The Stingy News Weekly: 01/24/2021
New from Norm
Asset Mixer Update
We've updated our Asset Mixer to include real data for 2020.
Periodic Table Update
We've updated our periodic table of annual returns for Canadians to include real data for 2020.
Investing in a bubble
"This ratio of growth to value valuations has already reached 1999 levels and is trending towards dot-com bubble levels. While this is not a definitive sign that we are in a bubble that is about to burst, it is yet another in a growing number of red flags. And while we believe value will prevail in the full sweep of history, those who want to participate in the bubble.s upside might want to consider implementing trend-following rules that might help cushion the fall if the large-cap technology market turns." [Markets]
Quality, where art thou
"Unfortunately, neither quality nor quality income ETFs had significantly lower maximum drawdowns during the global financial crisis of 2009 or the more recent COVID-19 crisis of 2020, which resulted in lower risk-adjusted returns compared to the S&P 500. In contrast, the portfolio comprised of highly profitable stocks achieved meaningful reductions in drawdowns in both crisis periods." [Markets]
Growth can go out of style
"Amazon's stock fell from a peak of $113 to a low of $5.51. That means that from the peak, it got cut in half, then it got cut in half again, and then it got cut in half a third time, and then, you guessed it, it got cut in half again. And then it lost another 22% for good measure. So the next time you see somebody say, 'If you invested $10,000 at Amazon's IPO,' you can safely dismiss the second part of their statement." [Markets]
Randomized control trials and the minimum wage
"There are four main results: '(1) the wages of hired workers increases, (2) at a sufficiently high minimum wage, the probability of hiring goes down, (3) hours-worked decreases at much lower levels of the minimum wage, and (4) the size of the reductions in hours-worked can be parsimoniously explained in part by the substantial substitution of higher productivity workers for lower productivity workers.'" [Economics]
Another alpha bites the dust
"One of the claims of active fund managers is that the rise of indexing and passive investing in general would make the markets less informationally efficient. It would also create more opportunities for exploiting index funds that focus on minimizing tracking error.they are forced to trade, and, thus, likely to take a loss when rebalancing occurs. If that were the case, the rise in passive investing would have led to an increase in the Index Effect. Yet, the exact opposite has occurred." [Markets]
Well-being rises with income
"Past research has found that experienced well-being does not increase above incomes of $75,000/y. This finding has been the focus of substantial attention from researchers and the general public, yet is based on a dataset with a measure of experienced well-being that may or may not be indicative of actual emotional experience (retrospective, dichotomous reports). Here, over one million real-time reports of experienced well-being from a large US sample show evidence that experienced well-being rises linearly with log income, with an equally steep slope above $80,000 as below it. This suggests that higher incomes may still have potential to improve people's day-to-day well-being, rather than having already reached a plateau for many people in wealthy countries." [Behvaiour]
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