2018

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How Yale Beat the Market

The Yale Endowment released their 2017 report, taking a victory lap over their 20-year returns.  In their hubris, the endowment’s management team let slip the secret to beating the markets.  “[A]ctive management can be a powerful tool for institutions that commit the resources to achieve superior, risk-adjusted investment results.”  If only Harvard had thought to commit the resources to achieve superior, risk-adjusted investment results! What’s happening here is two of the planet’s greatest active managers disagree about passive investing.  Warren Buffett says most individual and institutional investors would be better off indexing.  Yale’s David Swenson argues that institutional investors with the resources to do so should just pick good funds. Check out this gem of a footnote in the report: “Yale’s 106.3% venture capital return over the past twenty years is heavily influenced by large distributions during the Internet boom. Since such a calculation assumes reinvestment of proceeds from the…


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My “Bad” Personal Finance

“Dad, can we go speed?” I always wondered if my kids would be like me.  So when William asked that question on the way to swimming lessons, I knew I could check that box.  Yep, this kid inherited the car gene.  My dad is a car guy.  By today’s standards (I enjoy driving stick), I am a car guy.  And now it seems the next generation has the bug.  What’s this got to do with personal finance?  Cars are one of the biggest targets for personal finance bloggers.  If you’re trying to live the FIRE (financially independent, retire early) lifestyle and do the whole retire in your 30s/40s thing, a car can be a huge burden on this journey. Car FIRE The FIRE crowd isn’t necessarily against cars so much as car payments.  Their arguments are air-tight and their logic is flawless.  Yes, it makes sense to buy a used…


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I’m Back, Baby!

It’s been a while since I’ve posted, but that’s because I’ve been busy with a new baby!  Baby and Mom are happy and healthy.  This is a pretty big difference from our first child who spent a ton of time in the hospital during his first two years. There’s a pretty big gap between our two kids (almost 8 years!) so a lot of people are asking us if we are ready to go through all the newborn stuff again.  Are we ready?  We’ve been playing the child-raising game on hard mode for the past 8 years.  We are reveling in changing diapers, feeding, and just holding the newest member of our family. Our child-raising experience is anchored in years of NICU units, dialysis treatments, and navigating various hardware that came with having a baby with ARPKD.  While it’s not exactly a vacation to wake up at 2 in the…


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Has the Dow Left You Dazed and Confused?

Let’s set aside the fact that the Dow Jones Industrial Average is a flawed measure of the overall stock market.  The media, your parents, and their parents have all accepted the Dow as the standard.  Besides, over time the Dow does move in line with the overall market.  So instead of arguing semantics, let’s talk about the headline: a 4-digit drop in the Dow today along with a 600+ point drop on Friday. While the average person associates the Dow with the overall market, we should also recognize that the media loves the Dow because of the potential for attention grabbing headlines.  To paraphrase Wooderson in Dazed and Confused: That’s what I like about the Dow, the points get bigger, but the size of the returns stays the same. On average, the S&P 500 experiences a drawdown of 14% every year.  If we apply that average to the Dow, it would…


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2018 Outlook

I’ve been meaning to post an outlook for 2018, but I kept putting it off.  Between the holidays, a sick kid, and my belief that calendar year outlooks are dumb, procrastination has been beating my will to write.  No more!  Here are my predictions for 2018: If you have been investing for 10+ years, your 10 year return number is going to look a ton better at the end of 2018 Donald Trump is going to collaborate with Democrats going into the mid-term elections Bitcoin and crypto-assets will rally hard, then have a huge correction at year-end To be honest, those second two predictions are garbage.  The first one, however, is the stealth story of the year. Ten Year Returns If you’ve been investing for over ten years, your ten year return number is going to burst higher.  Why?  The S&P 500 lost 37% in 2008 and that year is…


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Doing Good While (Hopefully) Doing Well

Each year, BlackRock’s Chairman and CEO, Larry Fink, writes a letter to CEOs of “leading companies” in which BlackRock’s clients are shareholders.  Last year’s letter encouraged long-term thinking in the context of a world that is increasingly focused on short-term volatility.  This year’s letter strikes a similar tone, but goes a step further in mentioning environmental, social, and governance (ESG) matters as factors CEOs should be considering in their long-term strategies.  Socially responsible investing (SRI) is gaining traction among investors.  Is this just kumbaya investing or is it for serious investors, too?  Why would anyone do this?  On the other hand, why would anyone NOT do this? The Basics ESG and SRI are sometimes used interchangeably, but they are different.  SRI is the broad overarching investment thesis of the movement.  ESG filters this mandate through three lenses, environmental, social, and governance.  SRI is open to personal interpretation just like the…


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‘Bron, ‘Bama, and the January Effect

  The NBA may as well cancel the rest of the season.  Why?  Alabama won the college football championship, of course!  This means LeBron James is sure to win a title of his own: This reminds me of the January effect in the markets.  The thinking is that if January is positive, the year as a whole will be positive and if January is a down month, it means negative returns for the year as a whole.  That’s totally ridiculous, of course.  The January effect ‘feels’ right because most months are positive and most years are positive.  Since January is the first month of the year, humans tend to add emphasis to it whether it is deserved or not.  Similarly, Alabama has had a great football program for the last decade and LeBron has been the best player in the NBA for about the same time (don’t @ me).  It…