The Hype Surrounding Environmental, Social, and Governance Investing
“The shares of ESG companies will get wicked expensive as more and more money piles into them. At that point, with the expectation of low returns on ESG and high ones on ‘wicked’ stocks, virtue investors and ESG fund managers will have to eat palpably lower returns or creatively reclassify ‘wicked’ companies to get higher performing stocks into their portfolios, i.e., destroy the meaningful differentiation between ESG and ‘wicked’ companies once again.” ~ Robert E. Wright
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What Raised the S&P 500 Price-Earnings Ratio?
“For those who find stock price gains inexplicable and therefore terrifying, the Yardeni-Reynolds Model offers a purely empirical explanation of a seemingly high trailing P/E ratio – extremely low global inflation and bond yields combined with an artificially low P/E denominator of past earnings that includes the terrible second quarter of 2020.” ~ Alan Reynolds
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Yield Curve Inversions Don’t Improve Investment Outcomes
In light of the yield curve signal’s inability to overperform, it seems that for most investors the takeaway is that yield curve inversions are mostly noise. Ignore them and stick to your strategy.
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How To Decode Investment Advisor Speak
This is my short list of things I hear way too often in the investment industry, and my honest translation into English.
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There’s No Such Thing as Socially Harmful Speculation
Financial markets, including markets for complex instruments that may just look like speculative casino bets, allow important real transactions to occur. And in a brilliantly decentralized way, they bring into harmony people whose information, values, goals, and risk aversion differ.
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You Don’t Really Know When to Buy or Sell
Active managers may be good at finding buying opportunities, but they seem to lose their discipline when it comes to selling.
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Making America Broke (More Than It Already Is)
Social Security is in the hole. It’s time to stop digging.
READ MOREWhat Will Inflation and Devaluation Mean to You?
By Donald G. Ferguson, Bion H. Francis, E. C. Harwood, Benjamin D. Manton, and Their Assistants on the Institute Staff Part I Where Does Money Come From, and What Is Inflation? Has the Danger of Inflation Passed? Part II Inflation’s Timing an …
READ MOREWhy Can’t Americans Save?
Financial wellness has become a popular topic with policymakers, human resources departments, and the financial media. The concept is simple: Just as with physical health, financial wellness assesses your ability to support yourself into old age.
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Is the Rydex S&P 500 Fund the Worst Mutual Fund in the World?
It is generally a reasonable approach to invest in passively managed index funds because research has shown that actively managed funds have not shown a consistent ability to beat their indexes. But you’ve got to pay attention to the fees.
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How Fear Helps Predict Stock Returns
Stocks are well known for their high volatility. Stocks respond to financial, economic, and political events in real time. The recent Brexit vote, for example, caused a sharp drop in stock prices. But the U.S. stock market was able to rebound in several days. Going forward, it is certain that stock markets will be sensitive to events like the upcoming Federal Open Market Committee meeting (July 26-27), the ongoing presidential election, oil shocks, and so on. But it is far from certain whether we can predict future stock returns. However, an index, called VIX, may surprise investors.
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Can You Expect Your Money to Double in 10 Years?
Sometimes when I do a back-of-the-napkin estimate about how much I’ll have saved in the future, I’ll use a handy formula known as the “rule of 72.” This rule says that if you divide 72 by your rate of return, the resulting number is roughly how many years it will take your money to double.
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