The Stingy News Weekly (09/12/2010)
Risk and return in general
"Professors have been very successful at presenting the CAPM and its spawn as a triumph of the social sciences, in a way similar to how macroeconomists used to present Keynesian macro models before the Phillips curve started to do multiple backflips. The profs are filled with wishful thinking based on ever more obscure econometric tests that prove their big idea works, a science no less than thermodynamics. It doesn't work, not even as an approximation."
Beware of professors bearing ETFs
"But while market research by these scholars has helped shape how firms design hundreds or thousands of portfolios, the particular investments created by the academics themselves haven't always performed well."
Do Investors Benefit from Financial Advice
"Working with one of the biggest brokerages in Europe, we record what happens when unbiased investment advice is offered for the first time to about a random 8,000 of their several hundred thousand active retail customers. We analyze the data to answer which customers accept the offer and, if they accept the offer, do they improve their investment performance. These are our findings. First, only 5%, (who are likely to be male, older, richer, more financially sophisticated, and have a longer relationship with the brokerage) accept the offer. Second, of those who accept the offer, the advice is hardly followed. Third, though the investment performance does not improve for the average advisee, it does improve for the average advisee who follows the advice. Fourth, it seems that the investors who most need (do not need) the financial advice are the ones who are most likely to not get it (get it). Overall, our results imply that the mere availability of smart and unbiased financial advice is a necessary but not a sufficient condition for benefiting retail customers. "
"It's time to delete the CAPM from business school textbooks. It's done more harm than good for investors."
Apple's Pricing Decoys
"Next time you're sitting at an airport bar and hear two businesspeople debate whether Apple is a technology or design company, chime in: 'Nope. What Steve Jobs sells is pricing.' Pricing? You bet. Jobs is a master of using pricing decoys, reference prices, bundling, and obscurity to make you think his shiny aluminum toys are a good deal."
The puzzling success of trend-following
"the part of his speech which I found most fascinating seemed to contradict this conclusion. This is an assessment of investment strategies which are based on momentum in asset prices, rather than long term economic fundamentals. Momentum wins the race hands down."
Patience and Finance
"Evidence from social and economic systems points to two evolutionary paths. Along one, patience becomes self-reinforcing. For example, financial liberalisation may encourage patience and improve inter-temporal choice, unlocking growth. But there is a second path, along which impatience is self-reinforcing. Financial liberalisation can also unlock impatience, generating over-trading and under-investment."
Beware of Greeks bearing bonds
"After systematically looting their own treasury, in a breathtaking binge of tax evasion, bribery, and creative accounting spurred on by Goldman Sachs, Greeks are sure of one thing: they can't trust their fellow Greeks."
Not enough labor day
"Today, many Americans will be enjoying a respite from the incessant demands of their jobs. But many Americans will be wishing desperately they could trade the holiday for the incessant demands of a job. This year, given the state of the economy, Labor Day should be called Not Enough Labor Day."
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