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Article Archive: 2022

The Stingy News Weekly: May 15, 2022
05/15/22   SNW
This week we have bears, real estate, bonds, the value spread, and more.

Big selloffs are part of investing
05/15/22   Markets
"Huge stock market sell-offs are normal. The S&P has historically seen an average annual drawdown of 14%. Some years see milder sell-offs. Other years see worse ones."

The start of a real estate bust
05/15/22   Real Estate
"During the market peak, sellers were receiving so many offers they weren't even considering conditional ones. That pushed some buyers to make high, firm offers just ahead of the market softening. Now, as they near their closing date, appraisals are coming back tens or hundreds of thousands of dollars short, leaving people scrambling to pay the difference or risk losing their deposit - or worse."

Welcome back to 1994
05/14/22   Markets
"At present I am pretty sure 30-year mortgage rates will rise to 6%, and maybe 7%. No one is panicking enough on this, so it will likely go higher. MBS hedging is a powerful force, and will continue until people no longer want to buy houses at such high interest rates."

Glamour momentum
05/14/22   Momentum Investing
"we see that building a momentum portfolio solely on stocks trading above 10x P/S is a bad idea (not surprising). One would lose about 3.5% annually compared to the simple momentum portfolio."

Value spread still crazy
05/14/22   Value Investing
Cliff updates his graph ...

15 charts
05/14/22   Markets
"Pundits spent a lot of time asking if Warren Buffett had lost his touch in 2020. It felt like the market had passed him by. As usual, Buffett just had to wait"

The Stingy News Weekly: May 8, 2022
05/08/22   SNW
This week we have weed, inventory, bad bonds, and more.

75/25 the new 60/40
05/08/22   Markets
"His point about cash outperforming when bond returns go negative is certainly applicable in today's rising interest rate environment. Bernstein offered up a mix of 75% in stocks and 25% in cash equivalents as an alternative to the 60/40 stock-bond portfolio."

EM crisis investing
05/08/22   Value Investing
"The model works so well in large part because it dramatically shifts geographic exposures, as there's almost always an EM crisis happening somewhere."

Using momentum to find value
05/08/22   Value Investing
"The research demonstrates that using multiple measures of value and combining value and momentum in a strategy has produced superior results compared to using either the traditional HML value factor or the traditional momentum factor independently."

Up in smoke
05/08/22   Markets
"The two characteristics of thematic investing are having a good story and attractive returns. No matter how sexy a theme is, the majority of investors only hop onto the train once it started moving uphill. Naturally, this makes thematic investing so dangerous as it appeals to our love for stories, and greed for making money. Stated differently, thematic investing is performance chasing with a narrative."

The great inventory build
05/08/22   Markets
"With The Great Inventory Build in full swing, we believe we are getting closer to a point when rotating out of energy stocks and into beaten down consumer discretionary stocks will make sense."

Mayday from bonds
05/08/22   Bonds
"Year-to-date, long maturity Treasuries have declined in price by almost 20%. Because of their high interest rate duration, long maturity Treasuries have underperformed both investment grade bonds and high yield bonds."

The Stingy News Weekly: May 1, 2022
05/01/22   SNW
This week we have the world of value, real estate, Buffett, and more.

Homeland securities
05/01/22   Value Investing
"Reams of studies suggest that consistently holding the cheapest and most thinly traded stocks within a country's market provided investors with a healthy premium in the long haul. Purchasing pessimism (as reflected in low prices) pays off on long horizons. But does the same apply between countries?"

The scale versus the casino
05/01/22   Markets
"In the short run, the market is a casino, but in the long run, it is a scale. Is this an improvement? Probably not, but speculation has become so rampant that it may be a necessary modification to change voting machine to casino."

This time wasn't different
05/01/22   Markets
"Arguably, the market is hitting the worst offenders because they deserve it. For instance, over 40% of all stocks had no earnings over the last 12 months. But what we haven't seen in at least 20 years is such a high number of stocks with no sales. 15% of all stocks reported no revenues over the last year! That's a smidge over 900 stocks with no sales!"

Cement, concrete, and gravel
05/01/22   Stocks
"I have always found it interesting how some great watchlist companies can trade at very high valuations for long periods of time. In some cases, their valuations just get higher and higher, especially during bull markets."

Housing and demographics
05/01/22   Real Estate
"The current demographics are now very favorable for home buying - and will remain somewhat positive for most of the decade, although most of the increase is now behind us."

Berkshire AGM
04/30/22   Buffett
"Nicknamed 'Woodstock for Capitalists,' the Berkshire Hathaway annual meeting is a gathering of the company's shareholders presided over by Chairman and CEO Warren Buffett and Vice Chairman Charlie Munger. The Omaha, Nebraska, event gives shareholders a chance to hear Buffett and Munger discuss investing, their economic outlook and life, as well as ask the legendary pair questions."

Sell in May and go away
04/29/22   Markets
"we think it is fair to conclude (as many empirical studies already have) that there may be something to this 'selling in May and going away' thing, especially over very long time horizons."

04/24/22   Markets
"The value factor works well when spreads are falling and poorly when spreads are rising. The cheap cyclical stocks captured by the value factor are heavily impacted by changes in credit conditions. Notably, this is the opposite pattern shown by 10-year Treasurys, which is why the two asset classes serve as good complements in a business-cycle based strategy."

Loss aversion across the ages
04/24/22   Behaviour
"Younger people aged 18 to 24 exhibit a loss aversion coefficient somewhere between 3 and 4 as do people aged 65 and over. But people in the midst of their working lives (aged 35 to 54) tend to have much lower loss aversion, somewhere between 1 and 2."

Dropping Economics 101
04/24/22   Economics
"behavioral economics effectively disproves what was long the fundamental premise of economics. It reveals people are not rational profit-maximizing agents. Give up the underlying assumptions of Homo Economicus, and suddenly a large swath of economics appears to be riddled with fallacious thinking. Sometimes it leads to the correct decision, sometimes not, but its fundamental premise contains a deep flaw that practitioners ignore at their own financial peril."

Why homeowners aren't selling
04/24/22   Real Estate
"Nine out of ten mortgages in America carry an interest rate of less than 5%, which is the official level at which most new 30-year fixed-rate mortgages are now being written."

Sick and tired
04/24/22   Behaviour
"More money, it seems, hasn't bought happiness. One reason: We care less about our absolute standard of living, and more about how our financial lot in life compares to that of others."

5 small joys you can cut out of your life
04/24/22   Fun
"With home prices doubling in the last 5 years and increasingly divorced from the incomes of Canadians such that the real estate market has created a completely parallel universe devoid of anything resembling reality, it can be easy to think you can never afford a home. But with this handy list of 5 money saving tips, you can delude yourself into the belief that it's still possible, all while depriving yourself of what simple small joys remain in your life." [Satire]

The Stingy News Weekly: April 17, 2022
04/17/22   SNW
This week we have the long and short of value vs. size, inflation, and more.

Size does not matter for value
04/17/22   Value Investing
"Based on prior academic research conducted in long/short portfolio analysis, some market participants believe that long-only Value investing works better in small-cap stocks. Our research shows that this is not true in long-only Value investing, which is how most practitioners allocate towards the Value premium. Our primary research finding is that equal-weight large-cap Value portfolios and small-cap Value portfolios are statistically similar from a returns perspective. The data suggests that value investors with a liquidity preference should allocate towards equal-weight large-cap Value portfolios. If nothing else, the data suggests that practitioners should split their Value allocations across the large-cap Value (equal-weighted) and small-cap Value since these portfolios have zero overlap but similar historical returns, highlighting a potential diversification benefit."

Generational dislocation in value stocks
04/17/22   Value Investing
"We often get asked whether value stocks are 'cheap.' The short answer is 'yes', but they have been cheap for a while. This important caveat underscores the fact that valuation tends to be a poor timing mechanism for all but true long-term investors."

On concentrated positions
04/17/22   Markets
"Be careful with concentrated positions. You need certainty about safety most, earnings second, and growth third. Otherwise you are a gambler, and most gamblers lose."

Risk-reward in a hiking cycle
04/17/22   Markets
"We believe there's a strong practical argument for a large allocation to fixed income today. The argument is simple: rising rates tend to be bad for all asset classes, and fixed income actually tends to perform relatively well, with significantly lower drawdowns."

Value factor comes back
04/17/22   Value Investing
"Antti's latest book does exactly that. It argues that Value (and Momentum), are still reliable long run sources of return that can (and should) be used to enhance portfolio returns during the current environment of low expected returns."

The Stingy News Weekly: April 10, 2022
04/10/22   SNW
This week we have decades of bad news for bond mullets and more.

Lost decades
04/10/22   Markets
"As with any insurance-like products, the signal would have slightly underperformed the benchmark in most of the other periods. This is because investors would trade upside capture for downside protection by holding cash roughly one-third of the time."

Inverted bonds
04/10/22   Markets
"Going back to 1970, in the year after a yield curve inversion, U.S. stocks had a median inflation-adjusted total return of 4.7% while 5-Year U.S. Treasuries had a median inflation-adjusted return of 4%. Even if we were to extend this analysis to look over two or five years, we would find that 5-Year Treasuries still underperform U.S. stocks following a yield curve inversion."

The mullet discount
04/10/22   Behaviour
"Our main concern with TSYS wasn't its business or financials - it was its valuation. We couldn't understand why it sold at such an attractive valuation. And then it hit me while listening to one of their quarterly conference calls. TSYS suffered from the mullet discount"

Managing money and marriage
04/10/22   Behaviour
"If you want to maximize your chances of happiness and togetherness, merge your finances. That's the upshot of a paper recently published in the Journal of Personality and Social Psychology, which found that joint financial resources are more likely to lead to greater relationship stability."

No news is good news
04/10/22   Media
"How many of us have felt true fear or disgust or burning anger after watching the evening news or reading the morning paper or listening to the radio as we commute to work? How many of us have left snarky replies to trending media tweets or submitted rage-fuelled comments on news websites? And yet we continue to consume the news."

The Stingy News Weekly: April 3, 2022
04/03/22   SNW
This week we have deep value, renting, real estate, flows, and more.

Predictable price pressure
04/03/22   Markets
"The market moves higher when dividends are paid. Market returns are 4x higher when dividend-payments are the highest. The results hold internationally as well. Some specific stats: market returns are 13bps higher on the top 5 dividend-payment days and 5bps higher on the top 50 dividend-paying days. The largest price pressure effects are in the first quarter of the year, when the probability of an asset manager reinvesting is highest. In contrast, the effect is muted in the fourth quarter, when the probability of reinvestment is lowest (managers are using cash to pay off investors)."

Talk about hot
04/03/22   Real Estate
"I was presented with an all-cash offer of $125,000 over the asking price. All contingencies and inspections would be waived."

Financially independent and renting
04/03/22   Real Estate
"I am often struck by people's obsession with owning a home. We owned a home for 15 years, and it was a wonderful experience for that time in our lives. But owning a home should not be universally equivalent with financial success. Here are seven reasons renting can be much better than owning."

Bill Miller's biggest loss
04/03/22   Markets
"Miller lost $300 million on Enron. It was roughly an 89% loss and the most money he had ever lost in a single position (at that point in his career). It also turned out to be the quickest. It only took 60 days."

Deep roots
04/03/22   World
"Innovation in particular is hard to envision if you think of it happening all at once. When you think of it as tiny increments, where current innovations have roots planted decades ago, it's more believable - and the range of possible outcomes of what we might be achievable explodes."

Drivers of deep value
03/30/22   Value Investing
"As expected, deleveraging and multiple expansion tend to contribute positively to returns in deep value, while earnings growth tends to be a negative contributor over a one-year hold."

The Stingy News Weekly: March 27, 2022
03/27/22   SNW
This week we have Buffett, Cowen, Summers, and more.

Warren Buffett getting the last laugh
03/27/22   Buffett
"it has been an almost infallible rule during my career as a financial journalist that you should just go out and buy stock in Berkshire Hathaway whenever people start to say that Buffett has passed his prime."

What Buffett sees in Alleghany
03/27/22   Buffett
"Berkshire is getting $12.9 billion of float for Mr. Buffett to deploy, a very profitable specialty insurance business, and a reinsurance business that, while volatile, could improve with Berkshire.s additional capital backing. Additionally, Berkshire adds eight non-insurance subsidiaries with good returns on invested capital."

Optimists are too pessimistic
03/27/22   Markets
"Michael Kitces did an analysis where he discovered that retirees following the 4% rule in a 60/40 portfolio were more likely to 4x their wealth than deplete any of their principal after 30 years. In other words, if you started retirement with $1 million in a 60/40 portfolio and withdrew 4% a year, your chance of ending up with $4 million was higher than your chance of ending up with under $1 million after 30 years."

Tyler Cowen on economic growth
03/27/22   World
"He visits the podcast to discuss the moral argument for high economic growth and discusses the relationship between growth and issues like general happiness, geopolitics, and the transition to a society with net zero carbon emissions." [video]

Markets follow profits
03/27/22   Markets
"Basic corporate profits have grown about 8% a year historically. So, corporate profits double about every nine years. The stock market ought to double about every nine years."

Fed's plan to raise interest rates is wrong
03/21/22   Bonds
"The central principle of anti-inflationary monetary policy is that to reduce inflation it is necessary to raise real rates. Equivalently, it is necessary to raise interest rates by more than the inflation being counteracted and above a neutral level that neither speeds nor slows growth."

The Stingy News Weekly: March 20, 2022
03/20/22   SNW
This week we have growth, value, beta, mental capital, and more.

Preserve your mental capital
03/20/22   Behaviour
"if you need to withdraw $50,000 per year, I'd suggest maintaining a minimum $250,000 to $350,000 outside of stocks at all times."

Demise of the growthsters
03/20/22   Growth Investing
"on the whole the markets and growth stocks overall are far from cheap. If history is any guide, there is a decent chance that the next few years will hold some more market pain for the growthsters."

Value stocks are still cheap
03/19/22   Value Investing
"Low interest rates might not justify very cheap value vs. growth, but people think they do because they're so extreme in their long-term forecast of growth"

In case you're wrong
03/19/22   Behaviour
"Because of this association with Graham and Klarman, the notion of margin of safety is seen mostly as a concept within the limited domain of investment analysis - and, even more narrowly, within the domain of value investing. It is, however, an idea that I think is more broadly applicable within personal finance."

The low beta premium
03/19/22   Markets
"The superior performance of low-volatility stocks was first documented in the literature in the 1970s - by Fischer Black in 1972, among others - even before the size and value premiums were 'discovered'. The low-volatility anomaly has been shown to exist in equity markets around the world. Interestingly, this finding is true not only for stocks but for bonds as well. In other words, it has been pervasive."

Low expectations
03/19/22   Behaviour
"The first rule of a happy life is low expectations. If you have unrealistic expectations you're going to be miserable your whole life. You want to have reasonable expectations and take life's results good and bad as they happen with a certain amount of stoicism."

The Stingy News Weekly: March 13, 2022
03/13/22   SNW
This week we have Schloss, oil, Turkey, inflation, and more.

Wise words from Walter Schloss
03/13/22   Value Investing
"A fee structure, by the way, that would make any fund managers squeamish. Schloss believed his pay should be tied to success. So he got 25% of realized gains. But if there were losses, his limited partners were made whole before he earned a cent. He only got paid when his partners made money."

Commodities vs Commodity ETFs
03/13/22   Markets
"The average correlation between oil and oil ETFs was only 0.8. Gold ETFs provide better exposure to gold than oil ETFs to oil. Gold mining stocks are hybrids that feature gold and equity beta."

Crisis in Turkey
03/13/22   World
"We differentiated between two types of crises: global ones, defined as a 50% drawdown in emerging markets that happen in parallel with a 20% drawdown of the S&P 500, and idiosyncratic ones, where only the local market has drawn down. Our research suggests that value stocks are strong return generators in global crises, but US dollar-denominated government bonds are a more reliable bet in idiosyncratic crises."

Estimating future returns
03/13/22   Markets
"The only period compares with this valuation-wise is the dot-com bubble. We are near dot-com level valuations, in the 98th percentile. And if you view the 10-year returns from the worst time of the dot-com bubble to now, you can see that the results they obtained are worse than what I forecast here."

The inflation headshake
03/13/22   Economy
"While we acknowledge the year-over-year inflation rate may eventually moderate, we must ask, how much purchasing power will be lost by the time the inflation fire subsides? The U.S. dollar has already lost considerable purchasing power relative to most necessities, such as shelter. Over the past three years, the median price of homes sold in the U.S. has increased 30%. Even if shelter inflation moderates, past increases have made home ownership unaffordable for millions of Americans."

Getting back to normal life
03/13/22   Health
"We can't give booster dose after booster dose, all in the name of preventing mild illness. To avoid this, we need to change our thinking"

The high cost of gender bias
03/08/22   Funds
"A new, global survey from BNY Mellon looked at the barriers faced by women investors. It concluded the industry is losing out on US$3 trillion in assets under management (AUM) by not making investing more accessible. More than 9-out-of-10 asset managers admitted they target their products to men and saw them as their target market."

The Stingy News Weekly: March 6, 2022
03/06/22   SNW
This week we have passive, active, neutral, shocks, and more.

The evidence mounts against active share
03/06/22   Funds
"Since the initial publication of research documenting active share, its advocates have clung to the belief that the metric could identify funds that would outperform. But the academic evidence has all but disproven that thesis."

Sector neutral or not?
03/06/22   Value Investing
"But for long only investors - and that is pretty much every traditional fund out there - their research finds that it is highly unlikely that a sector-neutral strategy will perform better than a strategy that incorporate sector bets."

Will the optimists triumph yet again?
03/06/22   World
"Despite the wars, depressions, and sicknesses of the last 100 years, we somehow pulled through. The optimists triumphed. As we face similar challenges in the days and years ahead, the question is: will the optimists triumph yet again?"

Surprise, shock, and uncertainty
03/06/22   World
"The world breaks every decade or so. There are so few exceptions to this it's astounding."

Momentum in emerging markets
03/06/22   Momentum Investing
"Perhaps investors should be skeptical of implementing the strategy in certain markets and heavily discount theoretical returns, but there is still an overwhelming amount of financial research that supports the factor across developed stock markets, where trading stocks has become very cheap, and asset classes, where futures can be used."

The politics of passive investing
03/06/22   Indexing
"Most of us in the finance world are well aware of the evolution of 'passive' equity investing over the years, and have witnessed its tremendous growth. And some of us have asked questions about it. We've asked is it all good? Is it mostly good? Are some aspects perhaps bad? Are some really bad? It is a subject that has kindled fierce deliberation."

The Stingy News Weekly: February 27, 2022
02/27/22   SNW
This week we have Buffett, marshmallows, dividends, and more.

Do what Jack said
02/27/22   Markets
"But while I worry about the Ukrainian people, I'm not much concerned about the stock market's decline. It's not because I have a crystal ball. Unlike the talking heads on the financial cable TV shows, I have no idea what will happen next in the financial markets. But I'm certainly not selling my stock funds. In fact, if the decline continues, I'll be investing more and, if the drop is steep enough, a whole lot more."

CS Yearbook 2022
02/26/22   World
"This is an extract of the Yearbook 2022, produced in collaboration with the CSRI by Elroy Dimson, Paul Marsh and Mike Staunton. This year's edition focuses on diversification as a special topic and offers an extended dataset by adding three new markets." [pdf]

Buffett's annual letter
02/26/22   Buffett
"After my initial plunge, I always kept at least 80% of my net worth in equities. My favored status throughout that period was 100% - and still is. Berkshire's current 80%-or-so position in businesses is a consequence of my failure to find entire companies or small portions thereof (that is, marketable stocks) which meet our criteria for long-term holding."

Graphing Dividends 2022
02/25/22   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]

Death of the marshmallow test
02/21/22   Behaviour
"Following the Bing children into their 40s, the new study finds that kids who quickly gave in to the marshmallow temptation are generally no more or less financially secure, educated or physically healthy than their more patient peers. The amount of time the child waited to eat the treat failed to forecast roughly a dozen adult outcomes the researchers tested, including net worth, social standing, high interest-rate debt, diet and exercise habits, smoking, procrastination tendencies and preventative dental care, according to the study published in the Journal of Economic Behavior and Organization."

The Stingy News Weekly: February 20, 2022
02/20/22   SNW
This week we have historical value, old age, Munger, and more.

After you leave
02/20/22   Retirement
"I'm sensitive to this issue because, during my working years, I received many calls from new widows asking about their survivor pension. Often, there was none because their husbands had selected to receive income only over their life, with no survivor benefit. Times have changed, of course. There are new laws to protect spouses, plus many couples have dual incomes. But at the same time, retirement is more the individual's responsibility than ever before."

7 habits that lead to happiness in old age
02/20/22   Behaviour
"Happiness tends to decline throughout young adulthood and middle age, bottoming out at about age 50. After that, it heads back up again into one's mid-60s. Then something strange happens. Older people split into two groups as they get old: those getting much happier, and those getting much unhappier."

Charlie at the DJ AGM
02/16/22   Munger
"Daily Journal annual meeting with Chairman Charlie Munger"

The cross-section of stock returns before 1926
02/15/22   Value Investing
"We study the cross-section of stock returns using a novel constructed database of U.S. stocks covering 61 years of additional and independent data. Our database contains data on stock prices, dividends and hand-collected market capitalizations for 1,488 major stocks between 1866-1926. Results over this 'pre-CRSP' era reveal a flat relation between market beta and returns, an insignificant size premium, and significant momentum, value and low-risk premiums that are of similar size as over the post-1926 period."

The Stingy News Weekly: February 13, 2022
02/13/22   SNW
This week we have value investing, real estate, the long run, and more.

Higher mortgage rates
02/13/22   Real Estate
"With 4% 30-year mortgage rates, we will likely see a slowdown in both new and existing home sales (based on previous periods of rising rates). It also seems likely house price growth will slow."

Scams, grift, and bad journalism
02/13/22   Media
"That 'rapper' accused of billions in crypto fraud was also a Forbes contributor. Is it finally time to move past the contributor network?"

Noise traders
02/13/22   Markets
"Research has demonstrated that individual investors generate negative results by paying attention to the noise of the market even before the costs of the trades. In addition, their behaviour induces increased crash risk in the stocks they buy. Investors should have learned that lesson from the crash of the dot-com stocks in March 2000."

The long run
02/13/22   Markets
"To give you an idea about the numbers, real rates are currently very close to these long-term trends but slightly below. In order to get back to trend, real rates would have to rise by about 0.7% to 0.8% in the United States and the UK."

That's it
02/13/22   Value Investing
"Global value spread at 98th percentile"

Good enough?
02/13/22   Economy
"Based on the amount of inflation that has occurred and is in the pipeline, we believe the Federal Reserve has gotten inflation terribly wrong. For the Fed to regain credibility and achieve its price mandate, we believe a meaningful tightening in monetary policy or sharp decline in asset prices will be necessary. Although central bankers have certainly conditioned investors otherwise, whether they like it or not, we believe a large serving of vegetables is on the way."

Superpower of mini-retirement
02/13/22   Taxes
"These steps allow the mini-retiree with low or no income to make massive changes to the amount of future taxes owed, all because they have planned ahead a little bit. This is not 'cheating' the (U.S.) tax code - it is making smart decisions and paying only the taxes due and not a dollar more."

Value Investing: From Theory to Practice
02/08/22   Books
"Giving a fresh take on investing, Value Investing: From Theory to Practice shows the readers a process that will enable them to find the stocks worth investing in. The book is not giving the reader stock tips, but, instead, is teaching an approach to pick stocks through a step-by-step, end-to-end process. This process includes identifying possibly undervalued stocks, estimating their intrinsic value, and making a decision to buy or not."

The Stingy News Weekly: February 4, 2022
02/04/22   SNW
This week we have value investing, momentum, bubbles, short sellers, and more.

When short-sellers attack
02/04/22   Markets
"short-sellers are biased. They issue fare more negative target prices than can be justified by fundamentals. This isn't surprising. Short-sellers make money if a share drops, so they systematically overstate the negatives and understate the positives. As a rule of thumb, it seems a good idea to divide the target return of a short seller by ten and you get the true reaction of the share price in the first week or so after the short-seller attacks."

Use it or lose it
02/04/22   Retirement
"My contention: It's a mistake to let the fire go out when we retire. Transitioning from a mentally challenging job to a sedentary lifestyle, where you spend a lot of time sitting around watching TV or on social media, is going to cost you."

Employment recession close to an end
02/04/22   Economy
"The current employment recession was by far the worst recession since WWII in percentage terms. However, the current employment recession, 23 months after the onset, is now significantly better than the worst of the "Great Recession"."

The size of the value premium
02/04/22   Value Investing
"While there are no crystal balls, there doesn't seem to be any strong evidence supporting the belief that the value premium is dead. And there may not even be any evidence that it was either smaller than Fama and French had originally found or that it is now smaller than it was originally found. The poor performance has been due to changes in what John Bogle called the speculative return (the change in relative valuations)."

What explains momentum?
02/04/22   Momentum Investing
"There is as yet no consensus on why equity markets permit momentum. Our analysis uses out-of-sample international data to consider a 'horse race' across momentum rationales based on overconfidence, slow diffusion of information, limited attention, anchoring bias, and real options. Our central finding in cross-sectional analyses is that the frog-in-the-pan (FIP) hypothesis, which posits that due to limited attention, investors underreact to information that arrives gradually rather than in concentrated doses, consistently wins. Also, internationally, momentum is stronger in less volatile markets and in up-markets. Information flows more gradually during these market states, implying additional support for FIP."

Retire with more money than you need
02/03/22   Thrift
"If we really want to help our kids or the causes that are important to us, however, leaving it all in our will may not be the best way to do it."

Bubble stock meltdown
01/31/22   Value Investing
"This breakdown is significant, especially for growth stocks. Remember, growth stocks trend, and value stocks mean revert. The psychology is simple. People hear about a hot stock that's gone up 3x, they buy some, it goes up 2x, they buy more: the whole attraction of buying a hot growth stock is the historic return trajectory. Value stocks are the opposite: you do well buying them when they're down, as our Crisis Investing piece showed. And so, once the trend gets broken, once the magic of the rising stock prices disappears, it's a long way down until valuation becomes the justification for buying."

The Stingy News Weekly: January 30, 2022
01/30/22   SNW
This week we have the inflation, duration, declines, the big D, and more.

Observations from the decline
01/30/22   Markets
"The average stock with a Price/Sales over 10 has lost 19% so far this year. The average stock with a Price/Sales over 30 has lost 23.5%."

AAA for Apple
01/30/22   Bonds
"The triple-A rating typically bestows the lowest borrowing rates and suggests the highest ability to repay bondholders. But the triple-A club has been shrinking over the past four decades. Apple recently became only the third current corporate member of this exclusive club."

ETFs are not eating the world
01/30/22   Indexing
"Today, there are more than 2,000 equity-focused ETFs in the United States and only about 3,000 US stocks. These ETFs cover every imaginable strategy and are almost all active bets. This is definitely not what the ETF's creators had intended."

When the Fed raises rates
01/30/22   Markets
"Surprisingly, stocks have held up relatively well during past hiking cycles. The average total return in these periods was 23%."

How to worry about duration
01/30/22   Bonds
"Rising rates translated to negative returns across the interest rate curve, with bond returns at longer maturities suffering more."

Vitamin D reduces risk of autoimmune disease
01/30/22   Health
"The team tracked the participants for around five years to measure the development of autoimmune conditions, including rheumatoid arthritis, autoimmune thyroid disease and psoriasis. This revealed that a dose of 2000 international units of vitamin D per day reduced the development of autoimmune disease by 22 per cent, compared with the placebo."

The Stingy News Weekly: January 23, 2022
01/23/22   SNW
This week we have the beach, chips, inflation, empires, and more.

Casualties of success
01/23/22   Markets
"Size is nature's leverage. Sought after for its benefits straight up to the point that it ferociously turns against you. Same thing applies to companies and investments."

Growth multiple contraction
01/23/22   Growth Investing
"In 2018, the business was trading at 14.6x sales. Right now it's 6.3x. Yes, the business is generating a lot more revenue and earnings today than it was then, but investors aren't willing to pay the same price. 276x earnings in 2018. 36x today."

Life's not a beach
01/22/22   Retirement
"For the past 50 years, retirement commercials have been showing the couple on the beach or the golf course. But this is nonsense. Not every retiree wants to live like that, nor can every retiree afford to. Watching such commercials causes retirees a lot of stress. Deep down, most retirees know that most retirements - including theirs - won't look like that. In fact, most of them have no idea what their retirement will look like."

Inflation expectations
01/22/22   Markets
"Most importantly, the relationship between inflation expectations and future inflation changes over time, not just in degrees, but in sign, meaning that sometimes higher inflation expectations lead to higher inflation and other times they lead to lower inflation."

Japan's empire builders
01/22/22   World
"There may be a lot we can learn from the curious case of Japan's empire builders. Japanese companies both do far less M&A than US firms and seem to have had better results from the deals they do. Yet strangely, it is American consultants, bankers, and lawyers who believe their methods of doing business are superior, not the other way around."

The forgotten habit of two sleeps
01/22/22   Health
"For millennia, people slept in two shifts - once in the evening, and once in the morning. But why? And how did the habit disappear?"

How the potato chip took over America
01/22/22   History
"The earliest known recipe for chips dates to 1817, when an English doctor named William Kitchiner published The Cook's Oracle, a cookbook that included a recipe for 'potatoes fried in slices or shavings.' And in July 1849, four years before Crum supposedly dissed Vanderbilt, a New York Herald reporter noted the work of 'Eliza,' also, curiously, a cook in Saratoga Springs, whose 'potato frying reputation' had become 'one of the prominent matters of remark at Saratoga.'"

The Stingy News Weekly: January 16, 2022
01/16/22   SNW
This week we have dividends, conglomerates, 52-week highs, and more.

Dividend charts
01/16/22   Dividends
"When you look at the long-term cash dividends on the S&P 500 going back to the inception of the index in 1957, inflation has averaged 3.6% but cash dividends have provided real growth on top of inflation."

Goodbye upside
01/16/22   Markets
"I was shocked when I saw the 2021 performance of Global X Nasdaq 100 Covered Call ETF (symbol: QYLD) compared to that of the Invesco QQQ Trust (QQQ), which tracks the Nasdaq 100. The Global X fund was up a paltry 10% last year, while the Invesco ETF soared 27%."

Conglomerates worth holding
01/15/22   Value Investing
"Power Corporation of Canada is a great example. The stock is roughly the same price today as it was in 2007. Yet it has grown its book value per share from roughly $17 to $33 during that time, and paid shareholders $18 in cumulative dividends per share to boot. To me, that.s exciting!"

Buy things, not experiences
01/15/22   Thrift
"While I appreciate the Stoic-style appraisal of what really brings happiness, economically, this analysis seems precisely backward. It amounts to saying that in an age of industrialization and globalism, when material goods are cheaper than ever, we should avoid partaking of this abundance. Instead, we should consume services afflicted by Baumol's cost disease, taking long vacations and getting expensive haircuts which are just as hard to produce as ever."

The 52-week high glass ceiling
01/15/22   Markets
"Chart analysts would tell you that at the 52-week high many investors will want to sell their stocks in order to lock in their profits at that salient anchor. Thus, selling pressure increases and the share price often bounces lower from this psychologically important level."

The Stingy News Weekly: January 9, 2022
01/09/22   SNW
This week we have value investing, picking funds, the periodic table, asset mixer, and more.

Factor Olympics Q4 2021
01/09/22   Markets
"It is easy making the case that we are currently at the peak of the current market cycle, eg by pointing to the sale of an invisible rock NFT for $12,800. However, the same position could have been taken in 2017 when the Argentinian government sold 100-year bonds shortly after resolving its latest sovereign default. The good times can not continue forever, but short-term predictions are futile. A more nuanced argument is that there has already been a change in the investment sentiment that is reflected in the factor rotation from momentum to value stocks."

Model portfolios
01/09/22   Funds
"On average, affiliated ETFs charged 6 bps higher expense ratios and generated 67 bps lower net year-to-date returns than unaffiliated funds (significant at the 1 percent confidence level). Their past performance, measured by the performance-rank percentiles over the previous one and three years, was also five and six ranks lower, respectively."

Picking funds and indices
01/09/22   Funds
"Unfortunately, the natural desire to allocate more money to better-performing asset classes turns out to be exactly the wrong instinct. While asset classes exhibit short-term (one-year) momentum, they tend to mean revert over the long term, as shown in the chart below."

Growth stocks sell off
01/09/22   Markets
"If growth stocks sell off will they bring value stocks down with them?"

Asset Mixer Update
01/03/22   Stingy Investing
We've updated our Asset Mixer to include nominal data for 2021.

Periodic Table Update
01/03/22   Stingy Investing
We've updated our periodic table of annual returns for Canadians to include nominal data for 2021.

The Stingy News Weekly: January 2, 2022
01/02/22   SNW
Happy New Year!

Stock market history
01/02/22   Markets
"This also means that US growth is not necessarily 'expensive' vs. European growth, but that European value has a decent chance - at least from a historical perspective - of being extremely inexpensive not only when compared to European growth, but also when compared to US value."

5 books Bill loved
01/02/22   Books
"My holiday reading list this year includes two terrific science fiction stories. One takes place nearly 12 light-years away from our sun, and the other is set right here in the United States - but both made me think about how people can use technology to respond to challenges. I've also included a pair of non-fiction books about cutting-edge science and a novel that made me look at one of history's most famous figures in a new light."

Value investing after the peak
01/01/22   Value Investing
"Overall, the conclusions are the same - the five-year stretch after the valuation peak was another good time to be a value investor. Not nearly as good as after the 1999 peak, but the relative outperformance was around 13% annualized in the U.S. and 8% annualized in international markets"

Predicting our longevity
01/01/22   Health
"Consistent with past research, while individuals appear to have some sense about their likelihood of survival (on average, their estimates are close to those provided by Social Security), there are notable gaps in their estimates. For example, respondents in the first wave (1992) of the HRS who said they had a 0% probability of surviving to age 75 actually had about a 50% chance, and those who said they had a 100% probability actually had about an 80% chance."

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