by snail mail or email. Of the 32 stocks I wrote about, how many failed in entire? Twenty-four. How many have a market cap over $1 million? Three. How many actually appreciated in price from the time I wrote the article? One, Barfresh [BRFH], … [Read More...]
The Value of a CFA Charter: Ethics
Picture Credit: Marco Verch Professional Photographer || Being a financial analyst is being a competent generalist in business Let me tell you why I am writing this, roughly three years later than I said I would. It started with a post I entitled Limits. The post itself is not why I am writing this, but in the the comments there was great criticism of the CFA Institute. They asked me what I thought of the criticisms and I said I would write about it. I suspect no one will like this post. I will mention that I served on the board of the Baltimore CFA Society for 12 years, serving nine years as its Secretary, and two years as its programs chair. I am grateful that I earned … [Read More...]
It is not a Bad Time to Retire
Picture credit: Kevin Trotman || In general, it is probably best to put off retirement as long as you can… I’ve seen a number of articles suggesting that it is a bad time to retire at present, because the market value of portfolios has declined. I’m here to tell you that the opposite is true. Picture Credit: Aleph Blog. Who else would do a graph this lame? Why did I pick these three dates to show you the US Treasury Yield Curve? On 1/3/2022, the stock market hit its high point. On 11/7/2022, pessimism about FOMC policy hit its high point. 12/13/2022 is now, leaving aside the rally in long Treasuries after the FOMC announcement on 12/14/2022. Yes, asset values on a mark-to-market basis have declined by … [Read More...]
Talk is Cheap, but Money Talks
Photo Credit: Inhabitat || What is wealth, but concentrated efforts from the past organized by a man? I’ve written on this topic many times, and I summarized my thoughts in this piece, Understanding Investment Consensus. Journalists and investors are often cavalier regarding how the market is positioned versus a given issue. Just because journalists and bloggers talk about something that is a possible crisis, that does not mean that investors have acted on those opinions. Think of our last two major crises, the Great Financial Crisis (2008) and the Dot-Com Bubble (2000). Were there many people warning about those events in advance? Yes, there were many who did so. Did institutional investors react to these correct predictions? No, they didn’t. Why? First, … [Read More...]
Estimating Future Stock Returns, September 2022 Update
Picture Credit: Aleph Blog || I know this is late, but still, here it is… At September 30th, 2022, the S&P 500 was priced to return 4.14%/year over the next ten years. Given the rally since then, that return has shrunk to 3.20%/year. Does that sound attractive? It is lower than the yield on the 10-year T-note, and lower than current inflation (which is falling like a stone, don’t tell the geniuses at the FOMC). And you could be adventurous, as I was when I was a corporate bond manager (2001-2003) buying long single-A and BBB/Baa bonds. Even at 10 year maturities, you can get well over 5% for sound credits. The stock market needs to fall around 20% to be at … [Read More...]
Sorted Weekly Tweets
Picture Credit: David Merkel, with an assist from the YouImagine AI image generator || Running at the beach Non-US New Zealand Prime Minister Jacinda Ardern’s resignation highlights the complexity of post-Covid economic challenges https://t.co/wYjiYV0MLi People got tired of an overly interventionist leader who did not listen. Jan 20, 2023 Argentina’s plan to repurchase $1 billion of its deeply distressed dollar bonds has emerging-market investors scratching their heads https://t.co/hlu9qSfIrI If you are going to do this, don’t announce it in advance. Just do it quietly. Jan 19, 2023 Entrepreneurs Flee China’s Heavy Hand: ‘You Don’t Have to Stay There’ https://t.co/Ijh5EWbg9A China faces a talent and capital drain. Once you experience freedom, no level of economic … [Read More...]