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Article Archive: 2018

The Stingy News Weekly: October 15, 2018
10/15/18   SNW
This week we have gambiling, writers, predict, monstrous, value, and more.

Monstrous returns
10/15/18   Stingy Investing
"Shell out! Shell out! Halloween is fast approaching and income investors want their dividends. They have bowls of candy to fill for the little witches and goblins who are soon to arrive at their doors." [$]

Lessons from Annie Duke
10/15/18   Books
"[A baseball executive] was in Las Vegas sitting next to a guy who has got a 17. So the dealer is asking for hits and everybody knows the standard in blackjack is that you sit on a 17. The guy asked for a hit. The dealer flips over 4, makes the man's hand, right, and the dealer sort of smiles and says, 'Nice hit, sir?' Well, you're thinking nice hit if you're the casino, because if that guy does that a hundred times, obviously the casino is going to take it the bulk of the time. But in that one particular instance: bad process, good outcome. If the process is the key thing that you focus on, and if you do it properly, over time the outcomes will ultimately take care of themselves. In the short run, however, randomness just takes over, and even a good process may lead to bad outcomes. And if that's the case: You pick yourself up. You dust yourself off. You make sure you have capital to trade the next day, and you go back at it."

20 rules for writers
10/15/18   Books
"Stephen King's top 20 rules for writers"

Rich ghost towns
10/15/18   Real Estate
"These days, walking through parts of Manhattan feels like occupying two worlds at the same time. In a theoretical universe, you are standing in the nation's capital of business, commerce, and culture. In the physical universe, the stores are closed, the lights are off, and the windows are plastered with for-lease signs."

Beliefs don't predict
10/15/18   Behaviour
"The more we learn about how people really think, the more we must rethink economic theory."

The odds of value
10/15/18   Value Investing
"Allocating tactically based on the market skewness might be considered unusual given the abstract nature of skewness. However, the skewness of the stock market can perhaps be understood as a measurement for the risk sentiment of investors. If risk aversion prevails, then investors are less likely to be interested in cheap, but problematic stocks and Value investors will not get compensated for holding undesirable stocks."

The Stingy News Weekly: October 9, 2018
10/09/18   SNW
This week we have 100, micro, Cliff, predictors, and more.

The best market predictor is useless
10/09/18   Markets
"While you might think this is far-fetched, the basic forces of supply and demand are also one of the best predictors of future stock market returns."

Micro and small cap factor investing
10/09/18   Value Investing
"The quality factor is most effective in micro caps, successfully screening out the deteriorating businesses."

Cliff Asness hasn't smashed his screen this year - yet
10/09/18   Asness
"There is part of investing that must be done with great skill. There is part of investing that was automatable. Part of what Warren Buffett does is to always own cheaper, more profitable, lower-risk stocks. I think it's been a pretty good deal for Warren Buffett's investors. But with most active managers, you paid through the nose for it. Nowadays, you pay tiny amounts for it. There are ETFs out there charging nine basis points on factors for U.S. large-cap stocks."

Slightly more than 100 fantastic articles
10/09/18   Media
"A list of nonfiction journalism from 2017 that will stand the test of time."

High-yield small-caps
10/09/18   Stingy Investing
"the middle portfolio of medium-yielding (quintile) stocks grew at a compound annual rate of 14.1 per cent and outperformed the S&P/TSX Composite Index by an average of 6.6 percentage points per year." (Avoid the top and bottom yield quintiles.) [$]

The Stingy News Weekly: September 30, 2018
09/30/18   SNW
This week we have value, commitment, 200 days, and more.

The next level of commitment
09/30/18   Behaviour
"Should we tell each other how much we make?"

3 shades of value
09/29/18   Value Investing
"Rebalancing into ultra-cheap shares at the market's lowest point helped these funds outperform VTI in 2009 as the recovery got underway. DFA U.S. Large Cap Value, Invesco FTSE RAFI US 1000 ETF (PRF), and Invesco S&P 500 Pure Value ETF (RPV) had excess returns of more than 2 percentage points over VTI from March 2009 through June 2018. RPV had the best returns of the bunch, outpacing VTI by 6.3 percentage points annually."

The death of the 200 day
09/29/18   Markets
"The major market averages' recent all-time highs have done more than confirm that the bull market is still alive: They have raised yet more questions about the market-timing value of the 200-day moving average."

The Stingy News Weekly: September 24, 2018
09/24/18   SNW
This week we have a mission, small value, emerging markets, and more.

The curious case for emerging markets
09/24/18   World
"Since the inception of the MSCI Emerging Markets Index in 1988 through August of this year, EM returned 10.84% annualized while the S&P 500 returned 10.80%. Despite the eerily similar gains, a blend of the two, rebalanced annually, would have yielded better results."

Active vs. index investing
09/24/18   Hallett
"The vast majority of investors can benefit from qualified professional advice that integrates wealth planning with investment management. This includes a robust discovery process, goals-based planning and a portfolio designed around these important inputs. The value of this combination is so significant over time that it can render the active vs passive debate almost meaningless."

Weird Al: Mission Statement
09/24/18   Fun
"Some 'Mandatory Fun'" [video]

Go small value
09/24/18   Value Investing
"Small-cap value is where you have a fighting chance of finding the alpha opportunities passed over by the big guys. With little sell-side coverage or institutional ownership of these stocks, your research could lead you to a proprietary insight and significant upside."

P/E 10 works better in some markets
09/24/18   World
"the more domestically-concentrated a given market is, the less the explanatory power of its P/E 10"

Low-P/E in the DJIA
09/24/18   Stingy Investing
"It's easy to find simple stock-picking strategies that have outperformed the market for decades. One of the very simplest was highlighted way back in 1973 and has continued to trounce the market since then." [$]

The Stingy News Weekly: September 17, 2018
09/17/18   SNW
This week we have Buffett, Lehman, Lynch, trends, facts, and more.

Why facts don't change our minds
09/17/18   Behaviour
"False beliefs can be useful in a social sense even if they are not useful in a factual sense. For lack of a better phrase, we might call this approach 'factually false, but socially accurate.'"

Striking a chord
09/17/18   Behaviour
"During the fall of 2008 - I'm referring here to both the season and the stock market - the sense of panic was palpable. I even got a call from a financial planner, whom I considered a veteran investor, wondering whether he should sell. Until that moment, I don't think I'd fully realized that knowledge is truly no match for emotion."

Lessons from Peter Lynch
09/17/18   Funds
"Multiple analyses have been performed with the purpose of deconstructing and explaining Lynch's success, and the conclusion seems to be that higher beta, momentum, and size were among the primary sources of Magellan's amazing performance."

A trend equity primer
09/17/18   Markets
"While many investment strategies have a concave payoff profile that reaps small rewards at the risk of large losses, trend-following strategies exhibit a convex payoff profile, one that pays small premiums with the potential of a large reward."

Why Warren Buffett said no to Lehman
09/17/18   Buffett
"Warren Buffett's Berkshire Hathaway is famous on Wall Street for having the cash to make deals happen, even during a crisis. But in 2008, he turned down both Lehman Brothers and AIG when they asked for help. In an interview with WSJ, he explains why." [video]

The Stingy News Weekly: September 10, 2018
09/10/18   SNW
This week we have dividend growth, a taxing situation, relative misery, and more.

Absolute joy and relative misery
09/10/18   Stocks
"Facebook is currently in its deepest drawdown of the last five years. Misery loves company, and right now with the S&P 500 near all-time highs, Facebook investors have little company."

The story of Gert Boyle
09/10/18   Managment
"In 1972, Gert Boyle's bankers came to see her. They told her the business was failing and she needed to find a buyer for it. She found an investor that was willing to buy the business for $1,400. She kicked the investor out of her office and yelled: 'I can run the shop into the ground myself for that money!'"

A warning to home buyers
09/10/18   Taxes
"So, the onus is now on the buyer of real estate to not only collect taxes on behalf of the CRA when a non-resident is selling a property, but to also make a judgment on when to investigate further the tax residency of the seller - as though a layperson is qualified to know when and how to make that inquiry."

Picking dividend growers
09/10/18   Stingy Investing
Wherein I observe that dividend investors should avoid the intersection of high yield and high dividend growth. [$]

Dividend yield vs dividend growth
09/10/18   Dividends
"Our research confirms that investors should focus on dividend yield rather than dividend growth rates."

The Stingy News Weekly: September 6, 2018
09/06/18   SNW
This week we have chasing, correlated, racing, fake returns, and more.

Quants at the track
09/06/18   Markets
"Benter and Coladonato watched as a software script filtered out the losing bets, one at a time, until there were 36 lines left on the screens. Thirty-five of their bets had correctly called the finishers in two of the races, qualifying for a consolation prize. And one wager had correctly predicted all nine horses."

In a crisis correlations go to 0.87
09/06/18   Markets
"When the U.S. market suffered a sharp sell-off, the opposite occurred: correlations turned positive to the tune of +0.87. This analysis confirms what experienced market traders know intuitively: 'In a financial crisis, all correlations turn to +1.0'."

Bruce J. Flatt talk
09/06/18   Value Investing
"In this talk, Bruce Flatt, CEO of Brookfield Asset Management, shares his journey, the challenges faced by Brookfield over the decades, key ideas that have shaped it's philosophy for successful investing and principles for enduring through times good and bad." [video]

Fake returns
09/06/18   Funds
"IRRs are meaningless and should never be used."

Spending matters more saving
09/06/18   Thrift
"Yet in reality, most households struggle to save because there is no money left at the end of the month to save in the first place. Because technically their problem isn't a savings rate that's too low; it's a spending rate that's too high, in one or more categories, that is causing all of the available household income to be consumed before the end of the month is even reached"

Chasing mutual fund performance
09/06/18   Funds
"So does performance chasing in the mutual fund universe deserve its less-than-stellar reputation? It depends. If the momentum strategy is systematically implemented, frequently rebalanced, and has low transaction costs, it can generate excess returns. But as a rule, performance chasing is best avoided. Our analysis indicates that investors would be better off betting on mean-reversion."

The inflation advantage of equal-weight
09/06/18   Markets
"I have written favorably several times before about the advantages of equal-weighted portfolios, and it is worth reminding readers that going back to 1990, the S&P 500 Equal-Weight index has not suffered a single negative 120-month return, which stands in stark contrast to the capitalization-weighted parent index, which experienced several negative 120-month periods around the time of the financial crisis"

How to retire in your 30s
09/06/18   Retirement
"Fed up with their high-pressure jobs, some millennials are quitting and embracing the FIRE movement."

The Stingy News Weekly: August 28, 2018
08/28/18   SNW
This week we have aliens, levering, loneliness, in rural Canada, and more.

In solitude what happiness?
08/28/18   Behaviour
"Three out of four GPs say that they see between one and five lonely people a day; only 13% feel equipped to help them, even though loneliness has a detrimental effect on health equivalent to smoking 15 cigarettes a day. Only 22% of us have never felt lonely."

Geoarbitrage
08/28/18   Real Estate
"So the meat of the matter is, how much is the gap between the actual median income for each state, and the income it takes to buy the median priced home in each state?"

What's killing rural Canada
08/28/18   World
"Crime, opioid abuse, boarded-up businesses and fleeing populations are destroying the country's heartland."

Levered 60/40 vs equities
08/28/18   Markets
"Asness's study, and the levered 60/40 portfolio utilizing the same approach he outlined in the paper, actually saw portfolio returns outperform in the following 25-year period compared to its historical back test. The levered 60/40 portfolio returned 12.2% for the 1994 - 2018 period, 260 bps ahead of the 100% equity line, compared with only 80 bps during his original test."

Aliens don't get fired
08/28/18   Behaviour
"Perhaps the alien's biggest superpower isn't perfect foresight, but the ability to invest in strategies that no normal investor can reasonably deploy"

Bettors sniff out weak studies
08/28/18   Behaviour
"Between them, they've successfully replicated just 87 out of 190 studies, for an overall rate of 46 percent."

The Stingy News Weekly: August 22, 2018
08/22/18   SNW
This week we have books, dividends, and more.

Capitalism without capital
08/22/18   Books
"The idea today that anyone would need to be pitched on why software is a legitimate investment seems unimaginable, but a lot has changed since the 1980s. It's time the way we think about the economy does, too."

The art of self-control
08/22/18   Behaviour
"So many investors try to give themselves an illusion of control in the markets by overtrading, switching strategies, following the advice of gurus, and the like. Being a control freak can work against you in something like the stock market where a lot of what happens is completely out of your control because of the inherent uncertainty."

Watch less, read more
08/22/18   Books
"Everywhere I have sought peace and not found it, except in a corner with a book."

Beating the TSX
08/22/18   Stingy Investing
Wherein I observe that dividend payers in the TSX beat the market by an average of 2.7 percentage points annually from 2001 to 2017 while non-payers trailed the market by 5.0 percentage points annually. But avoid the 5% of stocks with the highest yields that trailed the market by an average of 7.0 percentage points annually. [$]

The Stingy News Weekly: August 13, 2018
08/13/18   SNW
This week we have chicken, lollapalooza, bet, bites, and more.

Fixing chicken
08/13/18   Markets
"Today on the show, we follow the story of how some shadowy Wall Street investors became convinced that chicken companies were conspiring to charge Americans too much for their chicken." [audio]

The equilibrium delusion
08/13/18   Markets
"Economics is a discipline for quiet times. The profession, it turns out, ... has no grip on understanding how the abnormal grows out of the normal and what happens next, its practitioners like weather forecasters who don't understand storms."

Scott Galloway bites
08/13/18   Media
"The combined market capitalization of Amazon, Apple, Facebook and Google is now equivalent to the GDP of India. How did these four companies come to infiltrate our lives so completely? In a spectacular rant, Scott Galloway shares insights and eye-opening stats about their dominance and motivation" [video]

Lollapalooza effect
08/13/18   Munger
"In simple words, lollapalooza effect is an outcome which is far bigger than the sum of the parts."

The perfect bet
08/13/18   Math
"From the statisticians forecasting sports scores to the intelligent bots beating human poker players, Adam Kucharski traces the scientific origins of the world's best gambling strategies." [video]

Estimating the chances
08/13/18   Math
"The rule of three gives a quick and dirty way to estimate these kinds of probabilities. It says that if you've tested N cases and haven't found what you're looking for, a reasonable estimate is that the probability is less than 3/N."

The Stingy News Weekly: August 7, 2018
08/07/18   SNW
This week we have the loss of aversion, momentum to retirement, and more.

Loss aversion dies
08/07/18   Behaviour
"The popular idea that avoiding losses is a bigger motivator than achieving gains is not supported by the evidence"

Momentum for retirement
08/07/18   Momentum Investing
"Under every withdrawal rate scenario tested, from 3.4% to 12%, the median portfolio managed to more than double the initial investment after 30 years despite withdrawals of various sizes. Further, as a 'risk of ruin' measure, only when the withdrawal rate approached or exceeded 10% did any risk at all appear that the account balance would dip below half of the original amount invested at any time within the 30 years."

Charley Ellis interview
08/07/18   Indexing
"Charley was an early guest on the show and we reconvened to talk through the full case of indexing for individuals and some of its constraints for institutions. Our conversation covers the case for indexing, smart beta, the retirement problem, investing in alternatives, private equity, and indexing challenges in emerging markets." [audio]

7 strategies that walloped the market
08/07/18   Stingy Investing
"For instance, the portfolio containing the 20 stocks with the lowest price-to-earnings ratios (P/E) in the index generated compound annual returns of 14 per cent over the 15-year period through to the end of 2017. It beat the index, which climbed at a 9-per-cent annual rate over the same period, by an average of five percentage points annually." [$]

The Stingy News Weekly: July 30, 2018
07/30/18   SNW
This week we have Arnott, errors, blogs, and more.

MIB: Rob Arnott
07/30/18   Markets
"If you are at all interested in things like fundamental indexing, what's wrong with market cap weighting, how large that sector can grow, the advantages of factor-based investing, and I also learned that there are now over 500 such factors, I had no idea, I knew it was hundreds, I had no idea it was that many. This is really a master class in this space."

When Oracles Err
07/30/18   Buffett
"Mark Twain was a literary giant - but a horrible investor. John Maynard Keynes was one of history's greatest economists, but his genius for economics was less helpful to his own investment choices than his mental flexibility. Warren Buffett's investment track record is almost without equal, but he once made a $6 billion mistake." [audio]

The best investing blogs
07/30/18   Media
"It's that time of the year again when Tobias and I sit down to pick out one hundred of the best investing blogs on the planet. This year, with so many great blogs, we've extended the list to one hundred and fifty. This list is by no means complete but if you're an investor, take some time to read through the great blogs on this list, they'll provide you with an awesome starting point for your investing education."

Business gone bad
07/30/18   Media
"Bethany has covered many of the most interesting stories in business and investing, including Enron (which became the famous book and documentary, the Smartest Guys in the Room), Valeant, Wells Fargo, SAC Capital, Fannie Mae and Freddie Mac, the great financial crisis, and most recently, fracking and the energy revolution." [audio]

The Stingy News Weekly: July 23, 2018
07/23/18   SNW
This week we value investing, low vol, buybacks, and more.

Share buybacks: a global perspective
07/23/18   Value Investing
"For example, in the United States, the S&P 500 Buyback Index has pummeled the overall market, averaging annual returns of 13.98% since January of 1994, versus 9.05% for the S&P 500 over the same period"

Deconstructing the low vol anomaly
07/23/18   Value Investing
"Research has provided persistent and pervasive evidence that the low-volatility anomaly, at least in stocks, is well explained by other common factors, specifically the value factors of D/P and E/P, the profitability and investments factors, and the term factor. This makes the low-volatility factor redundant for portfolios that already have exposures to these factors."

O'Shaughnessy letter
07/23/18   Value Investing
"Is Value ever going to work again? Since 2010, the Russell 1000 Growth index has outperformed the Russell 1000 Value index by roughly 70%, leaving many investors wondering if Value's historical edge will persist, or whether, instead, the future will be more random."

Lessons from Jim O'Shaughnessy
07/23/18   Value Investing
"We are, by our very nature, story-loving animals, and we create stories to create narratives that help us make sense of what is going on around us in the world, and many times, those stories are wrong. And so, from our perspective, trying to make a successful forecast, short-term forecast, is a virtual impossibility, because, in the short term, there's quite a bit of noise in the marketplace. And people mistake noise for signal, and they have a narrative about it, and it's very believable, but unfortunately, often wrong. So we don't make forecasts in terms of what the market's going to do over short periods of time because quite frankly, we don't know. And if others were honest, they would have to admit that they don't know, either. However, we do make forecasts based on very long-term time in the market."

Long live value
07/23/18   Value Investing
"We discuss how difficult the market has become for active investors, thematic investment opportunities, and the potential sources of market mispricings." [audio]

The Stingy News Weekly: July 16, 2018
07/16/18   SNW
This week we have Graham, momentum, and more.

Simple momentum
07/16/18   Momentum Investing
"This simple momentum strategy would have grown at 10.5% for the last 91 years, compared to 10.1% for the index."

Lessons from Benjamin Graham
07/16/18   Graham
"In June 2003, HarperCollins Publishers asked if I would be interested in updating Benjamin Graham's classic The Intelligent Investor. After determining that the proposal was not somebody's idea of a practical joke, I agreed to take on the project. And as I worked on revising the book, I was reminded, once again, what a genius Graham was."

Momentum's magic number
07/16/18   Momentum Investing
"We find similar results, with performance peaking when the formation period plus the holding period is equal to 12-to-14 months."

Aaron Brown on risk
07/16/18   Markets
"Aaron Brown talks about risk at market highs and lows." [video]

The Stingy News Weekly: July 9, 2018
07/09/18   SNW
This week we have less open offices, falling knives, the media, and more.

The art of catching falling knives
07/09/18   Value Investing
"Ashok Leyland was a case of falling knife for me, and I did not want to get hurt catching it mid-air on its way down. But I learned something about catching falling knives from this mistake of omission, which has helped me in my subsequent decision making."

Open offices make you less open
07/09/18   Behaviour
"In the 15 days before the office redesign, participants accumulated an average of around 5.8 hours of face-to-face interaction per person per day. After the switch to the open layout, the same participants dropped to around 1.7 hours of face-to-face interaction per day."

The future of media
07/09/18   Media
"The conversation, with Niel Robertson, covers media, e-sports, content distribution, marketing, and a lot more." [audio]

Mind the gap 2018
07/09/18   Behaviour
"I'm pleased to report that the gap between official total returns and those actually experienced by investors across all mutual funds has shrunk to 26 basis points over the 10 years that ended March 31, 2018. For U.S. equity funds, the average investor (as measured by asset-weighted investor returns) gained 8.32% compared with 8.93% for the average equity fund."

Value investing for sunny outcomes
07/09/18   Stingy Investing
"I recently indulged in my passion by focusing on back-testing concentrated value strategies using the S&P 500 index of large U.S. stocks." [$]

12 rules for life
07/09/18   Behaviour
"Crucial life lessons from the end of hockey games, Idris Elba, and some Wall Street guys with a lot of time on their hands." [audio]

The Stingy News Weekly: July 2, 2018
07/02/18   SNW
This week we have momentum, fraud, ETFs, expiring knowledge, and more.

Lessons from Cliff Asness
07/02/18   Asness
"Learning about the approaches of investors like Cliff helps me in my daily work even though what I do in my work is very different. Cliff is trying to identify statistical factors that can generate a persistent positive disparity of return across large numbers of stocks in an environment where there is extensive historical data. What Cliff is doing is both important and valuable."

Expiring vs. long-term knowledge
07/02/18   Media
"How much of what you read today will you still care about a year from now? 80%? Half? Any of it? I ask myself this question a lot, and it's painful. If I'm honest with myself the answer is often close to none."

The myth of the Stanford Prison Study
07/02/18   Behaviour
"The problem is that the study is fundamentally not credible. Severe problems with it were serious and recognized in peer-reviewed scholarship as early as 1975"

Longest fraud sentence in Canada
07/02/18   Crime
"The former Waterloo Region financial adviser fleeced 41 people - many with little investing experience - out of $10 million."

ETFs with Eric Balchunas
07/02/18   Indexing
"My guest this week is Eric Balchunas, the senior ETF analyst for Bloomberg and the author of the Institutional ETF toolbox. This episode is intended for those in the asset or wealth management industry who have considered using ETFs in their portfolios, or for the individual investor who likes to stay up to date on trends in the market for asset management products. We cover all aspects of ETFs in some detail" [audio]

Momentum strategies have produced standout results
07/02/18   Momentum Investing
"Yet momentum investing works when practised rigorously and systematically. In fact, it has beaten the market over 211 years of U.S. stock market history, from 1801 to 2012, according to AQR Capital Management, which is based in Greenwich, Connecticut. It has also performed well in 40 other countries and for more than a dozen types of assets other than stocks. Heck, some researchers have found that momentum even works when it comes to trading baseball cards." [$]

The Stingy News Weekly: June 25, 2018
06/25/18   SNW
This week we have value, tails, mistakes, that ain't so, and more.

Tails, you win
06/25/18   Markets
"The S&P 500 gained 108% over the last five years. Twenty-two companies are responsible for half that gain. Ninety-two companies made up three-quarters of the returns."

In defense of the value premium
06/25/18   Value Investing
"In fact, even though the value premium has been quite large and persistent over the long term, it has been highly volatile."

Mistakes were made
06/25/18   Markets
"I thought it would be an interesting exercise to look at all the times where I got it almost entirely wrong, not for self-abasement, but rather as an exercise in how we can learn from our mistakes and still go on to do very well in life and our chosen careers."

What you know for sure that just ain't so
06/25/18   Markets
"Recently, my colleagues have written two papers questioning things we thought we knew. The first questions what we really know about current stock market valuations (e.g., the Shiller CAPE) forecasting long-horizon future returns. The second questions, among many other explorations, whether or not the patriarch of the family of anomalies or factors, the size effect, really exists."

Cliff Asness interview
06/25/18   Momentum Investing
"AQR Capital's Cliff Asness, a rare combination of Great Investor and Financial Thought Leader shares his views and strategies."

The Stingy News Weekly: June 19, 2018
06/19/18   SNW
This week we have new grades, the Bill and Warren show, alpha vs taxes, 52-week highs, and more.

Theranos lessons
06/19/18   Books
"There are jerks, egomaniacs, and hucksters everywhere. Many of them are good at their craft. Plan accordingly."

Warren and Bill visit a candy store
06/19/18   Buffett
"So when we got together in Omaha during this year's Berkshire Hathaway shareholder meeting, we decided to check out a real candy store."

Does your alpha cover its taxes?
06/19/18   Index Investing
"Management fees, the investment industry's most visible cost, often get more attention than the less visible and typically larger costs associated with trading and taxes."

Sector vs country momentum
06/19/18   Momentum Investing
"This short research note shows that long-short Momentum portfolios of sectors or countries in European stock markets generated positive excess returns over the last two decades."

52 week high and the Q-factor
06/19/18   Momentum Investing
"Firms with high momentum (close to 52-week high) and low asset growth perform the best."

The Stingy News Weekly: June 12, 2018
06/12/18   SNW
This week we have risk, seasons, luck, work, and more

A season for sectors
06/12/18   Markets
"we find that seasonality has been economically significant and surprisingly robust to specification methods over the past 75 years."

Focus on risk
06/12/18   Behaviour
"Experience has shown again and again that, for example, higher returns have emanated from lower-volatility stocks, and higher quality bonds have tended to outperform those of lower credit quality. In both instances, - whether risk is defined by volatility (yes, volatility can be a risk), drawdowns, or total loss, - the more conservative option has generally performed better."

It can happen to anyone
06/12/18   Behaviour
"History is riddled with investor after investor who couldn't quit while they were ahead and eventually ended in ruin."

Lazy work
06/12/18   Behaviour
"Rockefeller's job wasn't to drill wells, load trains, or move barrels. It was to make good decisions. And making decisions requires, more than anything, quiet time alone in your own head to think a problem through. Rockefeller's product - his deliverable - wasn't what he did with this hands, or even his words. It was what he figured out inside his head. So that's where he spent most of his time and energy."

We are all created equal
06/12/18   Behaviour
"I didn't understand him or like him. But all it took to see his humanity - to be able to treat him - was to supply that tiny bit of openness and curiosity."

The missing table
06/04/18   Stingy Investing
"My Globe & Mail piece went out today with a missing table. The online article has been updated and the table itself is shown below."

The Stingy News Weekly: June 4, 2018
06/04/18   SNW
This week we have a great set of links. Be sure to check out Patrick O'Shaughnessy & Co.'s new research venture, Morgan Housel on psychology, Lou Simpson, factor timing, and more

The psychology of money
06/04/18   Behaviour
"In what other field does someone with no education, no relevant experience, no resources, and no connections vastly outperform someone with the best education, the most relevant experiences, the best resources and the best connections? There will never be a story of a Grace Groner performing heart surgery better than a Harvard-trained cardiologist. Or building a faster chip than Apple's engineers. Unthinkable. But these stories happen in investing"

Lou Simpson wisdom
06/04/18   Value Investing
"One thing a lot of investors do is they cut their flowers and water their weeds. They sell their winners and keep their losers, hoping the losers will come back even. Generally, it's more effective to cut your weeds and water your flowers."

Market timing with multiples
06/04/18   Momentum
"This short research note highlights that valuation multiples can be used for market timing, but result in an emotionally challenging strategy. Momentum or volatility-based strategies are attractive alternatives."

Low P/E in the TSX 60
06/04/18   Stingy Investing
"The low-P/E portfolio would have gained an average of 18.4-per-cent annually over the 16 years through to the end of 2017. It beat the index by a whopping 10.7 percentage points per year on average."

Scientists succumb to corruption
06/04/18   Behaviour
"It starts with a dash of temptation. Stir in some rationalization and deception. The final and key ingredient is: stupid systems with perverse incentives."

Revisiting the Marshmallow Test
06/04/18   Behaviour
"Associations between delay time and measures of behavioral outcomes at age 15 were much smaller and rarely statistically significant."

Factors from scratch
06/04/18   Value Investing
"The excess returns associated with Value and Momentum result from convergent and divergent processes, respectively. Value stocks are systematically underpriced and gradually converge on their fair value over time. Momentum stocks start out fairly valued or slightly overvalued, and go on to become more overvalued in the short-term, before reverting back. Both styles represent a market mistake that can be captured as alpha."

The Stingy News Weekly: May 28, 2018
05/28/18   SNW
This week we have unicorn, volatility, money, and more.

What happened at GE?
05/28/18   Management
"Few corporate meltdowns have been as swift and dramatic as General Electric's over the past 18 months - but the problems started long before that."

The reporter who took down a unicorn
05/28/18   Crime
"How John Carreyrou battled corporate surveillance and intimidation to expose a multibillion-dollar Silicon Valley start-up as a fraud."

Money really isn't everything
05/28/18   Behaviour
"Your mother was right: Money isn't everything. New research that examines levels of life satisfaction across more than 1,200 Canadian neighbourhoods shows that big pay cheques don't have much to say about the overall sense of happiness in a community. What matters more are factors such as affordable homes, short commuting times and - most important - a sense of community belonging. In general, rural residents are happier than their urban counterparts, despite lower incomes"

Attention and low volatility
05/28/18   Markets
"The bottom line is that investors do not need to invest in low-volatility stocks (which are now much more highly priced) to exploit the low-volatility anomaly. The reason is that it's mostly about the very poor performance of high-volatility stocks. And the poor performance of high-volatility stocks can be avoided simply by screening out stocks with the negative characteristics of high idiosyncratic volatility, high skewness and low prices."

The Stingy News Weekly: May 23, 2018
05/23/18   SNW
This week we have Montier, Griffin, replication, diapers, and more.

Replicating in Europe
05/23/18   Value Investing
"For context, the 4.5% premium of leveraged small value over small value is similar in magnitude to the 3.8% premium that we observed in our US research from 1965 to 2017. While the premium in the US includes in-sample data that was used to train the ranking algorithm, the observation of a 4.5% premium in Europe is completely out of sample."

Bezos went thermonuclear on Diapers.com
05/23/18   Management
"First, in 2009, Amazon sent a senior vice president to have lunch with the founders of the startup behind Diapers.com, called Quidsi. He warned them that Amazon was thinking about getting into the diaper business and suggested they think about selling. As Stone tells it, this was not a friendly suggestion. It was more like the kind of offer you can't refuse."

Meb talks to James Montier
05/23/18   Markets
"James starts from accounting identities. There are essentially four ways you get paid for owning an equity: a change in valuation, a change in profitability, some growth, and some yield. James fleshes out the details for us, discussing time-horizons of these identities. One of the takeaways is that we're looking at pretty miserable returns for U.S. equities." [audio]

Pulling the thread with Tren Griffin
05/22/18   Management
"Tren Griffin has been writing a weekly blog post that highlights things he has learned from various investors, businesspeople, musicians, comedians, and more. Lately, he has also been tackling individual businesses, and broad topics like scaling, competitive forces, and product market fit." [audio]

A megastar mega gain
05/22/18   Stingy Investing
"Of the current megastars, Canfor Pulp Products Inc. (CFX) caught my attention owing to its astonishing advance over the past few weeks. Its stock is up 30 per cent since March, when it returned to the megastar team for the second year in a row. The Vancouver-based pulp and paper company is up a whopping 85 per cent since it first became a megastar last year." [$]

Dematerialization
05/22/18   World
"Humans want more and more all the time, which seems like bad news. Aren't we going to use up all the natural resources and pollute the Earth as we keep growing? MIT scientist, Andrew McAfee, advocates that the answer is actually 'no.' Evidence from America shows that, amazingly enough, we are now dematerializing: using fewer resources year after year and treading more lightly on the planet." [video]

The Stingy News Weekly: May 14, 2018
05/14/18   SNW
This week we have GICs vs Bonds, wisdom from O'Shaughnessy, and more.

CEOs don't make 350x more than employees
05/14/18   Management
"Once we make a more statistically valid apples-to-apples comparison, the CEO-to-worker compensation ratio falls by 50 percent from the AFL-CIO.s expected 350-to-1 ratio to 177-to-1 once we consider total compensation for both CEOs and full-time (40 hours per week) rank-and-file workers employed by companies with 500 or more workers. If we assume a 60-hour work week for the average worker (to be comparable to the work week of an average CEO), the CEO-to-worker compensation ratio falls by two-thirds to only 118-to-1 for average CEO pay and 104-to-1 for median CEO pay. Further, even if we could confiscate 100 percent of the compensation of all S&P 500 CEOs, the typical rank-and-file worker would probably get about $1 per week in additional after-tax earnings."

O'Shaughnessy shares his secrets
05/14/18   Behaviour
"So don't expect the market won't tumble, O'Shaughnessy cautions. It always does. But even more important, and he targets passive index/ETF investors here, be careful to avoid one of the worst moves an investor can make, which is to sell when the market tumbles and get back in after it has already rebounded."

Canada's most boring investment ever
05/14/18   Bonds
"Enter the good old GIC. Not only does the Canada Deposit Insurance Corporation (CDIC) insure GICs within specified limits, many GICs have yields that rival those of your favourite bond ETFs, with a much lower average maturity. In fact, a 1.5 year GIC ladder at RBC Direct Investing currently boasts an identical average yield of 2.34%, with an average maturity of just 3 years"

The Stingy News Weekly: May 8, 2018
05/08/18   SNW
This week we have Buffett, Munger, Greenwald, thrift, and much more.

Berkshire Hathaway 2018 AGM
05/07/18   Buffett
"Investors and non-investors alike can witness history, live, as Chairman and CEO Warren Buffett and his right-hand man Charlie Munger share their unscripted views on the company, the markets, the economy, corporate governance, and a lot more." [video]

Looking past the package
05/07/18   Indexing
"ETFs have adopted all of the mutual fund industry's bad habits."

The worst time to retire
05/07/18   Retirement
"Market performance in the first few years of retirement determines financial security throughout one's golden years. Here's why the outlook for people retiring today is concerning"

Graham & Doddsville: Spring 2018
05/07/18   Value Investing
"This is a bittersweet issue for us. Bruce Greenwald, the Academic Co-Director of the Heilbrunn Center, retires at the end of this academic year"

On yield curves
05/07/18   Markets
"Articles often use dramatic language like whenever the yield curve inverts, a recession has followed. They also bring up how the last time the yield curve inverted in the U.S., some well-known policy makers doubted its predictive power, only to be set straight by the worst recession since the Great Depression. It sounds scary. It also happens be true ... in the U.S. ... in recent times. Internationally, the yield curve's predictive power has been mixed."

In praise of short sellers
05/07/18   Markets
"A growing body of academic literature argues that short interest can identify stocks likely to underperform the market - and that this signal can complement better known market signals like value and momentum. This research suggest that if there is substantial short interest in a stock, long-only investors would do well to beware."

Secretary donates $8.2 Million
05/07/18   Charity
"Even by the dizzying standards of New York City philanthropy, a recent $6.24 million donation to the Henry Street Settlement on the Lower East Side was a whopper - the largest single gift from an individual to the social service group in its 125-year history. It was not donated by some billionaire benefactor, but by a frugal legal secretary from Brooklyn who toiled for the same law firm for 67 years until she retired at age 96 and died not long afterward in 2016."

Is loss aversion a myth?
05/07/18   Behaviour
"The idea of loss aversion - that losses 'loom' larger than gains - is one of the most established and prominent findings in behavioural economics, and could be considered a foundation stone for the entire discipline. Recent research, however, has questioned the validity and robustness of the supporting evidence, suggesting that it is at worse a false concept and at best overstated"

The Warren Buffett Archive
05/07/18   Buffett
"The Warren Buffett Archive is the world's largest collection of Buffett speaking about business, investing, money and life."

The process matters
05/07/18   Value Investing
"After doing more research, I realized how much process mattered when it came to selecting which value stocks to invest in."

Coal contest
05/07/18   Stingy Investing
"Westshore's interesting position was put under the microscope in the final round of the Ben Graham Centre's International Stock Picking Competition, which promotes value investing to MBA students." [$]

The Stingy News Weekly: April 30, 2018
04/30/18   SNW
This week we have Cleese, Gawande, megastars, and more.

Lessons from John Cleese
04/30/18   Behaviour
"It's absolutely no good just writing a straight script and then sticking half a dozen jokes in, because people would just remember the jokes and forget the teaching points"

Atul Gawande interview
04/30/18   Health
"Sure, medical progress has been astounding. But today the U.S. spends more on healthcare than any other country, with so-so outcomes. Atul Gawande - cancer surgeon, public-health researcher, and best-selling author - has some simple ideas for treating a painfully complex system."

Factor investing: art and science
04/30/18   Value Investing
"Having studied finance for a long time, I think I now know less about how the stock market works. In fact, I probably should have stopped studying finance after I read Ben Graham's Intelligent Investor, over 20 years ago. Life would be a lot easier, or at least less complicated. Adhering to Graham's straightforward value investing ethos certainly worked out for Warren Buffett"

The Top 1000
04/27/18   Stingy Investing
"Below are the 1,000 largest publicly traded Canadian corporations, as measured by assets. You can rank them by revenue, profit, assets or market cap using the drop down menu below. Tap a company name for more data, including a live stock price look-up." [$]

Meet the Top 1000 Megastars
04/26/18   Stingy Investing
"Not sure which Top 1000 companies to buy? We analyzed the data for you to arrive at a shortlist of 20 stocks. Last year's picks delivered a stunning 16.2% return" [$]

The Stingy News Weekly: April 22, 2018
04/22/18   SNW
This week we have Whitman, Greenblatt, Amazon, and more.

Chasing returns
04/22/18   Funds
"The authors illustrated how the probability that a talented manager's performance will exceed the best in a pool of untalented managers can be surprisingly small, even over long periods. It helps explain why performance-chasing has produced such poor results for individual and institutional investors alike."

Meb's Amazon accusation
04/22/18   Books
"You've probably heard much in the media recently about Facebook, fake news, and weaponizing content to influence opinions and elections. You may have seen Mark Zuckerberg dragged in front of Congress to testify about Facebook's mistakes. Well, what you haven't heard much of in the media (yet) is how Amazon is an equally bad actor. Whereas Facebook is plagued by fake news, Amazon is littered with fake products. And these fake products encourage fraud and play a role in global money laundering."

Joel Greenblatt talks to Barry Ritholtz
04/22/18   Value Investing
"Bloomberg View columnist Barry Ritholtz interviews Joel Greenblatt, co-founder of Formula Investing LLC and managing principal, co-chief investment officer and portfolio manager at Gotham Short Strategies and Gotham Asset Management LLC." [audio]

Be a little underemployed
04/22/18   Behaviour
"Since the constraints of physically exhausting jobs are visible, we took decisive action when things weren.t working, like the Adamson Act. But the limits of mentally exhausting jobs are nuanced and less visible, so we get trapped in a spot where most of us work a schedule that doesn.t maximize our productivity, yet we do nothing about it."

Martin J. Whitman dies at 93
04/22/18   Value Investing
"Martin J. Whitman, who made .safe and cheap. a value-investing mantra during more than two decades managing the Third Avenue Value Fund, has died. He was 93."

The Stingy News Weekly: April 16, 2018
04/16/18   SNW
This week we have Peter Kaufman, value, ideas, and more.

Things I'm pretty sure about
04/16/18   Behaviour
"Some of the richest people are the worst money managers I've seen. When money loses the power of scarcity you stop caring about leaks that are meaningful when you're poorer. And when your life gets complicated you're more likely to outsource decisions to middlemen who may not have your best interest at heart. It's an overlooked irony. 'Enough money to care but not enough to not care' is the sweet spot for management."

Peter Kaufman talks about thinking
04/16/18   Behaviour
"I tried to learn what Munger calls, 'the big ideas' from all the different disciplines. Right up front I want to tell you my trick was, because if you try to do it the way he did it you don't have enough time in your life to do it. It's impossible. Because the fields are too big and the books are too thick."

Value stocks during a soft patch
04/16/18   Stingy Investing
"Buying into a strategy like value investing, or a fund like that offered by Mr. Chou, is easy to do after a strong run. It's much harder after a weak period. But buying during a soft patch may lead to generous returns." [$]

The Stingy News Weekly: April 10, 2018
04/10/18   SNW
This week we have momentum, marketing, deep value, and more.

Where have the public companies gone?
04/10/18   Markets
"The people who supervise the U.S. stock market are grappling with what they see as a troubling trend: One of the great innovations of Western capitalism - the public company - appears to be losing ground."

Art leveraging science
04/10/18   Media
"Communicating and allocating capital are miles apart. Completely different topics. But look around, and the two are constantly paired."

Explanations for momentum
04/10/18   Momentum Investing
"Our findings show that at least a substantial part of U.S. and international momentum profits represents a risk premium for the exposure of the strategy to systematic crash risk"

Common misconceptions about momentum
04/10/18   Momentum Investing
"With so much information available, it is not be surprising that many analysts have missed seeing some of the research. Based on the way momentum is generally used, it is clear to me that there are some serious misconceptions about it. Here is my discussion of some of the more serious ones."

Smart marketing
04/10/18   Markets
"More recently, long-only factor futures have been launched for European and US stock markets. Such derivatives can be used efficiently to create long-short factor exposure by combining them with a short position in the index future. In the US, investors can even purchase long-short factor ETFs, even though these have relatively low assets under management."

Chou's annual letter
04/10/18   Chou
"Similar to the current index mania, these 50 well-established growth stocks were considered buys at any price, sending them to levels that were unjustified on the basis of intrinsic value. The delusion was short - lived as they collapsed shortly after in the 1970s. As one Forbes columnist described it, 'the Nifty Fifty were taken out and shot one by one.'"

The Stingy News Weekly: April 2, 2018
04/02/18   SNW
This week we have Fairfax Lollapalooza 2018, Buffett, CPP, and more.

Deferring CPP
04/02/18   Retirement
"I believe deferring CPP is so unpopular because it forces people to withdraw more money from their savings early on to make up for the shortfall in income. The balance in their RRIF drops a lot faster as a result. I recognize that this phenomenon is hard for us to accept since so much of our self-worth and our sense of financial security are tied to the amount of wealth that we have accumulated. Even though it goes against the grain, you just need to have faith that this deferral strategy will pay off in the long run."

A back test checklist
04/02/18   Markets
"The checklist's objective is to help users determine how much confidence to place in a back test or a set of statistical results. No back test is perfect. Every back test suffers from limitations and the possibility of errors and biases affecting results. While these problems can't be avoided, they can be minimised and managed. Our task as users of back tests is to find a back test whose limitations we can live with. In other words, the back test's limitations, degree of bias or chance of error are not so bad that they completely invalidate the results."

Warren Buffett speech
04/02/18   Buffett
"One day, Warren Buffet came to campus to speak to the College of Business. I didn't think much of this speech at the time but I saved it for some reason. 15 years later, as a founder of my own company, I watch and listen to this particular speech every year to remind myself of the fundamentals and values Mr. Buffett looks for." [video]

How to talk to people about money
04/02/18   Behaviour
"we rarely recognize that most investment debates - debates that literally make markets - are just a reflection of people making different decisions not because they disagree with each other, but because they view investing with a different set of priorities."

The Stingy News Weekly: March 27, 2018
03/27/18   SNW
This week we have Fairfax Lollapalooza 2018, Combs, hacking the lotto, and more.

What's cheap?
03/27/18   Markets
"Stocks with high conviction buyback programs are as cheap as they've been since the tech bubble, and trending cheaper."

Momentum in Imperial Russia
03/27/18   Momentum Investing
"Some of the leading theories of momentum have different empirical predictions that depend on market composition and structure. The institutional theory predicts lower momentum profits in markets with less agency. Behavioral theories predict lower momentum profits in markets with more sophisticated investors. One risk-based theory predicts occasional momentum crashes. In this paper, we use a dataset from a major 19th century equity market to test these predictions. We find no evidence to support the institutional theory due to the lack of delegated management. We exploit a regulatory change in the middle of our sample period to test behavior theories. We find evidence consistent with overreaction theories of momentum. We find no evidence to support a rare disaster theory."

The billionaire whisperer
03/27/18   Buffett
"For Bezos, Dimon, and Buffett, it was another splashy headline in careers that have pushed boundaries. Behind the scenes, though, Combs largely spearheaded the effort, according to a person familiar with the matter. For months, Combs shuttled among the CEOs to get them to commit to doing something about a problem they.d discussed informally for years, the person says."

The lottery hackers
03/27/18   Markets
"After stopping in one morning at a convenience store he knew well, he picked up a brochure for a brand-new state lottery game. Studying the flyer later at his kitchen table, Jerry saw that it listed the odds of winning certain amounts of money by picking certain combinations of numbers. That's when it hit him. Right there, in the numbers on the page, he noticed a flaw - a strange and surprising pattern, like the cereal-box code, written into the fundamental machinery of the game. A loophole that would eventually make Jerry and Marge millionaires, spark an investigation by a Boston Globe Spotlight reporter, unleash a statewide political scandal and expose more than a few hypocrisies at the heart of America's favorite form of legalized gambling."

The devil in the low-P/E details
03/27/18   Stingy Investing
"Value investors love to pick stocks with low price-to-earnings ratios and a wealth of studies back them up. But recent research indicates there might be a devil hiding in the details." [$]

The Stingy News Weekly: March 19, 2018
03/19/18   SNW
This week we have simple value, buybacks, bad planning, and more.

Why projects are late
03/19/18   Behaviour
"Whether it's a giant infrastructure plan or a humble kitchen renovation, it'll inevitably take way too long and cost way too much. That's because you suffer from 'the planning fallacy.' (You also have an 'optimism bias' and a bad case of overconfidence.) But don't worry: we've got the solution." [audio]

High conviction buybacks
03/19/18   Value Investing
"Buybacks may not be well timed in aggregate, but they have been timed well (at least, timed at cheaper relative prices) by firms with high conviction buyback programs. These firms can get lost in the shuffle because, on average, the cash spent on buybacks by these high conviction firms represent a minority of the total cash being spent on buybacks."

Simple value strategies win
03/19/18   Value Investing
"While relative-value strategies do seem to add value over a passive index, it appears investors would be generally better off if they relied on simple P/E-based investing."

Capex darlings and the myth of long-termism
03/19/18   Value Investing
"part of the allure of buybacks is the signal to shareholders that management will not fritter away precious capital on dubious projects"

The Stingy News Weekly: March 12, 2018
03/12/18   SNW
This week we have retirement, FAANGs, farming, and more.

Andrew Tobias interview
03/12/18   Markets
"Andrew is a Harvard grad who went on to write for New York Magazine, covering the world of finance. For several years he had a column in Time and frequently appeared in Parade. His work has also appeared in such places as The New York Times Sunday Magazine and on the cover of Harvard Magazine. His twelve books include three New York Times best-sellers, one of which is The Only Investment Guide You.ll Ever Need, with more than one million copies in print." [audio]

Unraveling retirement strategies
03/12/18   Retirement
"The idea that we can spend an amount calculated at the beginning of retirement and continue spending it regardless of what happens to our financial situation over perhaps 30 years is not only risky but irrational."

About your almond farm
03/12/18   Markets
"I've grown weary hearing investors and consultants cackle about how niche investments like almond farms and small-market private credit deals in India could provide the returns they so desperately seek."

All FAANGed up
03/12/18   Stingy Investing
"Drew Barrymore reprises her role as real estate agent turned bloodthirsty zombie in the second season of Netflix Inc.'s Santa Clarita Diet. New episodes of the dark comedy promise toothsome fare for fans of the show this month. While waiting, investors can think about sinking their teeth into Netflix and the other FAANG stocks." [$]

The Stingy News Weekly: March 5, 2018
03/05/18   SNW
This week we have small value, the death of print, depression, Buffett, and more.

Sequential models
03/05/18   Value Investing
"The sequential model allows investors to prioritise factors and has the advantage of resulting in a concentrated portfolio of stocks. However, the prioritisation requires investors to have a strong preference for specific factors, which can be a difficult choice given that factors tend be highly cyclical."

New ways of treating depression
03/05/18   Health
"His research concluded that chemical antidepressants give you a boost, above the placebo effect, of 1.8 points on average on the Hamilton scale. This is less than a third of the boost that you get, by some estimates, from improving your sleep patterns."

Private equity returns in public markets
03/05/18   Markets
"It has been a while since we discussed private equity on the show, so I was excited for this week's conversation. My guest is Dan Rasmussen, the founder of Verdad advisers. Dan worked in private equity and has spent years studying the entire field. Dan identified several key drivers of private equity's outsized returns: size, value, and leverage. His firm uses these factors as a starting point to build a portfolio of public equities that behave like their private brethren." [audio]

How to kill your economy
03/05/18   Management
"80 percent of CEOs surveyed in one study said they'd pass up making an investment that would fuel a decade's worth of innovation if it meant they'd miss a quarter of earnings results"

Warren Buffett: Advice for entrepreneurs
03/05/18   Buffett
"Warren Buffett, Berkshire Hathaway CEO , talked about his personal experience in business and gave advice to small business owners." [video]

Most newspapers are going to perish
03/05/18   Stingy Investing
"Most newspapers are going to perish. It's just a question of when. That's the dour view of one of the smartest investors in the world and it bodes poorly for the purveyors of print." [$]

The Stingy News Weekly: February 26, 2018
02/26/18   SNW
This week we have a Buffett bonanza, Russo, and more.

Buffett talks to Becky Quick
02/26/18   Buffett
"Ajit has bought every share of that, come on, you know, in the open market and he buys it just like anybody else. If it goes down, he suffers. I mean, we do not have one way things. We don't grant the directors restricted shares or anything of the sort. We want our directors to stand in the shoes of the shareholders. We don't have directors and officers insurance liability. I think maybe one other company on the New York Stock Exchange does it. If we do something really dumb and they lose - a company loses a lot of money, they lose money and it's real money to them. It isn't just something that was given to them."

Tulip mania: the classic story is mostly wrong
02/26/18   History
"Prices could be high, but mostly they weren't. Although it's true that the most expensive tulips of all cost around 5,000 guilders (the price of a well-appointed house), I was able to identify only 37 people who spent more than 300 guilders on bulbs, around the yearly wage of a master craftsman. Many tulips were far cheaper. With one or two exceptions, these top buyers came from the wealthy merchant class and were well able to afford the bulbs."

My quest for loose change
02/26/18   Behaviour
"This change quest, as I've come to call it, has at times been an obsession, and at other times a hobby. But whatever you call it, it has taught me a number of lessons - about saving and spending, about patience, and even about life."

Thomas Russo talks at Google
02/26/18   Value Investing
"Thomas Russo describes the important ingredients of his tax-efficient, long-term buy-and-hold approach to global value equity investments." [video]

Buffett's annual letter
02/24/18   Buffett
"The bet illuminated another important investment lesson: Though markets are generally rational, they occasionally do crazy things. Seizing the opportunities then offered does not require great intelligence, a degree in economics or a familiarity with Wall Street jargon such as alpha and beta. What investors then need instead is an ability to both disregard mob fears or enthusiasms and to focus on a few simple fundamentals. A willingness to look unimaginative for a sustained period - or even to look foolish - is also essential."

The Stingy News Weekly: February 20, 2018
02/20/18   SNW
We have a lot on offer this week but be sure to check out the transcript from Charlie Munger's annual meeting.

Private equity: overvalued and overrated
02/20/18   Markets
"The great postcrisis private equity gold rush is on, fueled by cheap debt and enthusiastic investors. A lawn care chain might get half a dozen calls and emails a week from business brokers and 'searchers.' A regional bank auctioning off a business with $15 million in profits might pitch two hundred prospects, receive fifty letters of intent, and take twelve separate private equity firms to management meetings, ending in a sale price which the majority of bidders considers crazy. And the greatest prize of all - a software company - could sell for many multiples of revenue, regardless of profitability."

A better trend-following strategy
02/20/18   Stingy Investing
"The dual approach provides benefits, according to Philosophical Economics. It generated average annual returns of 12.7 per cent, from January, 1947, to November, 2015, with a volatility of 12.9 per cent. By way of comparison, the S&P 500 gained 11.2 per cent on average annually over the same period with a volatility of 14.5 per cent." [$]

Scant evidence of power laws in real-world networks
02/20/18   Science
"These results undermine the universality of scale-free networks and reveal that real-world networks exhibit a rich structural diversity that will likely require new ideas and mechanisms to explain."

Corrections come and go. It usually makes sense to do nothing
02/20/18   Stingy Investing
"the vast majority of investors should avoid market timing and follow the lead of Warren Buffett and Charlie Munger instead. Broadly speaking, they buy companies at reasonable prices and hold them for very long periods. They're like collectors but instead of baseball cards they buy good businesses and rarely sell. It's a simple approach that has worked well for decades."

Charlie Munger: 2018 AGM transcript
02/20/18   Munger
"Most newspapers by the way I think are going to perish. It's just a question of when. I mean they're all going to die. You know the New York Times will continue because people will pay $5 for it in an airport. So there will be a few survivors, but by and large the newspaper business is not doing well. Berkshire Hathaway owns a lot of them. And buying them we figured on a certain natural decline rate after which the profits would go to zero. We underestimated the rate of decline. It's going faster than we thought."

Smart beta is sick
02/20/18   Markets
"Smart beta may be state-of-the-art, but it has also become the E. coli of institutional investing. There are at least 300 published factors, with roughly 40 newly discovered factors announced each year."

The Stingy News Weekly: February 12, 2018
02/12/18   SNW
This week we have waffles, rent, risk parity, and more.

Lessons from Waffle House
02/12/18   Management
"You go in there and everyone's drunk. You know everyone's drunk in Waffle House because they have pictures of the food on the menu. How drunk do you have to be to not remember what a waffle looks like?"

Risk parity derangement syndrome
02/12/18   Markets
"You may have noticed the market turbulence lately. You may have also noticed the legion of commentators among the media, politicians, and famous investors, blaming this turbulence on 'risk parity,' 'trend-following strategies,' or my favorite, just 'the machines.' Poppycock. Yes, it's come to this; they've driven me to swear like Mrs. Doubtfire."

Rent control needs retirement
02/12/18   Government
"If politicians actually want to make sure everyone who needs a place to rest their head has one, there's only one way to do it: Build more housing. Which means, in turn, loosening the legal restrictions and community veto points that make it so hard to add supply. Because there's no way to escape the fundamental math: Unless you build enough housing to shelter the people who want to live in your city, a whole lot of people will be left out in the cold."

Why competitive advantages die
02/12/18   Management
"The only thing harder than gaining a competitive edge is not losing that advantage when you have one. That's as true for careers and investment strategies as it is for business. And since people are naturally optimistic, there's a tendency to put more thought into finding an edge than not losing it once you find one."

The Stingy News Weekly: February 5, 2018
02/05/18   SNW
This week we have a question of timing, a new balanced ETF solution, and more.

Vanguard's one-fund solution
02/05/18   Indexing
"It was one of the great mysteries in the Canadian fund market: why had no one created an ETF version of the balanced index mutual fund?"

Second childhood
02/05/18   Retirement
"I use the strategy I recommend to others: Occasionally, I will take my portfolio and assume the stock portion loses 35%, which is the typical decline during a bear market. I'll then look at the resulting hit to my overall portfolio's value and ask myself, 'Would you be okay with that?' As the market has climbed over the past year, I've found myself answering 'no' - and that's prompted me to ease up somewhat on stocks."

A simple timing strategy
02/05/18   Stingy Investing
"I've been eyeing escape pods - as an investor - for some time now. The U.S. market blasted through valuation levels seen at the 1929 market top in recent weeks. I outlined the dire situation using Prof. Robert Shiller's CAPE ratio (cyclically adjusted price-to-earnings ratio) in early January" [$]

The Stingy News Weekly: January 29, 2018
01/29/18   SNW
This week we have the top dog contest, leveraged value, broken pensions, momentum, and more.

A momentum signal
01/29/18   Momentum Investing
"Historically, the S&P 500 has been followed by above-average returns over the next 6, 12, 24, and 36 months when this cyclical momentum measure is above 85."

The bankruptcy of modern finance theory
01/29/18   Markets
"The profession of finance as practiced today relies heavily on modern finance theory: the dividend discount model and the capital asset pricing model. These models are the centerpieces of most business school finance courses, and surveys suggest that they are used by over 70 percent of CFOs for capital budgeting. They are also used by almost every fundamental investor and most financial advisers. Yet these theories have been empirically invalidated time and again in well-publicized, peer-reviewed studies. Their continued usage represents another calibration error - between the claimed precision of the models and the actual unpredictability of mark"

High-debt value
01/29/18   Value Investing
"Dan then delves into leverage and the value premium, telling us how important this interaction is. He gives us great details on the subject based on a study he was a part of while at Bain Consulting. The takeaway was that roughly 50% of deals done at multiples greater than 10x EBITDA posted 0% returns to investors, net of fees." [audio]

Ontario making it easier to underfund pensions
01/29/18   Government
"Pension defaults are rare, but the CCPA study found that of the 39 largest publicly traded companies that have defined-benefit pensions, only nine had plans that were fully funded last year. Rather than loosening restrictions, Ontario should amend the Ontario Pension Benefit Act to require businesses to fund 100% of their pensions. Those that can't shouldn't offer pensions in the first place."

Policy-based evidence making
01/29/18   Government
"Social scientists, meanwhile, are discovering that they cannot replicate many of their own findings. The incentives of the profession weigh heavily toward designing experiments that will produce a positive result, analyzing and reanalyzing data until one appears, and then interpreting it as broadly as possible. That kind of research produces headlines, but not knowledge - a fact that social scientists are beginning to acknowledge. With their enthusiasm for EBP, policymakers are running headlong into a collapsing structure, pushing past inhabitants fleeing in the other direction."

Asset Mixer Update
01/29/18   Stingy Investing
We've updated our Asset Mixer to include real data for 2017.

Periodic Table Update
01/29/18   Stingy Investing
We've updated our periodic table of annual returns for Canadians to include real data for 2017.

Dogs Contest
01/29/18   Stingy Investing
"Each January, I like to create a little challenge that adds a bit of flavour to the Safer Canadian Dogs strategy. All it takes is to pick the best and the worst of Canadian dividend stocks."

Creative investing
01/22/18   Management
"Ali views the world with a fresh set of eyes, and has already become an expert at identifying new investment opportunities where others have not. As the second prodigy 26 year old in as many weeks on the podcast, these young guns are making me feel like an ancient 32 year old." [audio]

A letter from an old friend
01/22/18   Markets
"I'm at my lowest equity allocation in 17 years. I am at 65% in equities. If the market goes up another 4-5%, I am planning on peeling of 25% of that to go into high quality bonds. Another 20% will go if the market rises 10% from here. At present, the S&P 500 offers returns of just 3.4%/year for the next ten years unadjusted for inflation. That's at the 95th percentile, and reflects valuations of the dot-com bubble, should we rise that far."

Value and momentum portfolio construction
01/22/18   Value Investing
"Being a Value investor is difficult, given that the stocks of a Value portfolios tend to have inherent issues, otherwise, these stocks would not be cheap. Being a B/M-focused value investor over the past decade has been especially hard, as the factor returns were effectively zero - plenty of pain, but no gain. Experiencing this factor cyclicality often leads investors to contemplate adding other factors in the hope of improving performance. An obvious candidate would be Momentum, as cheap and rising stocks are more appealing than cheap stocks. However, it is not quite straightforward for investors to add Momentum to a Value portfolio as there are several options available. In this short research note, we will analyze Value & Momentum portfolios created by three common multi-factor model approaches - the combination, the intersectional and the sequential models."

Fundamentals of value investing
01/22/18   Value Investing
"An interview with Value Investor, Joel Greenblatt. In this interview Joel discusses his approach to Value Investing and its core elements. Joel also discusses his career including examples of investments and why they were successful or not." [video]

Appalling problem for small businesses
01/22/18   Taxes
"The income the 'passive-income' proposal would hit may be far from passive and the rate on taxable capital gains will often exceed 100 per cent"

Rose Blumkin interview
01/22/18   Management
"A little gem of a 1980s NBC News story about Rose Blumkin" [video]

The Stingy News Weekly: January 15, 2018
01/15/18   SNW
This week we have best case returns, sloth, bitcoin, bankruptcy, and more.

U.S. equity returns: a best-case
01/15/18   Markets
"Adding in 2% for inflation, we get a 5.95% nominal upper limit total return estimate for U.S. equities."

Making history by doing nothing
01/15/18   Behaviour
"The pull toward constant action implicitly assumes the best opportunities are constantly presenting themselves to you at every moment. It's hard to think of living in bigger bubble. Doing nothing gives you options to do something different in the future. And options can be one of the most valuable assets in world that's constantly changing and breaking down old rules."

The FT paywall
01/15/18   Media
"The pink financial paper has used online subscriptions since 2002. After decades of diminishing ad returns, fellow digital publishers are finally catching on."

One-year performance is a terrible metric
01/15/18   Markets
"So ignore one year returns (unless you're taking the average from lots of them) and instead focus on five year returns and ten year returns."

Bitcoin 101
01/15/18   Markets
"Seth takes a moment to share a commercial he recently saw that explains what Bitcoin is and how it works." [video]

Staggering share of Canadians fear bankruptcy
01/15/18   Debt
"One-third of Canadians say they're now unable to cover their monthly bills while keeping up with their debt repayments, up eight points on the index since September."

The Stingy News Weekly: January 8, 2018
01/08/18   SNW
This week we have flying CAPEs, hot potatoes, dogs, cats, and more.

CAPE Fear
01/08/18   Markets
"The CAPE (cyclically adjusted PE) ratio is not a useful timing signal for market turning points, but is a powerful predictor of long-term market returns."

How Malcolm Hamilton prepared for his own retirement
01/08/18   Retirement
"I believe that Canadian governments are not well prepared for the retirement of the baby boom generation. They appear to have no coherent plan to address rising medical and custodial care costs in the 2030s and 2040s. Our governments have large debts. Their revenue may erode as heavily taxed working people retire and become lightly taxed pensioners. Most of their policy responses - raising the age at which government pensions start, income testing government benefits, holding interest rates down, encouraging inflation - will make it harder for people to retire comfortably at a reasonable age."

Market puts investors under the gun
01/08/18   Stingy Investing
"The U.S. stock market is trading at sky-high levels. So, you've gotta ask yourself one question. Do you feel lucky? Well, do ya? I'll be exploring that question after I briefly apologize for appropriating Clint Eastwood's lines from his 1971 movie Dirty Harry." [$]

Three strategies for 2018
01/08/18   Stingy Investing
"Three ways to make money, updated for the coming year: The climbing cats, the safer dogs and the hot potato"

Asset Mixer Update
01/04/18   Stingy Investing
We've updated our Asset Mixer to include nominal data for 2017.

Periodic Table Update
01/04/18   Stingy Investing
We've updated our periodic table of annual returns for Canadians to include nominal data for 2017.

The Stingy News Weekly: January 1, 2018
01/01/18   SNW
Happy New Year!

The full reset
01/01/18   Behaviour
"Anything that evolves - markets, technology, careers, etc - has to be approached with the mindset that once-great ideas can expire, and when they expire you're better off walking away rather than attempting to repair them."

The strong base
01/01/18   Behaviour
"The greatest shortcoming of the human race is our inability to understand the exponential function."

Investment writing of 2017
01/01/18   Media
"Reading the work of others is the most helpful way to learn about investing and it can also improve your writing. So, where credit is due, my favorite investment pieces of 2017"

The rate of return on everything
01/01/18   Real Estate
"This paper answers fundamental questions that have preoccupied modern economic thought since the 18th century. What is the aggregate real rate of return in the economy? Is it higher than the growth rate of the economy and, if so, by how much? Is there a tendency for returns to fall in the long-run? Which particular assets have the highest long-run returns? We answer these questions on the basis of a new and comprehensive dataset covering total returns for all important assets classes - equity, housing, bonds, and bills - across 16 advanced economies from 1870 to 2015"

Top opinion of 2017
01/01/18   Markets
"Not all great reporting requires hushed conversations in back allies or on burner phones. Sometimes - like what columnist Angelo Calvello did with A Crime Foretold - all it takes is an old magazine, Google, and a relentless curiosity about the inner workings of institutional finance. In case you missed it, here's Institutional Investor's top column of 2017 and the rest of the year's best"

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