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Cycles, Sectors, and The Perils of Aggregated Data

by: Lawrence Hamtil  on Wednesday, May 24, 2017

The 20th century ended with a bang with U.S. equities peaking on March 24th, 2000 with the apex of the tech bubble.  Only in the last few years have major market averages such as the Dow Jones Industrial Average and the S&P 500 index significantly surpassed the levels initially reached then.  What is more, the real trade-weighted dollar index has more or less completed a cycle of its own, ending last year little changed from where it was in the spring of 2000: Read More

What Will It Take For Europe To Outperform?

by: Lawrence Hamtil  on Friday, May 19, 2017

Going back to December of 1970 (the earliest for which I can find data), the Wilshire 5000 total return index has posted 10.65% annualized returns (through April of this year), versus 10.4% for the MSCI Europe total return index.  Given the fairly similar annual performances of the indices, one would be tempted to think that they have tracked relatively similar paths along the way to achieving those returns.   Read More

When It Comes to Foreign, There's No Reason To Own Everything

by: Lawrence Hamtil  on Tuesday, May 16, 2017

The trend toward "passive" investing - by which I mean investing in low-cost index-type funds that own broad swathes of the investable marketplace - is certainly a phenomenon that has many more years to play out.  Investors, frustrated with the high costs of actively managed funds, have shifted billions of dollars in assets from active funds to passive funds, and they have done so somewhat indiscriminately.   Read More

The Role of Luck In Investment Success Is Overrated

by: Lawrence Hamtil  on Sunday, May 14, 2017

Of Dollars and Data shared an interesting post titled, "Bad Investment Results?  Your Birth Year May Be to Blame:  How Luck Influences Investment Success and What To Do About It."  As the title implies, the post largely explains how being born at different periods throughout history would likely have played a role in how one's investments turned out, at least over subsequent decades.  This is an important consideration as the benefit of good fortune cannot be discounted.  In fact, more important than the year in which you were born is the country of your birth.  Given that the United States is an anomaly when it comes to stock market success, an American investor holds a sizable natural advantage to one born into less successful markets such as Austria or Italy.  Read More

The Limits of Mean Reversion

by: Lawrence Hamtil  on Friday, May 05, 2017

In his latest quarterly letter, GMO's always interesting Jeremy Grantham lamented the refusal of U.S. equity valuations, and the stubbornly high profit margins that have sustained them, to revert to the long-term average.  Grantham writesRead More

Why You Should Consider Global Small Caps

by: Lawrence Hamtil  on Monday, May 01, 2017

Because the American equity markets have enjoyed an  abnormally long period, - historically speaking, - of relative outperformance versus the rest of the global marketplace, a common plea among financial advisors and writers has been for investors to maintain discipline and continue to invest abroad.  This, of course, makes sense; after all, a good portion of the outperformance of American shares can be attributed to strength in the dollar, something that is obviously not guaranteed to continue indefinitely. Read More