Investing

Product or client first

This Weekend’s Fiduciary Test

The first phase of the Department of Labor’s fiduciary rule went into effect on Friday.  This is the rule that mandates that your financial advisor must act in your best interest.  The whole thing doesn’t go live until 2018, but it will be interesting to see who makes what kinds of changes in the meantime.  Some have rushed to comply.  Others are banking on the Trump administration to overturn it. The Test I was particularly interested to hear whether the local AM station’s annuity salesman would change up his schtick this weekend.  He has an hour on Sundays to make his pitch in his non-threatening monotone.  The focus is on potential returns of the annuity (really the change in income the annuity would pay – very different from change in total value).  There’s always some sort of bonus and guarantee that you can’t lose money.  What’s not in focus is…


Two Numbers

Two Numbers You Need to Know

How much is your electric bill?  What about media (cable, Netflix, etc)?  Or your phone bill?  You probably have at least a general idea, and if you had to know the exact number, you could find it relatively easily.  The two numbers you need to know in investing are how much are you paying and how did you do.  This sounds so easy, but for too many people, it’s difficult to track down.  The crazy thing is that investment companies are often reluctant to disclose this information.  Can you imagine calling the electric company to ask how much you paid last month and they wouldn’t give you a straight answer?  Or if you asked how much electricity you used and they would only tell you how much your individual appliances used?  That is what happened to Wall Street Journal reporter Andrea Fuller when she called her investment company and asked about fees….


Browns Draft

Don’t Turn Your Portfolio into the NFL Draft

The NFL draft reminds me of picking investments.  Lots of hype followed by second-guessing every pick.  It’s nice to acquire new talent, but the key to investing is to avoid a bust. Don’t Overthink It Leading up to the NFL draft, the experts on ESPN make and revise their mock drafts on a weekly, if not daily basis.  This is somewhat insane considering that player data isn’t changing that rapidly.  There is no daily combine.  There are no more games.  Similarly, your financial situation doesn’t change enough day-to-day for you to need to remake your entire portfolio.  While NFL scouts obsess over hand-size, vertical leap, and benchpress reps, you will be tempted by newly available financial data.  Sharpe ratios, Greek letters, and max drawdowns are only the beginning of the statistics you can dig up.  Just like the NFL, the minutiae can blind you to overall greatness. Have a process…


News as drama

Three Trades Based on This Week’s Headlines

The two big news items this week are the French election and US tax reform.  There was also a big shakeup in the House of Mouse as Disney’s ESPN laid off a significant amount of on-air talent.  What’s the best way to trade this news?  If you read this blog with any regularity, you already know where this is going. French Election France’s establishment parties got the boot as nationalist Marine Le Pen and centrist Emmanuel Macron advanced through the first round of voting.  This continues a global trend of shaking up the political status quo.  As in other recent elections, volatility picked up before the election only to drop once the results were reported.  While Le Pen is seen as a populist wild card, Macron is expected to win handily in the next round.  Many expect Macron to add a stable presence to contrast President Trump’s boat-rocking. The trade: No…


Why settle for average

Settling for Average

Settling for Average Capital Group is pushing back hard against the passive investing crowd.  They make the case that some basic screens (low expenses, manager investing in their own fund, etc) can reveal good managers.  I agree with that.  The screens I use at Fairway are kind of hilariously basic relative to the universe of modern portfolio theory statistics and Greek symbols I could choose from.  You really don’t need to layer on too many filters before you get a list of a dozen or so good managers in any particular asset class.  What I do take exception to is the ‘Why settle for average?‘ argument they put forward.  The Capital Group folks are some of the brightest folks around and yet this is the tagline?  I tackled this last year here and here.  I also posted a direct response to the Capital Group marketing here. The latest Capital Group marketing…


No Picture

Don’t Buy the Next Amazon

THIS STOCK COULD BE LIKE BUYING AMAZON IN 1997!  So reads the ad disguised as a headline on Yahoo Finance.  Here’s the thing: you don’t want to buy the next Amazon. Clicking on the ad takes you to a wall of text.  The performance is stellar.  The method is so easy an idiot could do it.  Two idiots say as much in quoted testimonials.  This is a no-brainer.  Then comes the catch – just subscribe to the newsletter. Disguising ads as news headlines is what finally pushed me off of Yahoo Finance.  I clicked the ad today (google took me to the site while looking for news on a company) because I’ve seen this same ad for years.  Either there’s a new Amazon every week or maybe, just maybe these guys are full of it. Don’t Buy The Next Amazon Amazon is up 43,000% (for real) since IPO.  Why wouldn’t…


An Anniversary and Some Words on Garbage

This week marks the anniversary of the bull market whether you measure from the intraday bottom on 3/6/2009 or the day’s closing bottom on 3/9/2009.  It’s not as simple as all that, though. After a 19% annualized gain or over 300% cumulative, it’s hard to ignore claims that the market is over-valued.  Sure, the doom and gloom folks have been saying that all the way up, but it’s getting harder to find statistics that don’t show the market at least fairly valued.  JP Morgan’s David Kelly shows P/Es slightly above historic averages, but the Shiller CAPE is really elevated. Some things to keep in mind After a long run, it feels like we are due for calamity or at least a pullback.  We’ve already had a pullback – four of them, in fact.  And we only need to look at last year to remind ourselves that the market’s rise was…


Trump Portfolio

We’ve witnessed the peaceful exchange of power in the most powerful country on the planet.  Now, how do we create a “Trump Portfolio” of only the best, really the greatest, everybody says so securities?  Does it make sense to overweight small cap manufacturing stocks that might benefit from a strong dollar or perhaps bank stocks to take advantage of rising rates? Here’s a better question: What’s more important, the person in the White House or the person who owns the portfolio?  It doesn’t make sense to put Grandma in volatile small cap stocks if what she really needs is income.  Likewise, it wouldn’t be prudent for a 20-something to move everything to cash because they don’t agree with the President’s politics.  I hope you already knew this, but there is no optimal “Trump Portfolio”.  Rather than rebuilding their portfolio every time the winds change in Washington, D.C., investors should build around their personal needs…


No Picture

HBTM: 12/12/2016

How ‘Bout That Market?  This is a question I hear at social gatherings often enough that it makes sense to make it a regular entry on this website. The Market The stock markets have been going up since the election.  Is this a Trump rally?  I hesitate to say so as the election still looms large in the rear view mirror.  It’s also worth noting that this gets filed under Obama’s record.  The markets seem to be adjusting quickly to what they expect under a Trump administration.  There is a shift in sentiment from the tech sector to what I’d call Make America Great Again (#MAGA) stocks (industrial and manufacturing – financials, too).  This makes sense from the standpoint that the President-elect focused on these types of businesses during the campaign, but if protectionist policies are implemented, I would expect a negative impact on these companies.  But really, who knows?  What’s…


Filthy Casual

Filthy Casual

I am a gamer.  I like role-playing games like Fallout and Final Fantasy as well as real-time strategy games like Starcraft.  However, according to the internet, I play these games all wrong.  I like to take my time and get lost in the story.  This is not the fastest or most efficient way to beat a game which puts me dangerously close to being a ‘Filthy Casual’ in internet-speak.  That is, my goal is not to optimize my playthrough like a ‘Hardcore’ player might.  It could be worse.  I could be a n3wb. This really does tie back to investing, I swear. There are countless blog posts dedicated to crafting the most efficient portfolio.  Finance Twitter is full of people who will argue asset allocations past the decimal point.  Advisor forums are almost toxic with folks who belabor semantics, dredge up endless white papers, and worship at the altar of Modern…