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Article Archive: 2022 The Cheesecake Factory marvel 12/31/22   Management "Common sense for restaurant success is actually the opposite of everything the Cheesecake Factory does. Minimize labor, minimize ingredients, minimize everything. Restaurants are expensive to maintain and trimming excess helps survivability. The restaurant industry revolves around the thinnest of margins, and the common refrain (which should be familiar to anyone who's ever seen an episode of Kitchen Nightmares) is to simplify everything." Take your losses 12/31/22   Markets "Given that the yield curve inverted in 2022, we need to examine what returns look like following an inversion. After digging into the data, I discovered the answer - after an inversion returns tend to be more bell shaped and more negative." Rational rebalancing 12/31/22   Markets "We find that optimal methods involve rebalancing that is neither too frequent, such as monthly or quarterly calendar-based methods, nor too infrequent, such as rebalancing every two years. Implementing an annual rebalancing strategy is optimal for investors who don't participate in tax-loss harvesting or maintain tight tracking to a benchmark portfolio, such as passive funds-of-funds. Most of the efficiency of these rebalancing strategies is generated by harvesting equity risk premium, while allowing reasonable portfolio drifts." [pdf] More important than getting rich 12/31/22   Buffett "While there is an overspill of advice regarding the 92-year-old legend's investment strategy, I believe the virtues that he lives by are pieces of his success that are often overlooked." The Stingy News Weekly: December 25, 2022 12/25/22   SNW Merry Christmas! The King's Christmas Speech 2022 12/25/22   Christmas "HM King Charles III delivers his first Christmas message to the nation and the Commonwealth." [video] Stuart McLean's Christmas stories 12/25/22   Christmas "Christmas stories from Stuart McLean's Vinyl Cafe" [video] A Child's Christmas in Wales 12/25/22   Christmas "One Christmas was so much like the other, in those years around the sea-town corner now, out of all sound except the distant speaking of the voices I sometimes hear a moment before sleep, that I can never remember whether it snowed for six days and six nights when I was twelve, or whether it snowed for twelve days and twelve nights when I was six." [video] Christmas at Red Butte 12/25/22   Christmas "Christmas at Red Butte by Lucy Maud Montgomery is about an orphaned girl, Theodora, who sacrifices her one family memento so her cousins can have Christmas." A Christmas Carol 12/25/22   Christmas "Scrooge was better than his word. He did it all, and infinitely more; and to Tiny Tim, who did not die, he was a second father. He became as good a friend, as good a master, and as good a man, as the good old city knew, or any other good old city, town, or borough, in the good old world." Fairytale Of New York 12/25/22   Christmas "Fairytale Of New York by The Pogues featuring Kirsty MacColl" [video] The Stingy News Weekly: December 18, 2022 12/18/22   SNW This week we have the Globe 250, Champagne, and more. The Globe 250 Method 12/18/22   Stingy Investing "Our star system combines two schools of investing with pedigrees that stretch back decades and that have been quite profitable in recent times. It starts with value investing principles, which favour profitable companies that trade at low prices relative to their fundamentals. Our system also employs techniques used by momentum investors, who like to buy recent winners." The Globe 250 Megastars 12/18/22   Stingy Investing "Our new Megastar ranking of Canada's largest publicly-traded companies evaluates each major stock on the TSX and awards two star ratings - one for its appeal to value investors and the other for its allure to momentum investors. We then focused on the 20 stocks with the best blend of value and momentum characteristics, which form our Megastar team." Don't try to get rich twice 12/18/22   Markets "Anyone who has become rich twice is dumb. Why would you risk what you need and have for what you don't need? If you are already rich, there is no upside to taking on a lot more risk, but there is disgrace on the downside." It is not a bad time to retire 12/17/22   Retirement "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." 'Twas the bill before Christmas 12/17/22   Markets "The Fed made an enormous error in miscalculating inflation and their ability to print trillions without consequence. As the Fed stirs investor enthusiasm by 'taking into account the cumulative tightening of monetary policy', cumulative inflation continues to build and influence real-world pricing and spending decisions. Without a sharp decline in the Fed's balance sheet, asset prices, and economic activity, we do not expect cumulative inflation to recede to levels the stock market appears to be pricing in. Instead of focusing on the cumulative tightening of monetary policy, we suggest the Fed consider how its cumulative loosening over many years continues to pressure businesses to raise prices, suffocate the consumer, and threaten real economic growth." The Champagne portfolio 12/16/22   Stingy Investing "The possibility of new highs prompted me to take a second look at the Champagne portfolio. It invests in the Canadian stock market after it hits new all-time highs and hides out in Canadian bonds the rest of the time. I was particularly interested to see how it fared during this year's unusually bad market for bonds." The Stingy News Weekly: December 11, 2022 12/11/22   SNW This week we have the Megastars, and more. Publication bias in economics 12/11/22   Academia "The probability of a study finding an effect in economics is 99.9%, but if publication selection bias is taken into account, this drops to a mere 29.7%. In other words, studies that find a significant effect are on average 3.4 times more likely to be published than studies that find no effect." Late shift 12/11/22   Economy "we've spent recent decades inching toward a world where we have too few workers and too many retirees dependent upon their labor. Have we finally reached the tipping point?" Not enough workers 12/11/22   Economy "The bottom line remains that a robust economy, pent-up post pandemic demand and massive fiscal stimulus have combined with a shortage of workers to be supportive of ongoing job creation." Size and monetary policy 12/11/22   Markets "The size premium was much stronger during periods of monetary easing - a statistically significant 0.41 percent per month at the 1 percent confidence level. However, it disappeared entirely during periods of monetary tightening." Sudden Stops 12/11/22   World "South Korea screens as the most vulnerable country, due primarily to high levels of domestic credit (165% of GDP) as well as capital inflows measuring 5.7% of GDP. We estimate the probability of South Korea experiencing a crisis in the next quarter as 3.55%." The Globe 250 12/09/22   Stingy Investing "The idea is to deliver the information that investors desire and use numerical analysis to highlight stocks that might deserve a spot in your portfolio." [$] Top 20 Megastars 12/09/22   Stingy Investing "Our new Megastar ranking of Canada's largest publicly-traded companies evaluates each major stock on the TSX and awards two star ratings - one for its appeal to value investors and the other for its allure to momentum investors. We then focused on the 20 stocks with the best blend of value and momentum characteristics, which form our Megastar team." [$] The Stingy News Weekly: December 4, 2022 12/04/22   SNW This week we have books, wealth, benchmarks, Christmas, and more. Bah Humbug 12/04/22   Christmas "I enjoy the spirit of Christmas, the music, getting together with friends and family, and eating. But let's face it, there's a lot of stress, aggravation - and money to be spent." Worth a read 12/04/22   Books "Personal finance books don't exactly rank as the most sought-after holiday gifts. Still, if there's a money nerd in your life - or someone who aspires to be one - below are 10 personal finance book recommendations." Becoming less discerning 12/04/22   Markets "My guess is that the rise of passive investments also has something to do with it. But whatever the reason, the trend is clear: Individual company earnings matter less and less compared to the overall market trend and how investors perceive this overall market trend." How much to expect 12/04/22   Markets "After controlling for all of these factors, we can get a better idea of what kind of growth a typical retail investor can expect going forward. This is important because many of us are trying to plan our financial futures based on growth expectations we get from the personal finance industry. And if those growth expectations are inflated, then we may overestimate our probability of reaching our financial destination." Performance benchmarks 12/04/22   Funds "Just like mutual funds, public pension plans and endowments are allowed to use benchmarks of their own choosing, typically referred to as custom or strategic benchmarks." Getting vs. staying wealthy 12/04/22   Behaviour "Good investing is not necessarily about making good decisions. It's about consistently not screwing up." The Screaming Value portfolio 11/28/22   Stingy Investing "But the second graph puts the screaming into the Screaming Value portfolio because it shows how far it fell in down periods." The Stingy News Weekly: November 27, 2022 11/27/22   SNW This week we have ceating, crypto, CFOs, and more. New rules for success 11/27/22   Thrift "By contrast, value stocks, with their healthy current earnings and often high dividend yields, have become far more appealing. After all, why speculate on the future when you can collect a handsome dividend check today?" Savers get paid again 11/27/22   Markets "In recent years, I have been bombarded by investors questioning why they should place any portion of their portfolios in bonds. Cash was never even under consideration. I do give credence to the argument that historically low-interest rates had nowhere to go but up, and that rising interest rates cause bond prices to fall. Regardless, my point on the investor question about bonds was merely the start of the risk-taking debauchery that ensued." Momentum in option markets 11/27/22   Markets "Momentum (6 to 36 months) is a far stronger phenomenon in options than in other asset classes, with a pre-cost Sharpe ratio at least three times higher than the standard cross-sectional momentum strategy for stocks." A crypto analogy 11/27/22   Markets "The same is true of promoted penny stocks. If they did a large issuance of stock, the price would quickly go to something near zero." CFO age and financial misreporting 11/27/22   Management "We find that the perverse effect of equity incentives on financial misreporting is weaker for older chief financial officers (CFOs) than for younger CFOs. We attribute this to differences in risk preferences associated with age." So many cheaters 11/27/22   Crime "It feels like we can.t go a week without some crazy cheating scandal popping up." Amazon is becoming an ad 11/27/22   Markets "When you search for a product on Amazon, you may not realize that most of what you see at first is advertising. Amazon is betraying your trust in its results to make an extra buck." The Stingy News Weekly: November 20, 2022 11/20/22   SNW This week we have manipulation, fraud, work, and more. Proof of work 11/20/22   Markets "When you see a lot of people making a lot of money that wouldn't normally be making a lot of money, that's a sign that something's off. When you have 29 year-olds worth $26 billion naming sports stadiums, look out. When individuals are going from unemployment to retirement in a few months, proceed with caution." Return manipulation in private equity 11/20/22   Markets "We provide evidence that private equity (PE) fund managers manipulate returns to cater to their investors." Not Buffett 11/20/22   Crime "bubbles are masters of disguise. Still, they often draw from the same playbook. Here are four reasons FTX succeeded in fooling so many." Save enough 11/20/22   Thrift "Unfortunately, most of us are stuck dealing with the financial markets, volatility and all, to improve our standard of living over the long haul. But the important thing to remember is it doesn't matter how you invest your money if you don't save enough in the first place." Glamour 11/20/22   Crime "The FTX scandal is on a par with the Madoff fireworks of fifteen years ago in terms of the amount of people affected, the institutions duped and the money that's missing. There might be as much as $10 billion missing and no one knows exactly where it went." The Blended Momentum portfolio 11/14/22   Stingy Investing "Momentum shines when it comes to returns. It has outperformed over the very long term in nearly all major markets, across many asset classes and using a variety of different approaches." The Stingy News Weekly: November 13, 2022 11/13/22   SNW This week we have jumping, margin, stories, and more. How the wealthy invest 11/13/22   Behaviour "If we can learn anything from how the wealthy invest, it's that they do it in a lot of different ways. Some of them own stocks, bonds, and real estate, while others utilize a wide range of alternatives. And though the data shows that wealthier people tend to own more alternatives, this doesn't mean that they've abandoned traditional asset classes. Try not to forget that the wealthiest 10% of Americans own nearly 90% of all U.S. stocks" Before jumping 11/12/22   Behaviour "If you've learned in 2022 that your risk tolerance is far lower than you imagined, try mightily to hang tough until the stock and bond markets recover." Persistence of margins 11/12/22   Markets "While we've been adamant that growth is not persistent and that high growth rates should not be carried out for many years, margins and returns on assets are relatively sticky. Very high margins and returns on capital do mean revert, but slowly. While growth may be ephemeral, profitability is not." A few stories 11/12/22   Buffett "Focusing on what's never going to change is more important than trying to anticipate how something might change." The Stingy News Weekly: November 6, 2022 11/06/22   SNW This week we have toxic, small, value, and more. Vincent Daniel and Porter Collins interview 11/06/22   Value Investing "Tobi interviews Vincent Daniel and Porter Collins from Seawolf on energy, inflation and the Fed." [video] Toxic workers are bad for business 11/06/22   Management "We see that even if a company manages to hire a top 1% superstar employee the cost savings are still only about half of the cost savings of replacing a toxic employee with an average employee." Cumulative vs. cyclical knowledge 11/06/22   History "President James Garfield died because the best doctors in the country didn't believe in germs, probing Garfield's bullet wound after an assassination attempt with ungloved, unwashed fingers that almost certainly contributed to his fatal infection." Small cap opportunity 11/06/22   Markets "Within the U.S., small caps trade at a 21% discount versus their typical relative multiple against the total market." Order 66 11/06/22   Value Investing "The central truth of the investment business is that investment behavior is driven by career risk. The prime directive ... is first and last to keep your job." The Impact of OPEC 11/06/22   Markets "We looked at how oil futures prices responded to OPEC production cuts from 2015 to the present. We found, as shown in the graph below, that, while OPEC production cuts generally resulted in about a 5% increase in oil prices, prices faded quickly over the course of the week following the announcement." The Dividend Monster portfolio 10/31/22   Stingy Investing "I was working in the lab late one night, when I brewed up the frightfully profitable Dividend Monster portfolio, which mixes momentum with dividend investing." The Stingy News Weekly: October 30, 2022 10/30/22   SNW This week we have momentum, multiples, and more. News you can't use 10/30/22   Media "But the truth is, each day's news offers little of value to longer-term investors. Instead, for those striving to be prudent managers of their own money, the big wins are to be found in subjects that rarely rank as news" Fair multiples 10/28/22   Value Investing "Mean reversion of the multiple is so powerful that the only factors other than starting TEV/EBITDA that matter are gross margin, free cash flow conversion and, to a small extent, size and return on capital (EBITDA/assets, this time with the sign in the direction we.d expect)." Thematic vs momentum investing 10/28/22   Momentum Investing "If asset managers are unable to select the winning themes, it is highly unlikely that the average investor can. Given this, it is much better to pursue momentum investing, which at times may include stocks from exciting industries. Boring and simple, but effective." Mind the momentum gap 10/28/22   Momentum Investing "Huang's findings are of interest, as he appears to have found a simple heuristic that could add value to a momentum strategy by providing a timing mechanism based on the Momentum Gap and significantly reducing the risk of momentum crashes." The value of a brand 10/28/22   Markets "Analysts covering the companies that own these brands systematically underestimate the pricing power and future earnings growth associated with these brands. This leads to a systematic underpricing of these shares and as a result a constant stream of positive surprises. The effect seems to be particularly large for companies that have developed their brands in-house and thus have no value associated with it on their balance sheet. It seems this ability to constantly surpass expectations is what drives the outperformance of the best brands." The Stingy News Weekly: October 23, 2022 10/23/22   SNW This week we have sleeping, growth, tales, and more. Predicting growth 10/23/22   Value Investing "The data in this chart is counterintuitive. Not because the high growth forecasts are too optimistic, but because they fade so quickly. We suspect that this historical base rate chart is far from what many investors hold in their head. But we also suspect that if we choose to replicate this data 20 years from now, the results will look eerily similar." Leisure and sleeping 10/23/22   Economy "The findings lend credence to the various reports on employees. preferences for flexible work arrangements, given that cutting the commute enables people to spend their time on other activities, such as childcare or leisure." Telling tales 10/23/22   Behaviour "Accepting new ideas is often difficult, but it can be especially hard when there's no precedent. In managing our personal finances, we can't plan for everything, but it's important not to dismiss possibilities just because they seem improbable." Asset growth anomaly 10/23/22   Markets "For investors, the takeaway is that an efficient way to improve the expected performance of an equity strategy might be to systematically exclude firms (especially small firms) with high asset growth and extreme past returns, especially if they have low profitability." An old story in modern times 10/23/22   Crime "Duncan Mavin's great book on the Greensill Capital debacle - tells us - as if we need to be told - that the illusion of omniscient bankers is just an illusion - and that dross masquerading as financial innovation continues well after the financial crisis." The Frugal Dividend portfolio 10/23/22   Stingy Investing "The Frugal Dividend portfolio offers a crop of stable dividend payers trading at bargain prices. It's the value investing variant of the Stable Dividend portfolio" The Stingy News Weekly: October 16, 2022 10/16/22   SNW This week we have value, growth, survival, and more. The unwind continues 10/16/22   Markets "We believe that Value will outperform Growth purely and simply because it is priced to do so." Where growth forecasts err 10/16/22   Markets "This analysis provides a tidy logic for value investing. Value investing works because stocks with low growth expectations priced in are less likely to disappoint dramatically." Russell Napier interview 10/16/22   Markets "First of all: avoid government bonds. Investors in government debt are the ones who will be robbed slowly." The survival game 10/16/22   Funds "There is a major incentive problem at the heart of the asset management industry, where the interests of clients and the professional investors who run money for them are often poorly aligned." Hold opinions loosely 10/16/22   Behaviour "If it's difficult to know where any one company is going, it's even more difficult to know where the overall economy is headed. We've seen this in living color over the past few years. At least five events couldn't possibly have been predicted, no matter how much research an investor had done." Fairfax shares merit consideration 10/11/22   Stocks "Even better, the massive decline in long-term bond values is constraining competitors' capacity to write new policies, allowing Fairfax to aggressively capitalize on this opportunity." The Stable Dividend portfolio 10/11/22   Stingy Investing "The recent tumble inspired me to check in on the Stable Dividend strategy to see how it's holding up in these uncertain times. It offers a conservative approach to picking stocks that focuses on Canadian dividend payers that are steady performers." The Stingy News Weekly: October 9, 2022 10/09/22   SNW This week we have recession, insurance, selling, growth, and more. Growth fades 10/09/22   Markets "Twenty-five years later, and we still can't find evidence of persistent growth" Don't sell 10/09/22   Markets "You don't need to catch the bottom. And you don't need to get super aggressive in drawdowns either. Not everybody has the stomach for that. But you absolutely cannot under any circumstances sell after a major decline. You just can't do it." Recession: earlier, harder, and longer 10/09/22   Economy "We had so much of a boom in the last couple of years, especially the housing market. Now, we're dealing with the aftermath" Going the distance 10/09/22   Retirement "The average American spends the last 12+ years of life with their activities at least partially and often seriously curtailed by illness, injury, or cognitive impairment" Florida's insurance market 10/09/22   Markets "That exposure of Florida as a low-lying peninsula means you have to charge much more than people can afford, and you will need public policy that will involve buying people out and saying 'You can't live here anymore.'" The Stingy News Weekly: October 2, 2022 10/02/22   SNW This week we have bonds, bonds, nuts, and more. Farewell, TINA 10/02/22   Bonds "but for the first time in several years, bonds are attractive investment options. In addition to providing diversification versus equities, and some ballast to an allocation, you now get paid for owning them." Back to fundamentals 10/02/22   Markets "The story of the financial markets over the past four decades can be told with two data points. In September 1981, the yield on the 10-year Treasury note almost reached 16%. In August 2020, it got as low as 0.52%. The intervening decline in interest rates drove up not only bond prices, but also the value that investors were willing to put on stocks." Losing with bonds 10/01/22   Bonds "bonds generated a negative return in the 40 years from 1940 to 1980, which includes various market and economic cycles, including World Word II. Holdings bonds in that period would have consistently reduced the purchasing power of such a portfolio, leaving investors poorer." Let's get nuts 10/01/22   Markets "In our opinion, the long overdue normalization of corporate profits is currently underway. As demand begins to falter and corporate costs remain elevated, we suspect a growing number of companies will announce lower earnings guidance later this year and into 2023. We anticipate businesses tied to housing will lead the way." Rob Arnott interview 10/01/22   Value Investing "Arnott shares his outlook on inflation, value stocks, and his cheap diversifiers strategy." [video] The Stingy News Weekly: September 25, 2022 09/25/22   SNW This week we have value, spreads, recessions, and more. Spreads and recessions 09/25/22   Stingy Investing "While the linkage between negative spreads and recessions appears to be strong in the U.S., it has been weaker in our home and native land." TSX 60 for value investors 09/25/22   Stingy Investing "The low-P/E portfolio fared the best of the bunch with average annual gains of 10.8 per cent from the end of January, 2002, through to the end of last month. It handily beat the index by an average of about three percentage points a year." Patience of value investors 09/25/22   Value Investing "Over the eight-year period 2000-2007, the Fama-French U.S. Value Research Index returned 11.0 percent per annum, outperforming the Fama-French U.S. Growth Research Index return of just 0.4 percent per annum by 10.6 percentage points a year. As you saw in the chart on valuation spreads from AQR, today's valuation spreads are very similar to what they were at the last peak in the 'bubble' in growth stocks. While that isn't a guarantee that value stocks will outperform, and do so by significant margins, it's what the historical evidence suggests is likely." Stocks vs bond yields 09/25/22   Markets "The average annual arithmetic expected ERP was 5.40% and the average annual expected geometric ERP was approximately 3.0%. This is slightly higher than the realized ERP values, at 5.0% (arithmetic) and 2.6% (geometric), respectively." Investing after market declines 09/25/22   Markets "However, once the market has declined by 40% (or more) from all time-highs, everything changes. At this point, it seems like the benefit of doubling down is quite large." MBAs vs billionaires 09/24/22   Behaviour "Let's assume, just for the sake of argument, that MBAs want to get rich. Let's also assume that, in figuring out how to get rich, they should probably look at how the richest people in the country - the billionaires - made their fortunes. If we're right in that second assumption, then MBAs are not making optimal career decisions." Alpha and the road less traveled 09/24/22   Markets "With pessimism this pervasive, it wouldn't take many positive surprises to overturn the obvious - and make global diversification lucrative again" Hot potato update 09/18/22   Stingy Investing "The hot potato portfolio has served up average annual returns of 15.2 per cent since 1981 by using momentum to jump into stocks during bull runs and out of them during long bear markets." [$] The Stingy News Weekly: September 18, 2022 09/18/22   SNW This week we have Grant, momentum, retirement, the future, and more. Beginning badly 09/18/22   Retirement "You might view sequence-of-return risk as the opposite of dollar-cost averaging. Instead of buying more shares when stock prices are down, you're selling additional shares at lower prices to generate the same amount of income. This year, unfortunately, provides a good example of how market forces can affect retirees' savings - and their plans." Estimating future returns 09/18/22   Markets "With the ten-year T-note yielding 3.41%, the S&P 500 at 3946 indicates likely nominal returns of 3.00%/year over the next ten years." Momentum after valuation peaks 09/18/22   Momentum Investing "Momentum investing also performed well following episodes when value stocks were cheap. Of course, momentum portfolios did not perform nearly as well as value portfolios, but they did still beat the generic market." James Grant on inflation 09/18/22   Grant "Grant will discuss the Fed's about-face on inflation, the battle it faces to bring it under control, the implications for financial markets, and two investment ideas for this new investment era." [video] The MBA indicator 09/18/22   Academia "Technology and private equity have taken share from investment banking, a highly popular field in the 2000s that has lost its luster since the financial crisis." The Stingy News Weekly: September 11, 2022 09/11/22   SNW This week we have value, liquidity, real estate, books, and more. An edge for retail investors 09/11/22   Markets "In all four sizes (large-cap/mid-cap/small-cap/micro-cap) the low liquidity stocks outperformed significantly. But, as you will notice, the difference in returns diminished with increasing size. Yes, you will find more illiquid stocks among microcaps simply because of the characteristics of the sector, but nevertheless, even among large-cap stocks, you can put the odds on your side." Active fund selection is difficult 09/11/22   Funds "For active investors, reducing fees paid is the easiest lever to pull to improve the odds of success." The Fed screwed up the housing market 09/11/22   Real Estate "if you are someone that's considering buying your first place you've been screwed in two different ways. Not only is it now more costly than ever to buy a home because of higher housing prices and mortgage rates, but rents are screaming higher as well" Personal-finance books are wrong 09/11/22   Books "Economists tend to offer more rational advice, because they are dealing with numbers; best sellers tend to offer more practical advice, because they are grappling with human behavior - with all of its mess and irrationality." Buyback myths 09/11/22   Markets "Dividends and buybacks are already taxed twice: when the company makes money and again when the investor receives payment. Taxing buybacks three times is obviously insane" The Stingy News Weekly: September 4, 2022 09/04/22   SNW This week we have growth, value, interest rates, diversification, and more. Abandoning diversification 09/04/22   Value Investing "Perhaps at the time when many investors are abandoning diversification in favor of putting all their money in the S&P 500, it's time to reconsider - and make the bet - that valuation gaps that have driven wide relative return differences might be strongly mean reverting." The impact of uncertainty on behaviour 09/04/22   Behaviour "Unfortunately, for those investors who sell and get out of the market 'just until things become clear again' (investors begin to treat equity investing again as risk instead of uncertainty), there is never an 'all clear' signal that will let them know it is safe to buy again." Interest rates and growth stocks 09/04/22   Growth Investing "the growth bubble that we experienced (and arguably are still experiencing) was not truly 'driven' by interest rates falling. They mattered a little bit, mathematically, but Mr. Market's belief in the false-narrative that they were the only thing that mattered perhaps was a main and important driver of growth's outperformance, and value's underperformance." Choosing happiness 09/04/22   Behaviour "It strikes me that hedonic happiness usually comes with a higher price tag, while eudaimonic happiness involves a greater investment of time. If we go to a lavish restaurant, we'll get hedonic happiness - and a big bill at the end. But if we decide to learn the piano, we may enjoy long-lasting eudaimonic happiness, but the cost will be a hefty commitment of time." The Stingy News Weekly: August 28, 2022 08/28/22   SNW This week we have history, fundamentals, size, inflation, democracy, and more. Why fundamentals matter 08/27/22   Markets "if you woke up on a Casper mattress, worked out with a Peloton, Ubered to a WeWork, ordered on DoorDash for lunch, took a Lyft home, and ordered dinner through Postmates only to realize your partner had already started on a Blue Apron meal, your household had, in one day, interacted with eight unprofitable companies that collectively lost about $15 billion in one year." The size factor 08/27/22   Value Investing "over the full period since 1963, small-cap value has been by far the best-performing corner of the equity markets, according to Ken French's data. And this relationship has been consistent across geographies" Liquidating assets 08/27/22   Thrift "How people spend their money fascinates me, especially when I hear that 42% of Americans are struggling financially, that many can't afford their prescription copays and that they're unable to save for the future. The average American household spends some 18% of its net income on things like pets, hotels, eating out, equipment for their hobbies, and entertainment fees and admissions." What about the Dufresnes 08/27/22   Economy "Like the Dufresnes, concerns related to inflation and lost purchasing power have gone missing. While investors have moved on to the next party, until our bottom-up indicators suggest otherwise, we believe the risk associated with accumulated inflation remains elevated." Democracy is good for returns 08/27/22   World "Lei and Wisniewski's findings suggest that because stock investments in more autocratic countries have provided lower returns with higher volatility and have been accompanied by expropriation risk, investors should underweight these countries in their portfolios. Investors wishing to minimise expropriation risk should consider screening out autocracies from their portfolios, or at least minimise exposure to them." The Stingy News Weekly: August 20, 2022 08/20/22   SNW This week we have recessions, trends, cycles, history, and more. Lessons from history 08/19/22   Markets "One of the most fascinating parts of the Great Depressions isn't just that the economy collapsed, but how quickly and dramatically people's views changed when it did." Bucked the trend that was your friend 08/19/22   Markets "Even over one of the tougher decades you'll see for managed futures, it did what it's supposed to do. It delivered non-trivial positive returns and excelled when it was supposed to and was most needed." Recessions as a timing tool 08/19/22   Markets "As a market-timing tool, the NBER announcements are clearly abysmal. The delays on the announcements are so long that it is effectively a countercyclical indicator." Emerging market cycles 08/19/22   Value Investing "we see no compelling reasons for an evergreen allocation to EM. However, EM equities perform particularly well during recoveries, when currencies stabilize and earnings and multiples rise." Products based on incomplete research 08/19/22   Markets "one of the key things you can do to improve your performance is to test the same methodology for other markets that have different dynamics and different performance histories. So, I calculated the daytime and nighttime returns of the US, UK, and Europe ex UK stock markets over the last 10 years. And as you can see below, while the nighttime returns for the S&P 500 look quite good, the nighttime returns for the European and UK markets are not only quite a bit lower but also roughly the same as the daytime returns." The Stingy News Weekly: August 14, 2022 08/14/22   SNW This week we have value, inflation, interest rates, and more. Looking at 10-year returns 08/14/22   Stingy Investing "U.S. politicians should be singing Stayin' Alive by the Bee Gees as the weight of 1970s-style inflation threatens to send them to the unemployment line." Changed by the trip 08/14/22   Retirement "Humans are hardwired both to worry and to strive. But looking back, all our worries - to the extent we can even remember them - appear to be a colossal waste of mental energy, while the goals we struggled to achieve now seem of little import." Mounting costs 08/14/22   Markets "Lately, 12-month CPI-U has been running around 9%. But if we extend the time horizon back 10 years, to mid-2012, the recent spike barely registers, with the average annual increase for the past decade coming in at just 2.6%." Value is not an interest rate bet 08/12/22   Value Investing "It seems obvious to so many that interest rates drive the value trade. After all, growth stocks have much longer-dated cash flows than value stocks and thus should be a 'longer duration' asset and move more with longer-term interest rates, right? 'Growth (or often just 'tech') stocks soar on plunging interest rates' (or vice versa) has become a common wise-sounding observation in the last few years. In fact, this is all taken as an axiomatic given in countless pundit and press observations. However it's not nearly that simple, and mostly it's just not true." Betting against expensive junk 08/12/22   Value Investing "For the first six months of this year, long-only investors really couldn't win. Unless you started the year long oil, almost every major asset class produced losses." The Stingy News Weekly: August 7, 2022 08/07/22   SNW This week we have value a bargain, Russo, dividend growth, and more. Watching for a bottom 08/07/22   Stingy Investing "The economy is starting to fall. Its descent is promising to be like that of the space capsule in the movie Apollo 13. As it plunges, everyone is waiting with bated breath, hoping to see the parachutes deploy before it crashes." Tom Russo interview 08/07/22   Value Investing "Global value investor Tom Russo says today's investment environment is the most challenging of his 40-year career. He explains why his core companies are up to the challenge." [video] Getting to happy 08/07/22   Behaviour "If you have some wealth, how can you use it to maximum advantage and avoid the kind of heartache experienced by the Vanderbilts, the du Ponts and others?" Dividend growers to manage volatility 08/07/22   Dividends "Notice that performance of the dividend growers nearly matches the return of the Russell 1000 Index. However, volatility is 2.4% per year lower. Said another way, the ride to achieve a similar return has fewer twists and turns." Value Cray-Cray 08/07/22   Value Investing "Value Spreads Are Back to Tech Bubble Highs" Avoiding momentum crashes 08/07/22   Momentum Investing "Remarkably, crashes are driven by large gains of previous losers while winners still exhibit modestly positive returns." The Stingy News Weekly: August 1, 2022 08/01/22   SNW This week we have retirement value drawdowns and more. Never anything wrong with value 08/01/22   Value Investing "Keswin and Wellington walked through 60 years of data on value, showing that the average up cycle lasts eight years, while down cycles last two. If investors look beyond what the big indices are showing, it's been no different since 2008" The pitfalls of analysis paralysis 08/01/22   Behaviour "When making decisions, we spend too much time choosing between options with roughly equal utility." Retirement riddles 08/01/22   Retirement "I spend significant time reading the viewpoints of people who are planning for retirement or who are already retired. My frequent reaction: What are they thinking?" Drawdowns and rallies 08/01/22   Markets "Investors may have sighed a breath of relief in July after months of pain. And perhaps we have already seen the market's 2022 lows and this recovery will follow the rapid pace of 2020. But a broader set of base rates suggest there's reason to be cautious, that risk is still elevated, and that we might yet experience an even more significant drawdown." Millions of people aren't working because... 08/01/22   Health "That's 2.4% of the U.S. working population." The Stingy News Weekly: July 24, 2022 07/24/22   SNW This week we have remote Alzheimer's smoking acquisitions and more. A tale of three acquisitions 07/24/22   Behaviour "The right culture, the highest and best culture, is a seamless web of deserved trust. Not much procedure, just totally reliable people correctly trusting one another." Remote work working 07/24/22   Economy "Despite concerns at the outset of the pandemic, working from home had a positive impact on productivity." Alzheimer's fabrication 07/23/22   Health "A neuroscience image sleuth finds signs of fabrication in scores of Alzheimer's articles, threatening a reigning theory of the disease" The news smoking 07/22/22   Media "That's how I came to see reading the news like smoking: harmful not just to the consumer, but to anyone nearby." Buffett's pension 07/22/22   Buffett "All the credit goes to Katharine Graham and the wisdom she had to ask Warren Buffett for his advice, and take it, back in 1978. Mr. Buffett recommended that we invest our pension assets in equities and hire smart advisors to manage those funds - and that is exactly what Mrs. Graham did." Little ways 07/22/22   Behaviour "If you find something that is true in more than one field, you.ve probably uncovered something particularly important. The more fields it shows up in, the more likely it is to be a fundamental and recurring driver of how the world works." That's the ticket 07/22/22   Markets "After creating the highest rate of inflation since 1981, the aggressive monetary and fiscal policies that led to the record earnings boom in 2021 have been put on hold. Businesses are finding themselves on their own to manage through an increasingly uncertain economy. While it's very early in the process, we believe peak earnings will be one of the victims of an economy that is currently attempting to normalize." The Stingy News Weekly: July 17, 2022 07/17/22   SNW This week we have a bear's bear, inflation, recessions, and more. Another bear. Oh, bother! 07/17/22   Stingy Investing "Oh, bother! We've fallen into a mess of a bear market. But Pooh Bear is really concerned about the price of honey because his last visit to the supermarket was distressing." Calling 1981 07/17/22   Markets "So in 1981 consumers were looking at 10% savings account yields, 17% mortgages, 10% bond yields and 9% inflation. Today it's 1% savings account yields, 5% mortgages, 3% bond yields and 9% inflation." A mild recession 07/17/22   Markets "That's 33 consecutive weeks of more stocks making new lows than making new highs. As you can see, this is historically as bad as it gets with the lone exception of the Great Financial Crisis in 2008-2009. Again, this is not the future, this is the present. We have already been living through it." Keith Smith's Q2 themes 07/17/22   Value Investing "Bonhoeffer Capital Management's Keith Smith discussed investment themes for Q2 2022, with an emphasis on Asbury Automotive Group and Scipps Networks." [video] The Stingy News Weekly: July 10, 2022 07/10/22   SNW This week we have taxing housing wealth momentum and more. Wealthy vs. wealthier 07/10/22   Behaviour "I think for a lot of people the process of becoming wealthier feels better than having wealth." Momentum by day or night 07/10/22   Momentum Investing "Yashar Barardehi and his colleagues performed an interesting experiment. They took all US-listed stocks from 1963 to 2019 and calculated the returns of these stocks during the day (when markets were open) and overnight, as well as the usual 24-hour full-day return. Then they formed momentum portfolios and looked at their performance in the subsequent weeks and months." Who owns sovereign debt 07/10/22   World "The researchers found that during recessions foreign non-bank investors and domestic banks dramatically reduce their holdings." Dollar cost averaging 07/10/22   Markets "Don't fear though, because I am here to defend dollar cost averaging as the greatest investment approach ever invented for the individual investor. How so? Because I'm going to show you how it held up during one of the worsts period in U.S. stock market history - the mid 1960s to the early 1980s. And if it worked there, it can work anywhere." Housing shortage 07/10/22   Real Estate "While there are numerous factors driving the rise in house prices, the increasing scarcity of housing units has risen to the top. This problem has been building (or not, as the case maybe) for decades." Spiderwebs 07/07/22   Taxes "After receiving an erroneous tax notice, Remy is convinced that the IRS is ghosting him." [video] The Stingy News Weekly: July 3, 2022 07/02/22   SNW This week we have a peppy long tailed recession, and more. The long tail is gone 07/03/22   Markets "For those who don't know the term, the Long Tail concept refers to businesses that focus on products and services with almost no customers." Time for a pep talk 07/03/22   Markets "This is where savvy investors get their edge. It's tough to outsmart other investors. But we can play a different game - by focusing not on next week but on the next 10 years." Home sweet whatever 07/03/22   Real Estate "When I sold the house in 2017 and paid off the mortgage, I pocketed roughly $86,000. When I consider the total cash outflow during the time I owned the place, I calculate an internal rate of return of -5.08% - and the return would have been even worse if I adjusted it for inflation. That isn't the sort of performance anyone would want on an investment." Plan now for recession 07/03/22   Markets "Today, the yield curve is not inverted, so why worry? As with the recent two-fold surplus of job openings relative to job seekers, this too shall pass. Really? The forward markets do a pretty good job of forecasting near-term Fed decisions and they are suggesting a 90% likelihood of a 75 basis-point hike in July followed by another 50 to 75 basis points in September. Those moves would take the 3-month Treasury bill yield to about 3%, within hailing distance of the current 3.15% yield on the 10-year Treasury bond. Absent a run-up in long bond yields, one additional hike before year-end would leave us with an inverted yield curve." Imminent recession 07/02/22   Markets "High inflation is at the top of the Federal Reserve's, Washington's, and Wall Street's list. Rosenberg says they are looking at the wrong numbers and that disinflation is already taking hold. Interest rates are expected to go higher for longer. Rosenberg cites evidence of economic slowing which will require easing sooner than expected." [video] The Stingy News Weekly: June 26, 2022 06/26/22   SNW This week we have rebalancing, recessions, happiness, and more. Understand rebalancing 06/24/22   Markets "Wise then went on to derive an interesting formula for the probability that buy-and-hold will beat rebalancing in the very long run - that is, as time goes to infinity. The result is that if the average difference between constituent portfolio assets' expected returns is small, less than about one percent, then rebalancing will, in the very long run - that is, at eternity - surely beat buy-and-hold; but if the average difference is greater than that, buy-and-hold will surely beat rebalancing." Think outside the portfolio 06/24/22   Behaviour "Following a year of high inflation, U.S. bonds significantly underperformed over the next three years when compared to their median performance in all other three year periods" Money makes you happy 06/24/22   Thrift "They say money can't buy you happiness and there is evidence that once income reaches a certain level people really aren't getting much happier with more income. But what about assets? Studies in the past focused on income rather than wealth but now a study among Germans looked at the interactions between income and wealth." Bull market grift 06/24/22   Crime "Stock markets have a long history of fraud and grift during bull markets. Grifters find it easier to entice would-be 'suckers' when everyone seems to be making a fortune but them. One such example took place at the start of the 1900s that has played out in some form or another in every bull market since." Larry Summers: recession soon 06/22/22   Economy "There is no historical precedents for inflation at the rate we now have to come down to the target the Fed has set of 2% without a recession." [video] The Stingy News Weekly: June 17, 2022 06/17/22   SNW This week we have a new bear, inflation, crystal balls, and more. How bad is it? 06/17/22   Markets "The average stock in the S&P and the Dow are not being beaten up as badly as they were during the Covid crash. The same cannot be said for the Nasdaq, where the average stock is getting killed, down 41% from its highs." Estimating future returns 06/17/22   Markets "What are the possibilities given where the market is now? When the market is expecting 3.57% nominal [over the next 10 years], give or take one percent, what tends to happen?" 30-year's soar 06/17/22   Real Estate "The 30-year fixed rate for top tier scenarios was 6.13% today, up from 5.55% last Thursday." Insider trades and non-trades 06/17/22   Markets "Consistent with prior literature findings that insider purchases are more informative than sales (sales can be made simply for diversification purposes), the return difference was more pronounced for insider purchases than for insider sales." Floodgate 06/17/22   World "will the Fed have to hike rates far enough to cause a recession? The most probable answer now is yes, absolutely. Ben Bernanke in his 1997 paper showed that central banks tragically capitulate to fighting energy-driven inflationary episodes, only to learn later that hiking rates into such events roughly doubles the effect of tightening because higher oil prices eventually act like a tightening on their own." BoC Financial System Review 06/14/22   Economy "In Canada, elevated levels of household debt and high house prices remain two key interconnected vulnerabilities. Many households have seen an improvement of their net worth and liquid asset holdings over the course of the pandemic. At the same time, the share of highly indebted households has risen. Those with high debt are more vulnerable to a decline in income and will face more financial strain when they renew their mortgages at higher rates." The Stingy News Weekly: June 12, 2022 06/12/22   SNW This week we have blood, mortgages, turnover, and more. The worst years for balanced indexing 06/12/22   Markets "Since bonds are having such a rough go at it during a correction in the stock market, this year is currently on par with 60/40 returns in 2008 and 1930. Not the kind of company you want to keep." Does turnover still matter? 06/12/22   Funds "For professional fund managers, transaction costs have come down significantly as well and risk management tools have become more sophisticated and which may have reduced the relationship between portfolio turnover and fund returns." A normal housing market 06/12/22   Real Estate "While the Fed is slowly raising the Fed Funds Rate, mortgage rates didn't want to wait around for Jerome Powell. Rates went from 3% in January to more than 5% by April. And the move higher was basically uninterrupted. The only period in history that comes even close to matching the speed and magnitude of this move was in the early 1980s." The 6% mortgage 06/12/22   Real Estate "Current 30-year mortgage rates are around 5.85%. Mortgage rates are probably close to the peak for this cycle (depending on inflation) but might rise to the low 6% range. Mortgage payments - for buying the same home - are up over 50% year-over-year." A bloody waste 06/12/22   Health "Hemochromatosis is a disorder in which extra iron builds up in the body. A potential treatment is phlebotomy so patients with hemochromatosis want to donate blood and donate regularly. The American Red Cross, however, does not permit people with hemochromatosis to donate blood. Why not? The blood is safe and effective. The blood of these patients doesn't have much, if any, extra iron (the iron builds up in the body not so much in the blood per se). The 'problem' is that people with hemochromatosis benefit themselves by giving blood and for this reason their blood is considered tainted by the American Red Cross." [Not the case in Canada where they're happy to take 500ml with extra iron] Commonness of divorce in America 06/12/22   World "Out of people who married at least once, the percentage of people who were married more than once or divorced approaches 50 percent as you get to age 60. But mortality appears to take precedence after that." The Stingy News Weekly: June 5, 2022 06/05/22   SNW This week we have inflation, momentum, crashes, and more. Bedtime for Bonzo 06/05/22   Markets "The clock is ticking on the Fed's delay game. They have waited and waited, as inflation has destroyed the standard of living of millions of Americans they promised to protect. And while moderating year-over-year inflation data may show statistical progress, it does nothing to reverse the inflation that has occurred or compensate those that have been harmed. Further, while the rate of year-over-year inflation may continue to decline as it did in April's CPI report, we believe inflation will remain well above the Fed's target and well above what the average family can withstand without significantly altering their spending and voting decisions." Risk when credit spreads rise 06/05/22   Markets "Every equity drawdown of -30% or more has occurred within six months of high-yield spreads crossing the 10-year median of 430bps. As Ben Bernanke highlights, credit markets amplify and propagate shocks to the real economy. Within this framework, deteriorating credit market conditions - such as increases in insolvency and rising real debt burdens - feed back into the economy, which in turn worsen credit conditions." Short-term momentum 06/05/22   Momentum "Their main contribution was that they documented that short-term reversal was fully explained by stocks in the lowest deciles of turnover. The fact that the largest, most liquid stocks actually exhibited short-term momentum with economically and statistically significant premiums is an important new finding, allowing long-only investors to exploit the short-term momentum of stocks with very low transaction costs." Concealing volatility 06/05/22   Funds "Don't listen to investment sales pitches which tell you to avoid the volatility of the public equity and debt markets, when they are taking the exact same risks in the private market, and they cannot or will not measure the risks for you, no matter how thick or thin the 'disclosure' document is." Rallies to the bottom 06/05/22   Markets "I thought it would be useful to exam how the U.S. stock market has bottomed historically and the false rallies that have occurred along the way." Buy high sell never 06/05/22   Markets "I always remember Bob when I'm putting money to work in the market, as I am today. It's never fun to watch an investment go down shortly after making it. Regret is a powerful emotion. But if you invest in a diversified stock portfolio and hold on for a decade or longer, just as Bob did, you should fare just fine." The Stingy News Weekly: May 29, 2022 05/29/22   SNW This week we have value by industry and country, tech, PE, and more. Still overrated 05/29/22   Markets "In sum, PE LPs are paying higher-than-S&P 500 prices for near-distressed credit quality micro-caps with a heavy sector bias toward tech and healthcare. With cracks showing in public markets for these sectors, and for growth in general, I fear that the reckoning might be finally arriving for private equity." Valuations with and without Tech 05/29/22   Value Investing "Turns out, the S&P 500 ex-technology is actually more expensive than the S&P 500, suggesting that large-cap tech might be relatively cheap but the devil is in the details." Value investing is not all about tech 05/29/22   Value Investing "The within-industry value spread (far closer to what we actually trade) is currently 95th percentile versus its own history and still 90% of the way up from median to its tech bubble peak (the prior peak before the crazy COVID driven 2020-2021 peak). The expensiveness of tech vs. the S&P 500 is 84th percentile versus its own history (so still on the high side but not the stratosphere) but only 17% of the way up from median toward its tech bubble peak." On European value 05/29/22   Value Investing "So it stands to reason, or at least consider, that in a more normal market environment, Europe might have a lot of catching up to do - particularly some of the value stocks across the continent." Avoidable costs of index rebalancing 05/29/22   Indexing "Traditional capitalization-weighted indices generally add stocks with high valuation multiples after persistent outperformance and sell stocks at low valuation multiples after persistent underperformance. For the S&P 500 Index, in the year after a change in the index, additions lose relative to discretionary deletions by about 22%. Simple rules, such as trading ahead of index funds or delaying reconstitution trades by 3 to 12 months, can add up to 23 basis points (bps). This benefit doubles when we cap-weight a portfolio not selected on market value, but based on the fundamental size of a business or its multi-year average market cap." The Stingy News Weekly: May 23, 2022 05/23/22   SNW This week we have value large and small, gold, bears, and more. Good news for large-cap value 05/23/22   Value Investing "Just as economic theory would predict, over the period 1927-2021, the Fama-French U.S. large-value research index returned an annualized 12.0% versus an annualized return of 14.5% for the Fama-French U.S. small-value index (an outperformance of 2.5% percentage points per annum). Economic theory would also predict, as Vogel demonstrated, that the advantage shrinks if one uses equal weighting for large stocks - it yields a higher average monthly return than value weighting them, resulting in a smaller return spread against the small-cap value portfolio. The reason is simple: Equally weighting large value stocks creates a portfolio with more weight to smaller stocks within the large cap universe." Crisis investing in Europe 05/23/22   Value Investing "Just like in the US, European small value stocks outperformed the market consistently and significantly after crises." Trying too hard 05/23/22   Behaviour "A truth that applies to almost every field is that it's possible to try too hard, and when doing so you can get worse results than those who knew less, cared less, and put in less effort than you did." The worst years in the market 05/23/22   Markets "Here's the good news - the longer-term returns after the worst years ever are pretty good. The average 3 year forward return is +35%. The average 5 year forward returns is a gain of almost 80%." Hedging with gold 05/23/22   Gold "If for whatever reason, things become extremely difficult, I may be running more risk than I thought in my funds. So gold is a nice insurance policy. The 5%-7% weighting would partially offset the hit we would take on equities." The Stingy News Weekly: May 15, 2022 05/15/22   SNW This week we have bears, real estate, bonds, the value spread, and more. Big selloffs are part of investing 05/15/22   Markets "Huge stock market sell-offs are normal. The S&P has historically seen an average annual drawdown of 14%. Some years see milder sell-offs. Other years see worse ones." The start of a real estate bust 05/15/22   Real Estate "During the market peak, sellers were receiving so many offers they weren't even considering conditional ones. That pushed some buyers to make high, firm offers just ahead of the market softening. Now, as they near their closing date, appraisals are coming back tens or hundreds of thousands of dollars short, leaving people scrambling to pay the difference or risk losing their deposit - or worse." Welcome back to 1994 05/14/22   Markets "At present I am pretty sure 30-year mortgage rates will rise to 6%, and maybe 7%. No one is panicking enough on this, so it will likely go higher. MBS hedging is a powerful force, and will continue until people no longer want to buy houses at such high interest rates." Glamour momentum 05/14/22   Momentum Investing "we see that building a momentum portfolio solely on stocks trading above 10x P/S is a bad idea (not surprising). One would lose about 3.5% annually compared to the simple momentum portfolio." Value spread still crazy 05/14/22   Value Investing Cliff updates his graph ... 15 charts 05/14/22   Markets "Pundits spent a lot of time asking if Warren Buffett had lost his touch in 2020. It felt like the market had passed him by. As usual, Buffett just had to wait" The Stingy News Weekly: May 8, 2022 05/08/22   SNW This week we have weed, inventory, bad bonds, and more. 75/25 the new 60/40 05/08/22   Markets "His point about cash outperforming when bond returns go negative is certainly applicable in today's rising interest rate environment. Bernstein offered up a mix of 75% in stocks and 25% in cash equivalents as an alternative to the 60/40 stock-bond portfolio." EM crisis investing 05/08/22   Value Investing "The model works so well in large part because it dramatically shifts geographic exposures, as there's almost always an EM crisis happening somewhere." Using momentum to find value 05/08/22   Value Investing "The research demonstrates that using multiple measures of value and combining value and momentum in a strategy has produced superior results compared to using either the traditional HML value factor or the traditional momentum factor independently." Up in smoke 05/08/22   Markets "The two characteristics of thematic investing are having a good story and attractive returns. No matter how sexy a theme is, the majority of investors only hop onto the train once it started moving uphill. Naturally, this makes thematic investing so dangerous as it appeals to our love for stories, and greed for making money. Stated differently, thematic investing is performance chasing with a narrative." The great inventory build 05/08/22   Markets "With The Great Inventory Build in full swing, we believe we are getting closer to a point when rotating out of energy stocks and into beaten down consumer discretionary stocks will make sense." Mayday from bonds 05/08/22   Bonds "Year-to-date, long maturity Treasuries have declined in price by almost 20%. Because of their high interest rate duration, long maturity Treasuries have underperformed both investment grade bonds and high yield bonds." The Stingy News Weekly: May 1, 2022 05/01/22   SNW This week we have the world of value, real estate, Buffett, and more. Homeland securities 05/01/22   Value Investing "Reams of studies suggest that consistently holding the cheapest and most thinly traded stocks within a country's market provided investors with a healthy premium in the long haul. Purchasing pessimism (as reflected in low prices) pays off on long horizons. But does the same apply between countries?" The scale versus the casino 05/01/22   Markets "In the short run, the market is a casino, but in the long run, it is a scale. Is this an improvement? Probably not, but speculation has become so rampant that it may be a necessary modification to change voting machine to casino." This time wasn't different 05/01/22   Markets "Arguably, the market is hitting the worst offenders because they deserve it. For instance, over 40% of all stocks had no earnings over the last 12 months. But what we haven't seen in at least 20 years is such a high number of stocks with no sales. 15% of all stocks reported no revenues over the last year! That's a smidge over 900 stocks with no sales!" Cement, concrete, and gravel 05/01/22   Stocks "I have always found it interesting how some great watchlist companies can trade at very high valuations for long periods of time. In some cases, their valuations just get higher and higher, especially during bull markets." Housing and demographics 05/01/22   Real Estate "The current demographics are now very favorable for home buying - and will remain somewhat positive for most of the decade, although most of the increase is now behind us." Berkshire AGM 04/30/22   Buffett "Nicknamed 'Woodstock for Capitalists,' the Berkshire Hathaway annual meeting is a gathering of the company's shareholders presided over by Chairman and CEO Warren Buffett and Vice Chairman Charlie Munger. The Omaha, Nebraska, event gives shareholders a chance to hear Buffett and Munger discuss investing, their economic outlook and life, as well as ask the legendary pair questions." Sell in May and go away 04/29/22   Markets "we think it is fair to conclude (as many empirical studies already have) that there may be something to this 'selling in May and going away' thing, especially over very long time horizons." Confidence 04/24/22   Markets "The value factor works well when spreads are falling and poorly when spreads are rising. The cheap cyclical stocks captured by the value factor are heavily impacted by changes in credit conditions. Notably, this is the opposite pattern shown by 10-year Treasurys, which is why the two asset classes serve as good complements in a business-cycle based strategy." Loss aversion across the ages 04/24/22   Behaviour "Younger people aged 18 to 24 exhibit a loss aversion coefficient somewhere between 3 and 4 as do people aged 65 and over. But people in the midst of their working lives (aged 35 to 54) tend to have much lower loss aversion, somewhere between 1 and 2." Dropping Economics 101 04/24/22   Economics "behavioral economics effectively disproves what was long the fundamental premise of economics. It reveals people are not rational profit-maximizing agents. Give up the underlying assumptions of Homo Economicus, and suddenly a large swath of economics appears to be riddled with fallacious thinking. Sometimes it leads to the correct decision, sometimes not, but its fundamental premise contains a deep flaw that practitioners ignore at their own financial peril." Why homeowners aren't selling 04/24/22   Real Estate "Nine out of ten mortgages in America carry an interest rate of less than 5%, which is the official level at which most new 30-year fixed-rate mortgages are now being written." Sick and tired 04/24/22   Behaviour "More money, it seems, hasn't bought happiness. One reason: We care less about our absolute standard of living, and more about how our financial lot in life compares to that of others." 5 small joys you can cut out of your life 04/24/22   Fun "With home prices doubling in the last 5 years and increasingly divorced from the incomes of Canadians such that the real estate market has created a completely parallel universe devoid of anything resembling reality, it can be easy to think you can never afford a home. But with this handy list of 5 money saving tips, you can delude yourself into the belief that it's still possible, all while depriving yourself of what simple small joys remain in your life." [Satire] The Stingy News Weekly: April 17, 2022 04/17/22   SNW This week we have the long and short of value vs. size, inflation, and more. Size does not matter for value 04/17/22   Value Investing "Based on prior academic research conducted in long/short portfolio analysis, some market participants believe that long-only Value investing works better in small-cap stocks. Our research shows that this is not true in long-only Value investing, which is how most practitioners allocate towards the Value premium. Our primary research finding is that equal-weight large-cap Value portfolios and small-cap Value portfolios are statistically similar from a returns perspective. The data suggests that value investors with a liquidity preference should allocate towards equal-weight large-cap Value portfolios. If nothing else, the data suggests that practitioners should split their Value allocations across the large-cap Value (equal-weighted) and small-cap Value since these portfolios have zero overlap but similar historical returns, highlighting a potential diversification benefit." Generational dislocation in value stocks 04/17/22   Value Investing "We often get asked whether value stocks are 'cheap.' The short answer is 'yes', but they have been cheap for a while. This important caveat underscores the fact that valuation tends to be a poor timing mechanism for all but true long-term investors." On concentrated positions 04/17/22   Markets "Be careful with concentrated positions. You need certainty about safety most, earnings second, and growth third. Otherwise you are a gambler, and most gamblers lose." Risk-reward in a hiking cycle 04/17/22   Markets "We believe there's a strong practical argument for a large allocation to fixed income today. The argument is simple: rising rates tend to be bad for all asset classes, and fixed income actually tends to perform relatively well, with significantly lower drawdowns." Value factor comes back 04/17/22   Value Investing "Antti's latest book does exactly that. It argues that Value (and Momentum), are still reliable long run sources of return that can (and should) be used to enhance portfolio returns during the current environment of low expected returns." The Stingy News Weekly: April 10, 2022 04/10/22   SNW This week we have decades of bad news for bond mullets and more. Lost decades 04/10/22   Markets "As with any insurance-like products, the signal would have slightly underperformed the benchmark in most of the other periods. This is because investors would trade upside capture for downside protection by holding cash roughly one-third of the time." Inverted bonds 04/10/22   Markets "Going back to 1970, in the year after a yield curve inversion, U.S. stocks had a median inflation-adjusted total return of 4.7% while 5-Year U.S. Treasuries had a median inflation-adjusted return of 4%. Even if we were to extend this analysis to look over two or five years, we would find that 5-Year Treasuries still underperform U.S. stocks following a yield curve inversion." The mullet discount 04/10/22   Behaviour "Our main concern with TSYS wasn't its business or financials - it was its valuation. We couldn't understand why it sold at such an attractive valuation. And then it hit me while listening to one of their quarterly conference calls. TSYS suffered from the mullet discount" Managing money and marriage 04/10/22   Behaviour "If you want to maximize your chances of happiness and togetherness, merge your finances. That's the upshot of a paper recently published in the Journal of Personality and Social Psychology, which found that joint financial resources are more likely to lead to greater relationship stability." No news is good news 04/10/22   Media "How many of us have felt true fear or disgust or burning anger after watching the evening news or reading the morning paper or listening to the radio as we commute to work? How many of us have left snarky replies to trending media tweets or submitted rage-fuelled comments on news websites? And yet we continue to consume the news." The Stingy News Weekly: April 3, 2022 04/03/22   SNW This week we have deep value, renting, real estate, flows, and more. Predictable price pressure 04/03/22   Markets "The market moves higher when dividends are paid. Market returns are 4x higher when dividend-payments are the highest. The results hold internationally as well. Some specific stats: market returns are 13bps higher on the top 5 dividend-payment days and 5bps higher on the top 50 dividend-paying days. The largest price pressure effects are in the first quarter of the year, when the probability of an asset manager reinvesting is highest. In contrast, the effect is muted in the fourth quarter, when the probability of reinvestment is lowest (managers are using cash to pay off investors)." Talk about hot 04/03/22   Real Estate "I was presented with an all-cash offer of $125,000 over the asking price. All contingencies and inspections would be waived." Financially independent and renting 04/03/22   Real Estate "I am often struck by people's obsession with owning a home. We owned a home for 15 years, and it was a wonderful experience for that time in our lives. But owning a home should not be universally equivalent with financial success. Here are seven reasons renting can be much better than owning." Bill Miller's biggest loss 04/03/22   Markets "Miller lost $300 million on Enron. It was roughly an 89% loss and the most money he had ever lost in a single position (at that point in his career). It also turned out to be the quickest. It only took 60 days." Deep roots 04/03/22   World "Innovation in particular is hard to envision if you think of it happening all at once. When you think of it as tiny increments, where current innovations have roots planted decades ago, it's more believable - and the range of possible outcomes of what we might be achievable explodes." Drivers of deep value 03/30/22   Value Investing "As expected, deleveraging and multiple expansion tend to contribute positively to returns in deep value, while earnings growth tends to be a negative contributor over a one-year hold." The Stingy News Weekly: March 27, 2022 03/27/22   SNW This week we have Buffett, Cowen, Summers, and more. Warren Buffett getting the last laugh 03/27/22   Buffett "it has been an almost infallible rule during my career as a financial journalist that you should just go out and buy stock in Berkshire Hathaway whenever people start to say that Buffett has passed his prime." What Buffett sees in Alleghany 03/27/22   Buffett "Berkshire is getting $12.9 billion of float for Mr. Buffett to deploy, a very profitable specialty insurance business, and a reinsurance business that, while volatile, could improve with Berkshire.s additional capital backing. Additionally, Berkshire adds eight non-insurance subsidiaries with good returns on invested capital." Optimists are too pessimistic 03/27/22   Markets "Michael Kitces did an analysis where he discovered that retirees following the 4% rule in a 60/40 portfolio were more likely to 4x their wealth than deplete any of their principal after 30 years. In other words, if you started retirement with $1 million in a 60/40 portfolio and withdrew 4% a year, your chance of ending up with $4 million was higher than your chance of ending up with under $1 million after 30 years." Tyler Cowen on economic growth 03/27/22   World "He visits the podcast to discuss the moral argument for high economic growth and discusses the relationship between growth and issues like general happiness, geopolitics, and the transition to a society with net zero carbon emissions." [video] Markets follow profits 03/27/22   Markets "Basic corporate profits have grown about 8% a year historically. So, corporate profits double about every nine years. The stock market ought to double about every nine years." Fed's plan to raise interest rates is wrong 03/21/22   Bonds "The central principle of anti-inflationary monetary policy is that to reduce inflation it is necessary to raise real rates. Equivalently, it is necessary to raise interest rates by more than the inflation being counteracted and above a neutral level that neither speeds nor slows growth." The Stingy News Weekly: March 20, 2022 03/20/22   SNW This week we have growth, value, beta, mental capital, and more. Preserve your mental capital 03/20/22   Behaviour "if you need to withdraw $50,000 per year, I'd suggest maintaining a minimum $250,000 to $350,000 outside of stocks at all times." Demise of the growthsters 03/20/22   Growth Investing "on the whole the markets and growth stocks overall are far from cheap. If history is any guide, there is a decent chance that the next few years will hold some more market pain for the growthsters." Value stocks are still cheap 03/19/22   Value Investing "Low interest rates might not justify very cheap value vs. growth, but people think they do because they're so extreme in their long-term forecast of growth" In case you're wrong 03/19/22   Behaviour "Because of this association with Graham and Klarman, the notion of margin of safety is seen mostly as a concept within the limited domain of investment analysis - and, even more narrowly, within the domain of value investing. It is, however, an idea that I think is more broadly applicable within personal finance." The low beta premium 03/19/22   Markets "The superior performance of low-volatility stocks was first documented in the literature in the 1970s - by Fischer Black in 1972, among others - even before the size and value premiums were 'discovered'. The low-volatility anomaly has been shown to exist in equity markets around the world. Interestingly, this finding is true not only for stocks but for bonds as well. In other words, it has been pervasive." Low expectations 03/19/22   Behaviour "The first rule of a happy life is low expectations. If you have unrealistic expectations you're going to be miserable your whole life. You want to have reasonable expectations and take life's results good and bad as they happen with a certain amount of stoicism." The Stingy News Weekly: March 13, 2022 03/13/22   SNW This week we have Schloss, oil, Turkey, inflation, and more. Wise words from Walter Schloss 03/13/22   Value Investing "A fee structure, by the way, that would make any fund managers squeamish. Schloss believed his pay should be tied to success. So he got 25% of realized gains. But if there were losses, his limited partners were made whole before he earned a cent. He only got paid when his partners made money." Commodities vs Commodity ETFs 03/13/22   Markets "The average correlation between oil and oil ETFs was only 0.8. Gold ETFs provide better exposure to gold than oil ETFs to oil. Gold mining stocks are hybrids that feature gold and equity beta." Crisis in Turkey 03/13/22   World "We differentiated between two types of crises: global ones, defined as a 50% drawdown in emerging markets that happen in parallel with a 20% drawdown of the S&P 500, and idiosyncratic ones, where only the local market has drawn down. Our research suggests that value stocks are strong return generators in global crises, but US dollar-denominated government bonds are a more reliable bet in idiosyncratic crises." Estimating future returns 03/13/22   Markets "The only period compares with this valuation-wise is the dot-com bubble. We are near dot-com level valuations, in the 98th percentile. And if you view the 10-year returns from the worst time of the dot-com bubble to now, you can see that the results they obtained are worse than what I forecast here." The inflation headshake 03/13/22   Economy "While we acknowledge the year-over-year inflation rate may eventually moderate, we must ask, how much purchasing power will be lost by the time the inflation fire subsides? The U.S. dollar has already lost considerable purchasing power relative to most necessities, such as shelter. Over the past three years, the median price of homes sold in the U.S. has increased 30%. Even if shelter inflation moderates, past increases have made home ownership unaffordable for millions of Americans." Getting back to normal life 03/13/22   Health "We can't give booster dose after booster dose, all in the name of preventing mild illness. To avoid this, we need to change our thinking" The high cost of gender bias 03/08/22   Funds "A new, global survey from BNY Mellon looked at the barriers faced by women investors. It concluded the industry is losing out on US$3 trillion in assets under management (AUM) by not making investing more accessible. More than 9-out-of-10 asset managers admitted they target their products to men and saw them as their target market." The Stingy News Weekly: March 6, 2022 03/06/22   SNW This week we have passive, active, neutral, shocks, and more. The evidence mounts against active share 03/06/22   Funds "Since the initial publication of research documenting active share, its advocates have clung to the belief that the metric could identify funds that would outperform. But the academic evidence has all but disproven that thesis." Sector neutral or not? 03/06/22   Value Investing "But for long only investors - and that is pretty much every traditional fund out there - their research finds that it is highly unlikely that a sector-neutral strategy will perform better than a strategy that incorporate sector bets." Will the optimists triumph yet again? 03/06/22   World "Despite the wars, depressions, and sicknesses of the last 100 years, we somehow pulled through. The optimists triumphed. As we face similar challenges in the days and years ahead, the question is: will the optimists triumph yet again?" Surprise, shock, and uncertainty 03/06/22   World "The world breaks every decade or so. There are so few exceptions to this it's astounding." Momentum in emerging markets 03/06/22   Momentum Investing "Perhaps investors should be skeptical of implementing the strategy in certain markets and heavily discount theoretical returns, but there is still an overwhelming amount of financial research that supports the factor across developed stock markets, where trading stocks has become very cheap, and asset classes, where futures can be used." The politics of passive investing 03/06/22   Indexing "Most of us in the finance world are well aware of the evolution of 'passive' equity investing over the years, and have witnessed its tremendous growth. And some of us have asked questions about it. We've asked is it all good? Is it mostly good? Are some aspects perhaps bad? Are some really bad? It is a subject that has kindled fierce deliberation." The Stingy News Weekly: February 27, 2022 02/27/22   SNW This week we have Buffett, marshmallows, dividends, and more. Do what Jack said 02/27/22   Markets "But while I worry about the Ukrainian people, I'm not much concerned about the stock market's decline. It's not because I have a crystal ball. Unlike the talking heads on the financial cable TV shows, I have no idea what will happen next in the financial markets. But I'm certainly not selling my stock funds. In fact, if the decline continues, I'll be investing more and, if the drop is steep enough, a whole lot more." CS Yearbook 2022 02/26/22   World "This is an extract of the Yearbook 2022, produced in collaboration with the CSRI by Elroy Dimson, Paul Marsh and Mike Staunton. This year's edition focuses on diversification as a special topic and offers an extended dataset by adding three new markets." [pdf] Buffett's annual letter 02/26/22   Buffett "After my initial plunge, I always kept at least 80% of my net worth in equities. My favored status throughout that period was 100% - and still is. Berkshire's current 80%-or-so position in businesses is a consequence of my failure to find entire companies or small portions thereof (that is, marketable stocks) which meet our criteria for long-term holding." Graphing Dividends 2022 02/25/22   Stingy Investing "I've written many articles highlighting the big returns generated by Canadian dividend stocks. They usually include only one or two graphs due to space limitations. But I've given the extra graphs a home here for the enjoyment of dividend aficionados." [pdf] Death of the marshmallow test 02/21/22   Behaviour "Following the Bing children into their 40s, the new study finds that kids who quickly gave in to the marshmallow temptation are generally no more or less financially secure, educated or physically healthy than their more patient peers. The amount of time the child waited to eat the treat failed to forecast roughly a dozen adult outcomes the researchers tested, including net worth, social standing, high interest-rate debt, diet and exercise habits, smoking, procrastination tendencies and preventative dental care, according to the study published in the Journal of Economic Behavior and Organization." The Stingy News Weekly: February 20, 2022 02/20/22   SNW This week we have historical value, old age, Munger, and more. After you leave 02/20/22   Retirement "I'm sensitive to this issue because, during my working years, I received many calls from new widows asking about their survivor pension. Often, there was none because their husbands had selected to receive income only over their life, with no survivor benefit. Times have changed, of course. There are new laws to protect spouses, plus many couples have dual incomes. But at the same time, retirement is more the individual's responsibility than ever before." 7 habits that lead to happiness in old age 02/20/22   Behaviour "Happiness tends to decline throughout young adulthood and middle age, bottoming out at about age 50. After that, it heads back up again into one's mid-60s. Then something strange happens. Older people split into two groups as they get old: those getting much happier, and those getting much unhappier." Charlie at the DJ AGM 02/16/22   Munger "Daily Journal annual meeting with Chairman Charlie Munger" The cross-section of stock returns before 1926 02/15/22   Value Investing "We study the cross-section of stock returns using a novel constructed database of U.S. stocks covering 61 years of additional and independent data. Our database contains data on stock prices, dividends and hand-collected market capitalizations for 1,488 major stocks between 1866-1926. Results over this 'pre-CRSP' era reveal a flat relation between market beta and returns, an insignificant size premium, and significant momentum, value and low-risk premiums that are of similar size as over the post-1926 period." The Stingy News Weekly: February 13, 2022 02/13/22   SNW This week we have value investing, real estate, the long run, and more. Higher mortgage rates 02/13/22   Real Estate "With 4% 30-year mortgage rates, we will likely see a slowdown in both new and existing home sales (based on previous periods of rising rates). It also seems likely house price growth will slow." Scams, grift, and bad journalism 02/13/22   Media "That 'rapper' accused of billions in crypto fraud was also a Forbes contributor. Is it finally time to move past the contributor network?" Noise traders 02/13/22   Markets "Research has demonstrated that individual investors generate negative results by paying attention to the noise of the market even before the costs of the trades. In addition, their behaviour induces increased crash risk in the stocks they buy. Investors should have learned that lesson from the crash of the dot-com stocks in March 2000." The long run 02/13/22   Markets "To give you an idea about the numbers, real rates are currently very close to these long-term trends but slightly below. In order to get back to trend, real rates would have to rise by about 0.7% to 0.8% in the United States and the UK." That's it 02/13/22   Value Investing "Global value spread at 98th percentile" Good enough? 02/13/22   Economy "Based on the amount of inflation that has occurred and is in the pipeline, we believe the Federal Reserve has gotten inflation terribly wrong. For the Fed to regain credibility and achieve its price mandate, we believe a meaningful tightening in monetary policy or sharp decline in asset prices will be necessary. Although central bankers have certainly conditioned investors otherwise, whether they like it or not, we believe a large serving of vegetables is on the way." Superpower of mini-retirement 02/13/22   Taxes "These steps allow the mini-retiree with low or no income to make massive changes to the amount of future taxes owed, all because they have planned ahead a little bit. This is not 'cheating' the (U.S.) tax code - it is making smart decisions and paying only the taxes due and not a dollar more." Value Investing: From Theory to Practice 02/08/22   Books "Giving a fresh take on investing, Value Investing: From Theory to Practice shows the readers a process that will enable them to find the stocks worth investing in. The book is not giving the reader stock tips, but, instead, is teaching an approach to pick stocks through a step-by-step, end-to-end process. This process includes identifying possibly undervalued stocks, estimating their intrinsic value, and making a decision to buy or not." The Stingy News Weekly: February 4, 2022 02/04/22   SNW This week we have value investing, momentum, bubbles, short sellers, and more. When short-sellers attack 02/04/22   Markets "short-sellers are biased. They issue fare more negative target prices than can be justified by fundamentals. This isn't surprising. Short-sellers make money if a share drops, so they systematically overstate the negatives and understate the positives. As a rule of thumb, it seems a good idea to divide the target return of a short seller by ten and you get the true reaction of the share price in the first week or so after the short-seller attacks." Use it or lose it 02/04/22   Retirement "My contention: It's a mistake to let the fire go out when we retire. Transitioning from a mentally challenging job to a sedentary lifestyle, where you spend a lot of time sitting around watching TV or on social media, is going to cost you." Employment recession close to an end 02/04/22   Economy "The current employment recession was by far the worst recession since WWII in percentage terms. However, the current employment recession, 23 months after the onset, is now significantly better than the worst of the "Great Recession"." The size of the value premium 02/04/22   Value Investing "While there are no crystal balls, there doesn't seem to be any strong evidence supporting the belief that the value premium is dead. And there may not even be any evidence that it was either smaller than Fama and French had originally found or that it is now smaller than it was originally found. The poor performance has been due to changes in what John Bogle called the speculative return (the change in relative valuations)." What explains momentum? 02/04/22   Momentum Investing "There is as yet no consensus on why equity markets permit momentum. Our analysis uses out-of-sample international data to consider a 'horse race' across momentum rationales based on overconfidence, slow diffusion of information, limited attention, anchoring bias, and real options. Our central finding in cross-sectional analyses is that the frog-in-the-pan (FIP) hypothesis, which posits that due to limited attention, investors underreact to information that arrives gradually rather than in concentrated doses, consistently wins. Also, internationally, momentum is stronger in less volatile markets and in up-markets. Information flows more gradually during these market states, implying additional support for FIP." Retire with more money than you need 02/03/22   Thrift "If we really want to help our kids or the causes that are important to us, however, leaving it all in our will may not be the best way to do it." Bubble stock meltdown 01/31/22   Value Investing "This breakdown is significant, especially for growth stocks. Remember, growth stocks trend, and value stocks mean revert. The psychology is simple. People hear about a hot stock that's gone up 3x, they buy some, it goes up 2x, they buy more: the whole attraction of buying a hot growth stock is the historic return trajectory. Value stocks are the opposite: you do well buying them when they're down, as our Crisis Investing piece showed. And so, once the trend gets broken, once the magic of the rising stock prices disappears, it's a long way down until valuation becomes the justification for buying." The Stingy News Weekly: January 30, 2022 01/30/22   SNW This week we have the inflation, duration, declines, the big D, and more. Observations from the decline 01/30/22   Markets "The average stock with a Price/Sales over 10 has lost 19% so far this year. The average stock with a Price/Sales over 30 has lost 23.5%." AAA for Apple 01/30/22   Bonds "The triple-A rating typically bestows the lowest borrowing rates and suggests the highest ability to repay bondholders. But the triple-A club has been shrinking over the past four decades. Apple recently became only the third current corporate member of this exclusive club." ETFs are not eating the world 01/30/22   Indexing "Today, there are more than 2,000 equity-focused ETFs in the United States and only about 3,000 US stocks. These ETFs cover every imaginable strategy and are almost all active bets. This is definitely not what the ETF's creators had intended." When the Fed raises rates 01/30/22   Markets "Surprisingly, stocks have held up relatively well during past hiking cycles. The average total return in these periods was 23%." How to worry about duration 01/30/22   Bonds "Rising rates translated to negative returns across the interest rate curve, with bond returns at longer maturities suffering more." Vitamin D reduces risk of autoimmune disease 01/30/22   Health "The team tracked the participants for around five years to measure the development of autoimmune conditions, including rheumatoid arthritis, autoimmune thyroid disease and psoriasis. This revealed that a dose of 2000 international units of vitamin D per day reduced the development of autoimmune disease by 22 per cent, compared with the placebo." The Stingy News Weekly: January 23, 2022 01/23/22   SNW This week we have the beach, chips, inflation, empires, and more. Casualties of success 01/23/22   Markets "Size is nature's leverage. Sought after for its benefits straight up to the point that it ferociously turns against you. Same thing applies to companies and investments." Growth multiple contraction 01/23/22   Growth Investing "In 2018, the business was trading at 14.6x sales. Right now it's 6.3x. Yes, the business is generating a lot more revenue and earnings today than it was then, but investors aren't willing to pay the same price. 276x earnings in 2018. 36x today." Life's not a beach 01/22/22   Retirement "For the past 50 years, retirement commercials have been showing the couple on the beach or the golf course. But this is nonsense. Not every retiree wants to live like that, nor can every retiree afford to. Watching such commercials causes retirees a lot of stress. Deep down, most retirees know that most retirements - including theirs - won't look like that. In fact, most of them have no idea what their retirement will look like." Inflation expectations 01/22/22   Markets "Most importantly, the relationship between inflation expectations and future inflation changes over time, not just in degrees, but in sign, meaning that sometimes higher inflation expectations lead to higher inflation and other times they lead to lower inflation." Japan's empire builders 01/22/22   World "There may be a lot we can learn from the curious case of Japan's empire builders. Japanese companies both do far less M&A than US firms and seem to have had better results from the deals they do. Yet strangely, it is American consultants, bankers, and lawyers who believe their methods of doing business are superior, not the other way around." The forgotten habit of two sleeps 01/22/22   Health "For millennia, people slept in two shifts - once in the evening, and once in the morning. But why? And how did the habit disappear?" How the potato chip took over America 01/22/22   History "The earliest known recipe for chips dates to 1817, when an English doctor named William Kitchiner published The Cook's Oracle, a cookbook that included a recipe for 'potatoes fried in slices or shavings.' And in July 1849, four years before Crum supposedly dissed Vanderbilt, a New York Herald reporter noted the work of 'Eliza,' also, curiously, a cook in Saratoga Springs, whose 'potato frying reputation' had become 'one of the prominent matters of remark at Saratoga.'" The Stingy News Weekly: January 16, 2022 01/16/22   SNW This week we have dividends, conglomerates, 52-week highs, and more. Dividend charts 01/16/22   Dividends "When you look at the long-term cash dividends on the S&P 500 going back to the inception of the index in 1957, inflation has averaged 3.6% but cash dividends have provided real growth on top of inflation." Goodbye upside 01/16/22   Markets "I was shocked when I saw the 2021 performance of Global X Nasdaq 100 Covered Call ETF (symbol: QYLD) compared to that of the Invesco QQQ Trust (QQQ), which tracks the Nasdaq 100. The Global X fund was up a paltry 10% last year, while the Invesco ETF soared 27%." Conglomerates worth holding 01/15/22   Value Investing "Power Corporation of Canada is a great example. The stock is roughly the same price today as it was in 2007. Yet it has grown its book value per share from roughly $17 to $33 during that time, and paid shareholders $18 in cumulative dividends per share to boot. To me, that.s exciting!" Buy things, not experiences 01/15/22   Thrift "While I appreciate the Stoic-style appraisal of what really brings happiness, economically, this analysis seems precisely backward. It amounts to saying that in an age of industrialization and globalism, when material goods are cheaper than ever, we should avoid partaking of this abundance. Instead, we should consume services afflicted by Baumol's cost disease, taking long vacations and getting expensive haircuts which are just as hard to produce as ever." The 52-week high glass ceiling 01/15/22   Markets "Chart analysts would tell you that at the 52-week high many investors will want to sell their stocks in order to lock in their profits at that salient anchor. Thus, selling pressure increases and the share price often bounces lower from this psychologically important level." The Stingy News Weekly: January 9, 2022 01/09/22   SNW This week we have value investing, picking funds, the periodic table, asset mixer, and more. Factor Olympics Q4 2021 01/09/22   Markets "It is easy making the case that we are currently at the peak of the current market cycle, eg by pointing to the sale of an invisible rock NFT for $12,800. However, the same position could have been taken in 2017 when the Argentinian government sold 100-year bonds shortly after resolving its latest sovereign default. The good times can not continue forever, but short-term predictions are futile. A more nuanced argument is that there has already been a change in the investment sentiment that is reflected in the factor rotation from momentum to value stocks." Model portfolios 01/09/22   Funds "On average, affiliated ETFs charged 6 bps higher expense ratios and generated 67 bps lower net year-to-date returns than unaffiliated funds (significant at the 1 percent confidence level). Their past performance, measured by the performance-rank percentiles over the previous one and three years, was also five and six ranks lower, respectively." Picking funds and indices 01/09/22   Funds "Unfortunately, the natural desire to allocate more money to better-performing asset classes turns out to be exactly the wrong instinct. While asset classes exhibit short-term (one-year) momentum, they tend to mean revert over the long term, as shown in the chart below." Growth stocks sell off 01/09/22   Markets "If growth stocks sell off will they bring value stocks down with them?" Asset Mixer Update 01/03/22   Stingy Investing We've updated our Asset Mixer to include nominal data for 2021. Periodic Table Update 01/03/22   Stingy Investing We've updated our periodic table of annual returns for Canadians to include nominal data for 2021. The Stingy News Weekly: January 2, 2022 01/02/22   SNW Happy New Year! Stock market history 01/02/22   Markets "This also means that US growth is not necessarily 'expensive' vs. European growth, but that European value has a decent chance - at least from a historical perspective - of being extremely inexpensive not only when compared to European growth, but also when compared to US value." 5 books Bill loved 01/02/22   Books "My holiday reading list this year includes two terrific science fiction stories. One takes place nearly 12 light-years away from our sun, and the other is set right here in the United States - but both made me think about how people can use technology to respond to challenges. I've also included a pair of non-fiction books about cutting-edge science and a novel that made me look at one of history's most famous figures in a new light." Value investing after the peak 01/01/22   Value Investing "Overall, the conclusions are the same - the five-year stretch after the valuation peak was another good time to be a value investor. Not nearly as good as after the 1999 peak, but the relative outperformance was around 13% annualized in the U.S. and 8% annualized in international markets" Predicting our longevity 01/01/22   Health "Consistent with past research, while individuals appear to have some sense about their likelihood of survival (on average, their estimates are close to those provided by Social Security), there are notable gaps in their estimates. For example, respondents in the first wave (1992) of the HRS who said they had a 0% probability of surviving to age 75 actually had about a 50% chance, and those who said they had a 100% probability actually had about an 80% chance." 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