The Stingy News Weekly (03/05/2017)
New from StingyInvestor
Your personalized rate of return
"Personalized rates of return are starting to appear on brokerage statements across Canada. But the new addition might cause more than a little confusion because it depends both on the returns generated by the portfolio and the flow of money into, and out of, it."
Asset markets as banks
"It's important to remember that as long as cash is yielding zero or something very low, there's no arbitrage to force asset prices lower, no dynamic to force them to conform to some historically observed level or average. They can go as high as they want to, and stay as high as they want to, provided investors are able to develop and retain the confidence to buy at those levels. Note that the same point doesn't hold as readily in the other direction, when considering how low prices can go. That's because financial assets have intrinsic value. Below that value, they're worth owning purely for their cash flow streams, regardless of the prices at which they can be sold. The market can take those prices all the way to down to zero, they'll still be worth owning as incoming cash flow streams." [Markets]
What do economists know?
"I am arguing that the math and science of economic predictions and assessments are nothing like the math and science of space travel. Economics provides the illusion of science, the veneer of mathematical certainty." [Economics]
Buffett on valuation
"The stock market has been overvalued in the eyes of many since the 1990's and hasn't reverted back to 'normal' levels in a long time. I think the error is that many look at raw P/E's and don't account for interest rates." [Markets]
The latest investment scam
"Canadian securities regulators have started a task force to raise awareness and protect Canadians from the latest investment scam, so-called binary options that can cost investors everything they have." [Crime]
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