Since we are involved in markets, it is inevitable that from time to time someone will ask me what the market did that day. That used to be a simple question to answer. It didn’t matter whether they were talking about the Dow Jones Industrial Average (“DJIA”) and I was thinking about the S&P, markets […]
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Is Your Stockpicker Lucky or Good?
The Wall Street Journal just published a great article “Is Your Stockpicker Lucky or Good” . The article hits on a point we talk about all the time, backward looking due diligence vs. forward looking due diligence. Investors use backward looking due diligence to try to pick managers who will beat the market, but the real […]
Turning Smart Beta into Smart Alpha
Smart alpha combines smart beta and tactical asset allocation to address the shortcomings of both approaches by giving investors the chance to beat the market during an upturn while still protecting investors during a downturn. Over the past few years, smart beta strategies have been gaining market share. The appeal is based on the idea that […]
Preparing for True Black Swans
A Black Swan is an event that comes as a surprise and has a major impact. Investors will often inappropriately refer to the bear markets of 2000-2002 and 2008 as Black Swan events. However, bear markets do not come as a surprise, everyone knows they happen and they are built into every capital market assumption. […]
Active vs. Passive-A New Way to Look at the Debate
The active vs. passive debate continues to rage across Wall Street. The passive guys believe that active money managers can’t beat a passive index so the fees they charge aren’t worth it. The active guys believe they can beat a passive index, even though they really haven’t, so the fees they charge are worth it. […]
A New Way to Look at Sector Rotation
Sector rotation has been a staple of tactical asset allocation from the beginning. Typically, sectors are ranked by momentum over some lookback period (3 months, 6 months, 12 months, etc) and then the top couple are picked and held for a month and then the process is repeated. On a backtest such a strategy will […]
How Tactical Strategies Can Make Money in a Bear Market
These days just about everyone seems to be predicting a major market selloff. We know that bear markets are part of normal market dynamics and since the bull market is now 8 years old we have to be closer to the end than the beginning. Tactical strategies have gained in prominence since 2008 as […]
How to Make Momentum Investing Work
Momentum investing is the idea of buying stocks that are strong and not buying (or shorting) stocks that are weak. Like it’s almost opposite cousin, value investing (buying stocks that are undervalued and not buying stocks that are overvalued), momentum investing shows extremely strong long term returns, but also goes through long periods of underperformance. In a […]