Never enough |
02/15/25 | | Behaviour |
"Accepting that we have enough and done enough might seem like worthy goals, a serene acceptance that's possible for those at peace with themselves and the world around them. Indeed, for many, “retirement” and “enough” seem to be pretty much synonymous, a declaration that the pursuit of “more” is over. But that isn't where my head is. Even now, I'm not sure I'll ever declare “I'm done,” which is weird, because I sure don't have the time to do much about it."
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Don't freak out |
02/10/25 | | Behaviour |
"If social media sentiment translated into market moves we would have seen a 1987-like crash on Monday. You had crypto prices crashing, equity futures falling, currencies moving and tons of speculation on what it all means. I don't know what it all means. No one does because we have no idea how long these tariffs will last or how punitive they will be. Investing would be a lot easier if there were no uncertainty."
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Bubbles might be likely to repeat today |
02/10/25 | | Markets |
"Bubbles do sometimes repeat within the span of a few years. Historically, the Mississippi Bubble in France ended around 1720 just as the South Sea Bubble appeared in Britain. And in the past few decades we've often see blatant overpricing that appears, gets corrected, and then promptly re-appears. In the lab, we can observe bubbles that occur in repeated experiments run with the same participants. All these facts are consistent with theoretical models that can produce recurring waves of bubbles."
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Taking it personally |
02/10/25 | | Behaviour |
"Today's discussions of risk are more nuanced, reflecting an awareness that the danger from misfortune is matched by the damage that can be done by our own behavior. Consider the typical stock-market cycle. Thanks to research by behavioral-finance experts, we now have a pretty good idea of how investors' thinking changes along with the market."
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The hidden costs of volatility drag |
02/10/25 | | Markets |
"Leveraged concentrated or non-diversified ETFs can be useful for short-term trading, but they are generally ill-suited for long-term investing. Their underperformance is primarily due to volatility drag - a natural result of compounding returns in volatile markets. This issue is amplified when leveraging highly volatile assets, as the drag increases disproportionately with higher leverage."
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AI and the Mag 7 |
02/10/25 | | Markets |
"a lot of investors have done very poorly betting against the scrappy innovators of Silicon Valley. But now that they are mega-cap behemoths run by mega-billionaires trying to outspend each other, maybe the Mag 7 will be outmaneuvered by their true heirs, another group of as-yet-unknown young innovators who are toiling away all over the world in garages far less expensive than the $1,700/square foot you have to pay to live in the cushy confines of Silicon Valley."
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When are tariffs good? |
02/10/25 | | World |
"Tariffs help domestic manufacturers by protecting them from foreign competition, but they hurt them by driving up the cost of their imported components. This is one of the two big problems with tariffs - the other one being that they drive up consumer prices.But does this mean tariffs are always bad?"
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U.S. floats idea of defaulting on treasuries |
02/10/25 | | Bonds |
"imagine thinking that by downloading a ton of data and having a few days to analyze it you could make the determination that a significant amount of the U.S. national debt wasn't real and didn't have to be paid."
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Tariffs on Canada and Mexico are bad news |
02/02/25 | | World |
"it's certainly America's dumbest trade war in living memory. There's really no upside for the country here - it's not going to help domestic manufacturing, it's not going to make Americans better off, it's not going to materially affect the fentanyl problem, and on top of all the economic risks it's going to piss off U.S. allies and make America look terrible. I still hold out hope that the tariffs will be quickly revoked after some sort of symbolic concessions. But if not, then we'll know that we've left the era where Trump just blustered and preened, and entered a more frightening era where he starts lashing out and breaking things."
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Trump gone soft |
02/02/25 | | World |
"Trump is imposing destructive (and self-destructive) tariffs on an ally that has done nothing wrong, while handling a rival and potential enemy with kid gloves. It is hard to believe that sheer stupidity - although there's plenty of that going on - can explain it."
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The fartcoin stage of the market |
02/01/25 | | Markets |
"I can't believe I'm saying this, but the current meme coin mania makes the bubble of 2021 seem like a relatively sober exercise in rational valuation. At least back then, Roaring Kitty talked about earnings, and crypto enthusiasts rhapsodized about use cases. They might have been delusional, but at least they were delusional about the right things."
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Shameless robber barons |
02/01/25 | | World |
"If swindling pays, then it will not stop. The definition of the good society is one in which virtue pays. I can now add a slight variation to this; you cannot have a good society unless virtue pays."
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International stocks |
02/01/25 | | World |
"This is why some have argued that U.S. stocks are experiencing DotCom Bubble 2.0. The euphoria surrounding AI today parallels that of internet companies in the late 1990s. While I see the similarities, the difference is that the earnings are much bigger this time."
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The inflation gamble |
02/01/25 | | Behaviour |
"we find that high inflation lowers risk aversion, strengthens skewness preference, and increases demand for investments that resemble lotteries. Due to increased gambling demand, lottery-type stocks become more overpriced and earn lower returns in the future. This negative relation is stronger for lottery-type stocks that have greater sensitivity to inflation and are harder to arbitrage."
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There is no fear priced into anything |
01/27/25 | | Markets |
"Valuations tell the tale. The current market's price-earnings ratio is top decile for last few decades. Credit-spreads are near record tights. There is no fear priced into anything at the present moment."
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Tariffs will not make america great |
01/27/25 | | Taxes |
"Unfortunately cutting taxes and replacing them with higher tariffs simply will not work. The only fiscally sustainable way to reduce the tax burden on working Americans is through spending cuts. Hiking tariffs in order to slash other taxes will do nothing to improve the plight of ordinary Americans and will almost certainly exacerbate their problems. Tariffs did not make America great and they will not make America great again."
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Explaining international valuations |
01/27/25 | | World |
"Were a larger percentage of the valuation gap explained by fundamentals, we'd expect such a gap to persist. But given that the valuation gap is primarily explained simply by the location of listing, we think there's a strong reason to expect a convergence - and therefore to favor international over US-listed stocks, despite their terrible relative performance over the past decade."
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Taking center stage |
01/27/25 | | Behaviour |
"It's the one asset we're all born with, and it pretty much defines our financial life. I'm talking here about our human capital, our ability to pull in a paycheck. That paycheck - or the lack thereof - drives our ability to save, service debt and take investment risk. It also dictates our insurance needs and how much emergency money we should hold. Put it all together, and our human capital should arguably determine how we manage our money over our lifetime."
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A recession is coming |
01/27/25 | | Markets |
"The 1960-61 and 1990-91 recessions are missed (although a 10yr-2yr disinversion might catch the latter), while a recession is predicted for April 2025. Of course, if the inversion failed to predict the 2024 recession, is there reason to believe the disinversion will predict well?"
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Valuation indicators to ignore |
01/19/25 | | Markets |
"Here I review four commonly used measures of market overvaluation that you can safely ignore. All four measures say the U.S. stock market is overvalued today. The market might well be overvalued today, but these measures are not good reasons to say so."
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Wealth or inflation |
01/19/25 | | Value Investing |
"Assuming financial assets remain inflated, we expect more companies will discover the rewards associated with higher-margin premium offerings. As businesses shift their mix to accommodate the higher end, we believe wealthy consumers will increasingly become the economy's price setters. Moreover, additional gains in household financial assets could lead to further increases in home prices and shelter inflation. If the bond market didn't have enough to worry about, we believe the days of booming asset prices coexisting with tame consumer prices are long gone. Asset inflation is leaking."
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Problems with passive investing |
01/19/25 | | Indexing |
"Passive investing has absolutely revolutionized the investment landscape for individual investors. Not only has it dramatically lowered the costs of asset ownership, but it has done so while delivering strong returns. What began as a radical idea to buy the overall market without worrying about picking the winners now accounts for 57% of all equity fund assets and over $13 trillion."
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2024 in factors |
01/19/25 | | Markets |
"Looking at some of the biggest drivers of returns, the global equity factor had higher returns and lower volatility versus the historical average. Similarly, the large size factor, high-investment (AI-driven), and high turnover (lots of trading activity) all did quite well for style factors. Momentum and quality did well but were largely in line with history while value lagged."
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Trudeau was a poor steward |
01/13/25 | | Government |
"The fact is, no one seems to really know what's behind Canada's low productivity growth. Observers agree that low rates of corporate investment, including investment in R&D, are the problem, but no one seems to have a good explanation for why companies aren't investing. And no one seems to know whether Canada's especially bad performance since the pandemic is just an exacerbation of the existing negative trends, or whether some new problem has cropped up in addition."
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Seven pillars of market bubbles |
01/13/25 | | Behaviour |
"Charles Mackay wrote the lurid bestseller Extraordinary Popular Delusions and the Madness of Crowds, which discussed many historical bubbles. Despite publishing his book in 1841 decrying bubbles, in 1845 Mackay himself was caught up in the British railway bubble and advocated buying shares."
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Spending it |
01/13/25 | | Retirement |
"Retirees can pick from a host of withdrawal strategies, including the five popular choices listed below. You'd likely fare just fine with any of the five strategies - but that doesn't mean you shouldn't pick carefully."
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Stock market history, illuminated |
01/13/25 | | Markets |
"What particularly interests us is that - until the last decade - European and US stock markets behaved very similarly over many, many years. Given that many constituents in both markets are global businesses selling many similar products and services multi‐nationally to similar regions, countries and customers, this made sense."
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The TSX's gains over almost 69 years |
01/13/25 | | Stingy Investing |
"When pondering the future, I like to set my expectations by looking to the past, because it offers clues to the rewards, and risks, associated with investing in stocks."
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Looking back from 2035 |
01/05/25 | | Fun |
"Well, sitting here in the year 2035 and looking back at our endowment's returns for the last decade is not a pleasant task. World markets have been subpar and our performance relative to world markets has been simply terrible. Hard times are never pleasant."
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Simple formulaic investing |
01/05/25 | | Value Investing |
"Schwartz and Hanauer demonstrated that simple, easy-to-implement, systematic formula-based investing can still generate market outperformance, providing investors with efficient exposure to well-documented factor premiums."
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Why we struggle |
01/05/25 | | Behaviour |
"Why do some financial situations scare us, while others leave us unperturbed? Why do we spend time and money in ways we later regret? Why do we find our bad habits so difficult to change? Why do we admire some folks, while being jealous of others?"
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Self defense |
01/05/25 | | Behaviour |
"Using the 4% rule as a benchmark for a reasonable portfolio spending rate, Blanchett found that retirees spend, on average, just 2.1%. The upshot: They could afford to double their spending without materially jeopardizing their plans."
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