The Stingy News Weekly (07/26/2015)
New from StingyInvestor
Dividend stocks aren't immune from downturns
"Income investors love dividend stocks and for good reason. But dividend stocks aren't immune from downturns and conservative retirees should think twice before spending all of their dividend income."
A value asset allocation strategy
"After enduring years of frustration trying to identify a valuation-based asset allocation technique.that actually worked.I think the team at Gestaltu is on to an interesting concept. By simply looking at real spreads between equity valuations and realized inflation (high spreads are good for equity; low spreads are bad for equity), one can devise a timing rule that captures most of the upside, but protects on the downside. Of course, this is all historical data and could very well be an exercise in data-mining. That said, the concept of buying equity assets when they have much higher yields than current inflation, is intuitively appealing." [Value Investing]
A survey of equity valuation models
"Our forecast for core U.S. equities is a 0.8% annualized real return over the next decade." [Markets]
The really big one
"A thirty-second earthquake generally has a magnitude in the mid-sevens. A minute-long quake is in the high sevens, a two-minute quake has entered the eights, and a three-minute quake is in the high eights. By four minutes, an earthquake has hit magnitude 9.0." [Science]
The minimum-wage muddle
"Raising the minimum wage will produce winners among job holders from all backgrounds, but it will disproportionately punish those with the lowest skills, who are least likely to be able to justify higher employment costs." [Economics]
Housing market still not rational
"The housing market is another matter. It is far less rational than even the often irrational stock market, for a couple of important reasons. First, most investors find it difficult to understand how housing supply responds to changes in demand. Only a small minority of people think carefully about such things. Second, it is very hard for the minority of smart-money investors who do understand such matters to bet against bubble-level prices in real estate markets. In housing, the smart money has relatively little voice." [Real Estate]
Index funds may work too well
"I have a good laugh every now and then about the people who think that index funds should be illegal because they make companies less competitive, but honestly it's a nervous sort of laughter. Those people are up to something, something so big and interesting that it makes them nervous too." [Indexing]
Why people repeat financial errors
"This week on our Masters in Business radio podcast, we speak with Howard Marks, co-chairman of Oaktree Capital Group. In our discussion, Marks explains what 'second-level thinking' means for investors and why so many people make the same financial errors." [Value Investing]
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