Practical analysis for investment professionals


James Montier Applies His Seven Immutable Laws of Investing to Europe

Noted behavioralist and value investor James Montier addressed the prospect of investing in European stocks through the framework of his Seven Immutable Laws of Investing — a set of common sense, value-based principles that are too often violated by the typical investor.

Rethinking the Risk-Free Rate: Offering Alternatives

In an earlier post, I criticized the concept of the “risk-free rate of return” as both illogical and not reflective of reality — and proposed renaming it the "lowest-available-risk expected rate of return." In this follow-up post, I offer some alternative bedrock rates of return for consideration. My preferred alternative: multifactor productivity growth.

Book Review: Finance and the Good Society

Robert Shiller contends that the recent financial crisis was caused not by greed and dishonesty but by the structural shortcomings of financial institutions. He suggests that the financial industry can serve the common good through financial innovation that creates the kind of inclusive society in which all can benefit.

How To Evaluate Economic Information (Video)

Harm Bandholz, CFA, stopped by our offices to discuss how individual investors should view the release of economic data.

How Should You Manage Your 401(K)?

Robert Martorana, CFA, came by our studio to give his advice about what investors should do to get the most out of their 401(k) plans.

Capitalism: It’s as Much About Cooperation as Competition

We have myopically come to believe that competition is the highest expression of our nature and the solution to our pressing business and policy dilemmas. Yet in capitalism, as in nature itself, cooperation is a foundational element that should not be overlooked.

Eugene Fama: Perspectives on Financial Research (Podcast)

Eugene F. Fama argues that the central consequences of the financial crisis are increased moral hazard, ineffective new regulations, and greater risk taking as investors search for yield. He also presents his responses to criticisms of the efficient markets hypothesis, from behavioral biases to momentum, and discusses skill and luck in active investment management and the identification of the best managers.

Bankable Insights: Overcoming Anxiety Is Key to Investment Success

Anxiety is an instinctively powerful force that stands in the way of good investment decisions. Here are some timeless tips for overcoming its effects.

Mike Mayo, CFA: Lessons for Financial Analysts from the Exile on Wall Street

Analysts must assert three essential rights, says the veteran banking analyst: the right to ask for information, the right to get information, and the right to act on information.

Book Review: Don’t Count on It!

In a lecture presented in 2004, John Bogle, founder of the Vanguard Group, documented a direct and substantial relationship between management costs and mutual fund returns. Stratifying all funds by expense ratio, from lowest to highest, he reported the following 10-year average annual returns by quartile: 10.7 percent, 9.8 percent, 9.5 percent, and 7.7 percent. A presumption of market rationality would lead one to expect that investors demanded reduced fees in response to this negative correlation. According to Bogle, however, the average equity fund’s expense ratio was on a long-run rise, which represented a gain for mutual fund operators but an aggregate loss for the consumers they served.

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