One of the more common responses to the fact that inflation is low is the idea that the inflation is all in asset prices. So, for instance, if someone were [ … ]
Category: How Things Work
What Will Happen to Bonds if Interest Rates “Normalize”?
There’s a lot of chatter out there about rising interest rates and “normalizing” rates. As I’ve written about before, I think most of these fears are a case of short-termism [ … ]
Why Does Momentum Investing Work?
When you’re choosing an equity market allocation I generally prefer to keep things simple – just buy a low fee global market cap weighted portfolio and call it a day. [ … ]
Are Individual Bonds Safer than Bond Funds?
The WSJ was out with a piece discussing outflows from DoubleLine’s Total Return Bond fund this week. One of the reasons for the outflows was cited as the lack of [ … ]
Repeat After me: “Bonds Don’t Necessarily Lose Value When Rates Rise”
If you take a basic finance course the first thing you learn about bonds is that bond prices are inversely correlated to interest rates. So, when rates rise bonds prices [ … ]
Why I Prefer to Think of Stocks as Bonds
Bonds have always struck me as fairly simple instruments. In general, you know what a (high quality) bond’s return will be and you know what its time horizon is. That [ … ]
The Alpha Paradox
Here are a few things we know about the financial markets: Beating the market or obtaining “alpha” (excess return) is extremely difficult as evidenced by the annual SPIVA Scorecards. Alpha [ … ]
How to Avoid the Problem of Short-Termism
If I had to pinpoint the biggest problem for most asset allocators I would probably say short-termism. Short-termism is the tendency to judge financial markets in periods that are so short [ … ]
Why Equity Outperforms Credit
In my new paper on asset allocation I go into quite a bit of detail about why certain asset classes generate the returns they do. Understanding this is useful when [ … ]