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Article Archive: 2024

Lucky vs. repeatable
04/14/24   Behaviour
"In business and investing, you want to learn the big lessons about why things behave the way they do without assuming the past is a direct guide to the future, because it's not - most of the details are not repeatable."

What global withdrawal rates teach us
04/14/24   Retirement
"One thing that I think withdrawal rate sceptics have right is their suspicion that over-relying on the performance of one country isn’t necessarily the best approach for risk management. The top global withdrawal rate portfolios all have heavy allocations to foreign markets either through stocks, bonds, or global real assets. Small bias to the home stock market can be productive, as well as a healthy dose of domestic bills. But if you want to protect yourself from the home economy tanking, global diversification is the way to go."

Back to work
04/14/24   Retirement
"Call it the great unretirement. Hit by rising living costs and unexpected feelings of boredom, one out of eight retirees plan to return to work this year, according to a recent survey."

It's not the economy
04/14/24   Markets
"One of the most widely cited surveys papers, summing up all the economic literature on the ability of financial market movements to predict economic growth, said that while economists have often noted some sort of link between stocks and growth, 'upon closer inspection, however, this link is murky.'"

Where it goes
04/14/24   Thrift
"A lifetime of frugality has made such spending and giving a whole lot sweeter. It really does feel wonderfully luxurious. And whenever the cash outflow makes me a little uncomfortable, I reassure myself that such expenditures are indeed discretionary and, if necessary, we could eliminate them and our annual spending would plunge."

The Stingy News Weekly: April 7, 2024
04/07/24   SNW
This week we have value, Cliff, market history, ETFs, and more.

The empirical problem with competitive strategy
04/06/24   Markets
"There is no empirical evidence that a company's market share predicts its profitability. But that hasn't stopped academics, business school curricula, and management consulting firms from promulgating the idea for decades."

Cliff Asness interview
04/06/24   Asness
"We talk about diversifying by both asset class and geography, the challenge of managing short-term expectations while keeping a long-term perspective, and ..." [video]

Cognitive dissonance
04/06/24   Asness
"Here are a few things I would've thought were hard for investors to believe simultaneously. I would've been wrong"

Don't bank on the equity risk premium
04/06/24   Markets
"If stocks will assuredly outperform bonds over intervals of, say, 20 years or more, where is the risk? And if stocks aren't risky over long intervals, why should their returns exceed the returns on bonds that are not risky?"

Buying tiny ETFs
04/03/24   Indexing
"We went with a NAV trade in this case, deploying $60 million into a $6 million ETF very efficiently in a single trade."

The Stingy News Weekly: March 31, 2024
03/31/24   SNW
This week we have value, trading, momentum, real estate, and more.

Shining moment
03/31/24   Markets
"Where will gold go from here? It's hard to know. Gold doesn't pay any income. As Warren Buffett likes to say, it 'just sits there.' In fact, gold costs money to hold, because it requires storage space and security."

The B-Team
03/30/24   Markets
"we do not believe the current market and profit cycles are perpetual. Like past cycles, we expect many of the trends inflating profits and asset prices will revert and be proven unsustainable. In basketball terms, this game (cycle) isn't over. We plan to keep shooting, finish the game, and are prepared for the final shot. Instead of giving up, we believe valuations matter more today than ever."

Rent or buy
03/30/24   Real Estate
"Putting the non-monetary issues aside, the most eye-opening thing I learned from this analysis was that you cannot know with certainty whether buying or renting is the right choice until far into the future. Why? Because of future inflation"

Economic momentum
03/30/24   Markets
"Strong empirical evidence demonstrates that momentum (both cross-sectional and time-series) provides information on the cross-section of returns of many risk assets and has generated alpha relative to existing asset pricing models. Brooks, Feilbogen, Ooi, and Akant's study adds to that body of research by providing tests of pervasiveness and robustness, increasing our confidence that the findings of momentum in asset prices are not a result of data mining."

90% is much better than nothing
03/30/24   Markets
"Noise is not only a fact of life for financial data, it is present in economic data, health data even data about Reddit comments. As the great Fischer Black said in his prescient article on data noise, published almost 40 years ago: 'I think almost all markets are efficient almost all of the time. 'Almost all' means at least 90%.'"

The trading game
03/30/24   Books
"Gary's book is a powerful tale of the industry and the people who work with Gary. And these people are driven, it seems, only by greed and characterised by a complete lack of ethics. These people are empty corporate automatons. And if the reader recognises himself in parts of this story, the question Gary asks implicitly is: What are you going to do about it?"

The Stingy News Weekly: March 24, 2024
03/24/24   SNW
This week we have quality, forecasting, markets, and more.

Forecasting is hard
03/23/24   Markets
"Although we might not like to admit it, we know that forecasting economic and market variables is tough, but just how tough? A new study by Don Moore and Sandy Campbell sought to answer this question. They looked at 16,559 forecasts made in the Survey of Professional Forecasters since 1968, and found that those making expert predictions had 53% confidence in their accuracy but were only correct 23% of the time."

Why are U.S. stocks expensive?
03/23/24   Markets
"But I do think Zack Morris is right to describe the U.S. stock market as a savings vehicle as much as an investing one, thereby earning a monetary premium."

Why quality stocks perform so well
03/23/24   Markets
"And this is good news for investors because it means that investing in highly profitable companies is not associated with higher risks and at the same time based on behavioural biases that are unlikely to change over time, so the effect should be relatively persistent."

A quiet life
03/23/24   Retirement
"For me, retirement isn't all that different from childhood. There have been very few other times when life felt relatively carefree. These days, I solve puzzles on my phone, rather than in a magazine, and I write my life stories using a Chromebook, not a notebook. The quiet life isn't for everyone. But it suits me just fine."

Fairfax Week 2024
03/23/24   Stingy Investing
"Check out this year's Canadian carnival for capitalists."

2023 private equity fundamentals
03/23/24   Markets
"PE-backed firms generally have much lower margins than public companies, so this rise in interest costs has meant that the median PE-backed company is actually generating zero free cash flow."

The Stingy News Weekly: March 17, 2024
03/17/24   SNW
This week we have momentum, small caps, working, and more.

Seven reasons to work
03/17/24   Retirement
"Before you dive into the world of endless vacations and gardening, consider that keeping a toe - and perhaps your whole foot - in the workforce might be the secret ingredient to a fulfilling retirement."

Momentum works everywhere
03/17/24   Momentum Investing
"Across a diverse set of global equities and multiple market capitalizations, we conducted an analysis of 32 distinct long-only factors, including momentum, value, growth, quality, and the market. Notably, momentum demonstrated exceptional performance, surpassing the respective market return in 100% of the samples." [pdf]

Sclerotic small caps
03/17/24   Markets
"We think the changing composition of industries and quality among the small-cap universe is more to blame for weaker recent returns to small caps rather than a structural change in the upward mobility for small-cap equities."

Breaking bad momentum trends
03/17/24   Momentum Investing
"Crashes occurred particularly in reversals from bear markets when the momentum portfolio displayed a negative market beta and momentum volatility was high. Fortunately, the empirical evidence has found that crashes were at least partially predictable and that the predictability and thus the performance of momentum strategies can be improved by employing systematic strategies."

Noisy factors
03/17/24   Value Investing
"A Nobel laureate's theory supports betting on cheaper stocks and sets a benchmark for money managers. But the numbers keep changing. How much does it matter?"

Different this time?
03/17/24   Economy
"Hence, I join Cam Harvey (who brought to prominence the yield curve as recession predictor) who says it's too early to drop the recession call."

The Stingy News Weekly: March 10, 2024
03/10/24   SNW
This week we have the yearbook, momentum, millionaires, and more.

Global Investment Returns Yearbook 2024
03/09/24   Markets
"Today, the US market dominates its closest rival and accounts for a staggering 60.5% of total world equity market value. Japan (6.2%) is in second place, the UK (3.7%) in third position, while Mainland China is ranked fourth (2.8%). France, Canada, Switzerland, Australia, Germany and India each represent 2-3% of the global market, followed by Taiwan with 1.7% and South Korea with a 1.4% weighting."

Cost of capital and capital allocation
03/09/24   Markets
"There is an old saying that 'in theory there is no difference between theory and practice, while in practice there is.' One area where this appears to be true is the actions of public companies in the U.S. during the recent period of 'easy money,' when financial capital was cheap and abundant."

Stocks (and bonds) for the long run
03/09/24   Markets
"Outside the post-World-War years from 1941 to 1981 stocks in the US did not outperform bonds by any meaningful margin. Let me repeat that: Apart from the four decades to the 1980s, stocks did not systematically outperform bonds. Sometimes stocks outperformed bonds, sometimes bonds outperformed stocks"

A momentum crash course
03/09/24   Momentum Investing
"Interestingly, the high-yield spread is not a particularly useful predictor of the forward returns of the 'winner' portfolio. Rather, it significantly predicts momentum crashes by identifying when the 'loser' portfolios will experience positive reversals."

Can the typical person become a millionaire?
03/09/24   Thrift
"So, can the typical person become a millionaire? Not if they take typical actions."

Graphing Dividends 2024
03/06/24   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]

The Stingy News Weekly: March 3, 2024
03/03/24   SNW
This week we have dividends, retirement, losses, and more.

The case for and against dividend ETFs
03/03/24   Dividends
"Unlike stock prices, which move based on the whims of market participants, dividends are set by company management and have been far more stable than prices historically. My favorite example of this comes from The Great Depression where monthly prices declined by nearly 90% (from peak to trough) but dividends weren't even cut in half."

Don't cut your losses?
03/03/24   Momentum
"'Cut your losses' is not a good strategy, as it underperformed the benchmark buy-and-hold portfolio. As Baur and Dimpfl noted, 'Losing stocks rarely continue to fall, which is not surprising in a world where stock markets rise and economies grow on average. In other words, if a rising tide lifts all boats, a cut-your-losses strategy cannot work.'"

Comfort has a cost
03/03/24   Bonds
"In the financial markets, you'll typically pay a high price for certainty. That price is paid in lower investment returns, and sometimes also in greater financial hassles. Yet I see investors paying that price again and again."

Rule, Britannia
03/03/24   World
"We think a long-term bet on upward mean reversion for Europe should also include a cap-weighted allocation to the UK because discounts are greater in Britain. UK stocks represent around 24% of aggregate tickers in the combined investment opportunity sets of the UK and Europe."

The Globe's Dividend All-Stars
03/03/24   Stingy Investing
"We're pleased to present the Globe's Dividend All-Stars, which highlights the best dividend-paying stocks on the Toronto Stock Exchange (TSX). It includes a wealth of information on the 200 largest companies in the land for bargain seekers and income investors alike. Each stock is measured up for its overall investment appeal and the top 20 five-star stocks make it into the Dividend All-Stars portfolio."

A Protestant retirement ethic?
03/03/24   Retirement
"Moshe Milevsky and Marcos Velazquez have identified one area where there is an advantage to being a Protestant, or at least living in a heavily Protestant society. They document a statistically significant relationship between the share of Protestants living in a country and the quality of the pension system in that country."

The Stingy News Weekly: February 25, 2024
02/25/24   SNW
This week we have dividends, Buffett, retirement, and more.

Buffett's 2023 letter to investors
02/25/24   Buffett
"With that focus, and with our present mix of businesses, Berkshire should do a bit better than the average American corporation and, more important, should also operate with materially less risk of permanent loss of capital. Anything beyond 'slightly better,' though, is wishful thinking"

The low-volatility factor
02/25/24   Markets
"The low-volatility premium may be the most compelling anomaly in financial markets: Less risky securities outperform their riskier counterparts over the long term."

The blue and yellow can
02/25/24   Markets
"the current market reminds us of the late 1990's when investors were also crowding into tech and high-quality stocks. Stocks such as Coca-Cola (KO) were in high demand as investors looked for ways to participate in the rising equity market while minimizing risk. As investors crowded into Coca-Cola's stock to reduce risk, its valuation soared along with the risk of overpaying. The flight into quality eventually resulted in losses, as Coca-Cola's stock declined over 50% from its cycle peak in 1998 to its trough in 2003, reminding us that good businesses don't always make good investments."

Japan's orphans
02/25/24   Value Investing
"Abandoned, deep-value micro-caps found sufficient buyers to produce a sizable premium over other strategies, even when the size premium only worked 50% of the time and liquidity levels and relative valuations for Japan were falling."

The Globe's Dividend All-Stars
02/24/24   Stingy Investing
"We're pleased to present the Globe's Dividend All-Stars, which highlights the best dividend-paying stocks on the Toronto Stock Exchange (TSX). It includes a wealth of information on the 200 largest companies in the land for bargain seekers and income investors alike. Each stock is measured up for its overall investment appeal and the top 20 five-star stocks make it into the Dividend All-Stars portfolio." [$]

The Globe's Top 20 Dividend All-Stars
02/24/24   Stingy Investing
"We combine all of our yield, value, and market measures to rate the 200 largest dividend stocks on the TSX. Only 20 get a full five out of five stars and are put into the new Dividend All-Stars portfolio." [$]

Faulty assumptions
02/24/24   Retirement
"Many people put a lot of faith in planning software, betting their financial life on assumptions, projections and past performance. The assumptions are usually theirs, but are they accurate? Do they reflect the reality of how they'll live in retirement?"

The Stingy News Weekly: February 17, 2024
02/17/24   SNW
This week we have retirement, all stocks, bond yields, and more.

Why not 100% equities
02/16/24   Asness
"The paper comes to the rather startling game-changing conclusion that long-term investors should be 100% in equities, not in a more diversified portfolio. We have been down this road before with this idea refuted with alacrity and panache at least as far back as the mid-1990s."

Yield is not return
02/16/24   Bonds
"Over the history of our internal bond dataset, returns for bonds rated single B have been 3% behind their yields, and returns for bonds rated CCC have been 7% behind their yields. We suspect that the average result for highly levered private credit deals will fall within that range."

How many factors do you need?
02/16/24   Markets
"Putting all this together, we end up with the knowledge that the factor zoo can be reduced to some 10 to 20 factors and that among the most important factors to consider are value, momentum, quality, and growth."

The persistence of growth
02/16/24   Markets
"An implicit assumption in most forecasts is that growth is persistent. While analysts underwrite high growth for companies that have grown quickly and slow growth for companies that have grown slowly in the past, a large body of evidence demonstrates that reversion to the mean of both positive and negative abnormal earnings growth is the norm."

Fire meets ice
02/16/24   Retirement
"While I think our current concept of retirement could do with some tweaking, I wouldn't want to discourage folks from saving aggressively for their later years. At the same time, I think it’s instructive to think about a different model of retirement, one where we continue to earn at least some income well into our 70s and perhaps beyond."

Fear of heights
02/16/24   Indexing
"In other words, we'd all prefer to invest when the market's cheap, but investors were still better off putting money into the market at all-time highs than not at all. The lesson: Investors who wait on the sidelines in the hope of earning better returns may miss out on receiving any returns."

The Stingy News Weekly: February 9, 2024
02/09/24   SNW
This week we have increasing returns, bias, spending, and more.

Increasing returns
02/09/24   Markets
"Although Adam Smith pointed out increasing returns two and a half centuries ago, much of economic theory over time has featured perfect competition and decreasing returns. However, Kenneth Arrow, an economist and also a Nobel Prize winner, noted that a review of economic studies over time reveals that, “[the theory of increasing returns] acts like an underground river, springing to the surface only every few decades.”10 Research over the past 50 years has allowed the river to flow to the surface, and it is time to see what it has to say and what it means." [pdf]

Overcoming experimenter bias
02/09/24   Markets
"One dramatic visual example of backtest overfitting is shown in the graph at the right, which displays the mean excess return (compared to benchmarks) of newly minted exchange-traded index-linked funds, both in the months of design prior to submission to U.S. Securities and Exchange Commission for approval, and in the months after the fund was actually fielded. The 'knee' in the graph at 0 shows unmistakably the difference between statistically overfit designs and actual field experience."

Thoughts on spending money
02/09/24   Thrift
"Everyone can spend money in a way that will make them happier, but there is no universal formula on how to do it. The nice stuff that makes me happy might seem crazy to you, and vice versa. Like many things in finance, debates over what kind of lifestyle you should live are often just people with different personalities talking over each other."

Overrated things in personal finance
02/09/24   Thrift
"Retiring at age 35 sounds interesting in principle, but it in practice, it would be hell. Imagine being completely idle and have nothing to do except worry about your small pile of money turning to dust."

Pods, passive flows, and punters
02/09/24   Markets
"Eventually, the market is a weighing machine. If you want some evidence " even from some of the most iconic, well-followed, index-heavy, retail-engaged, pod-owned, successful companies, it is still, eventually, about the fundies."

The Stingy News Weekly: February 3, 2024
02/03/24   SNW
This week we have happiness, plans, passive, value, and more.

Keep your investment plan on track
02/03/24   Behaviour
"When you don't watch the market every day, you can finally see with unquestionable clarity that what you would have expected to happen didn't. The unexpected did."

The right level of inflation
02/03/24   World
"once inflation surpasses 1%, views change quite quickly. The share of people who think inflation is too high and would better be lower starts to rise quickly, while the share of people who think inflation would be just right drops fast. This indicates that any change in the inflation target will likely trigger a significant public debate and will not be easy to communicate to the public."

Investing at all-time highs
02/03/24   Markets
"Historically, equities (as a whole) tend to outperform in the short run following all-time highs, but there is less clarity over longer time periods."

Valuing Japan's reform
02/03/24   Value Investing
"44% of Japanese companies trade at <1x P/B, but they're almost all microcaps"

Trend to passive investing
02/03/24   Indexing
"Expense ratios (about 70 basis points higher for active funds) largely explained the differences between gross and net returns for both active and index funds."

Happiness research
02/03/24   Behaviour
"From meditation to smiling, researchers take a second look at studies claiming to reveal what makes us happy."

The Stingy News Weekly: January 28, 2024
01/28/24   SNW
This week we have the Globe 250, bond yields, momentum, indexing, and more.

From COW to KARS
01/28/24   Indexing
"The ideal investment, in my opinion, is a simple, broadly diversified stock or bond index fund, such as one that tracks the S&P 500."

Moving average distance and momentum
01/28/24   Momentum Investing
"Our research suggests that active managers should pay attention to the distance between short- and long-run moving averages of prices in developing models for forecasting equity returns. We show that trading rules based on this distance present significant profits in historical data after accounting for reasonable trading cost estimates."

Ask what your credit quality pays
01/28/24   Bonds
"So rather than target a 7% yield, or any other yield, perhaps the right question is: "What's the best I can do in the liquid credit market?" The yield on the BB index is a good approximation. Right now, the BB index yields 6.6%. Meanwhile, the single B index yields 7.8% and the high-yield index yields 7.9%. Those are juicy 7% yields, but they are also less likely to be realized."

The Globe 250 for 2024
01/28/24   Stingy Investing
"We’re pleased to toast the New Year with our Megastar ranking of Canada’s largest publicly traded companies. It contains key investing data on 250 major stocks, with a star rating for each company’s momentum appeal and another for its value merit. Both are combined to form the Megastar portfolio, which outperformed the market by 9.4 percentage points since last year. Cheers!"

Return-to-office mandates
01/28/24   Management
"Results of our determinant analyses are consistent with managers using RTO mandates to reassert control over employees and blame employees as a scapegoat for bad firm performance. Also, our findings do not support the argument that managers impose mandate because they believe RTO increases firm values. Further, our difference in differences tests report significant declines in employees' job satisfactions mandates but no significant changes in financial performance or firm values after RTO mandates."

Investing in beauty trends
01/21/24   Markets
"Fashion may garner the attention but it's the little things - lipsticks and face creams - that steadily rake in the dollars no matter who is designing the frocks that season."

The Stingy News Weekly: January 21, 2024
01/21/24   SNW
This week we have beauty, highs, money, China, and more.

New all-time highs
01/21/24   Markets
"Most of the time new highs are followed by more new highs. The average one, three, five and ten year total returns following new highs were +16%, +27%, +59% and +206%, respectively."

Our money pit
01/21/24   Thrift
"We just finished a project that proved so expensive that, if I revealed the cost, my reputation for frugality would be in tatters. The cost was comfortably - or perhaps uncomfortably - into six figures. What if we sold our Philadelphia townhome tomorrow? I figure we might recoup half of what we just spent."

Adding China?
01/21/24   World
"To the extent that your portfolio is diversified internationally, it's important to keep an eye on developments elsewhere. At the top of the list: China, which is now the world's second-largest economy."

Regional growth and returns
01/21/24   Markets
"We believe the simple argument to invest in the fastest-growing region doesn't work as an investment strategy - something investors should be conscious of as they hear the seductive calls to overweight the United States even further."

Should your job determine how you invest?
01/21/24   Markets
"For example, as someone who works in the financial industry, this table suggests that I should have some of my wealth invested in commodities (despite their poor track record) and that I shouldn’t have any allocation to REITs."

Asset Mixer Update
01/16/24   Stingy Investing
We've updated our Asset Mixer to include real return data for 2023.

Periodic Table Update
01/16/24   Stingy Investing
We've updated our periodic table of annual returns for Canadians to include real return data for 2023.

The Stingy News Weekly: January 14, 2024
01/14/24   SNW
This week we have the Charlie, forecasts, 100% stocks, shorts, and more.

Oh those share price forecasts
01/14/24   Markets
"A simple forecast of a 7.5% return for the S&P 500 (the average annual price change since the end of World War II) would have been better than either the analyst bottom-up forecasts or the strategists’ forecasts. Over the last twenty years, it would have been slightly pessimistic, but the root mean square error (RMSE) as a measure of forecast accuracy of this simple 7.5% forecast was lower than either the RMSE of the bottom-up analyst forecasts or the strategists’ forecasts."

A lifetime of wisdom
01/14/24   Munger
"Though Munger was an active investment manager, he didn’t base his decisions on forecasts. He simply looked to buy good businesses with honest managers at attractive prices. That was the extent of the time he spent on predictions."

The all U.S. stock portfolio
01/14/24   Markets
"Though the U.S. stock market is far more diversified than any other stock market on Earth, investing 100% of your portfolio into U.S. stocks is inherently tilting your portfolio toward the U.S. technology sector."

Money misconceptions
01/14/24   Markets
"Sure, a big paycheck makes it easier to save. But in the end, what matters is your savings rate as a percentage of your income, rather than the size of your paycheck. In other words, a modest earner could potentially achieve financial freedom faster than a high-income individual with undisciplined spending and savings habits."

Costly shorts
01/14/24   Markets
"we believe in most instances the most pragmatic application of hard-to-borrow data is to steer clear of taking long positions in these stocks, serving as a strategic compass in the often-tumultuous seas of market speculation."

Ways you pay more for less
01/14/24   Thrift
"Andrew Chang breaks down four reasons your grocery bill might be rising" [video]

The Stingy News Weekly: January 7, 2024
01/07/24   SNW
This week we have the trading, balance, biotech, and more.

Crowded trades
01/07/24   Markets
"On average, crowded stocks were associated with future superior returns, while the least crowded stocks provided inferior returns"

Your money or your life
01/07/24   Thrift
"This partially explains why only 1 in 4 people with over $3 million in investable assets are self-made"

The biotech boneyard
01/06/24   Markets
"It seems that there is but one savior for biotechs with no revenue: get to revenue."

Turned the tide
01/06/24   Tech
"Forty years ago, scientists did the impossible. Why doesn’t anyone remember?"

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