Apr 29, 2018
In our last quarterly update, we focused on the extreme stock market optimism that prevailed at that time in late January. At that point, the market was up almost 7% for the year and, as we discussed, investors were by some measures more bullish on stocks than they had ever been.

Before getting to the punch line, we want to further point out that the optimism had been boosted by the fact that volatility in the market had been at multi-decade lows throughout 2017.

From that moment of historical optimism and extended low volatility, the market has given up all its gains for the year, and we are now seeing headlines like this:
Here are some numbers to show just how huge the jump in volatility has been:

  • The S&P 500 has experienced 14 days so far this year with at least a 1% loss after only 4 such days in all of 2017.
  • There have been 7 days this year with over a 2% decline after no such days in 2017. (Source: Albridge Wealth Reporting)
As we noted in that prior letter, "investors on the whole always get optimistic after markets have done well, and they become pessimistic after markets have done poorly. This gets it backwards." So the experience of the markets since that last letter shouldn't really come as much of a surprise.

(read more)
Jan 31, 2018
The world economy has continued to strengthen. Growth in both emerging and advanced countries has been on the rise, with the latter showing a particularly rapid comeback:
This is actually the first time since the global financial crisis that all the world's major economies are growing at the same time:

Source: New York Times (original here )

(read more)
Nov 2, 2017
Renewed optimism about economies and markets has led to an unusual calm. Global stock markets have gone up in practically a straight line since the post-Brexit vote correction ended in mid-2016, and here in the US, markets are by many measures the calmest they've been in decades.

As a result, right now many people are feeling like investing is easy and without risk. This is, of course, not the case: at some point, markets will fall and fear will come to the forefront again. (read more)
Aug 8, 2017
We discussed why we're leery of US stocks in the last article: they just aren't priced for very good long-term returns, especially when compared to much less expensive markets outside the US.

Here's another way of looking at it:
Source: Global Financial Data, AMP Capital

(read more)
Jun 19, 2017
The median price of a San Diego home recently surpassed its all-time peak, as noted by the San Diego Union-Tribune (with a cameo appearance from Rich). We thought this made for a good opportunity to share some thoughts on the local housing market, addressing common questions such as…

  • How expensive is San Diego housing?
  • How do low interest rates impact home prices?
  • Are we in another housing bubble?
  • Does it make sense to buy a home right now?
We'll give some quick thoughts on each of these below, along with links to more detailed articles Rich wrote for Voice of San Diego. (read more)
May 13, 2017
With so much news and commentary these days focused on politics, some people might not realize that there's been a noticeable strengthening of the global economy.

Below are a couple of charts to support this point. The first shows global manufacturing Purchasing Managers' Index (PMI), an economic indicator which you can see from the chart correlates well with economic growth. Global PMI has increased pretty steadily over the past year, and now sits at a 6-year high:

(read more)
Jan 26, 2017
We wanted to quickly highlight some cool research from StarCapital, a German investment firm, showing how well global value investing worked in 2016.

What the folks at StarCapital did was to sort 40 countries by their beginning-of-2016 stock market valuation, and then to average out how the cheapest and most expensive markets went on to perform for the year. We recommend checking out their report, which has some great visualizations, but here’s a summary.

Source StarCapital (returns measured in US dollars)

So the least expensive stuff, despite being generally hated and shunned at the beginning of the year, went on to consistently and significantly outperform the much more beloved expensive markets. (read more)
Jan 18, 2017
We've often argued that trying to invest based on economic and political current events what we call "headline investing" — is unlikely to work well. (The reasons are many; a good refresher can be found here).

2016 was a disaster for headline investing. Here are some of the more prominent examples... (read more)
Sep 19, 2016
Does value investing still work? It's a reasonable question, given the tough stretch that value-based asset allocators have faced over the past several years (at least up until this year, which has so far been quite a good one for Team Value).

GMO's Ben Inker examined the question of value's viability in depth in an article published earlier this year. While excellent, Inker's article1 is fairly long and technical, so we thought we'd try to summarize some key points here.

S&P500 price vs. clairvoyant fair

(read more)
Jul 29, 2016
Our view on "headline" news events is that while they can certainly have an impact on markets, that impact is impossible to reliably predict, and is often short-lived in any case. Presidential elections seem to fit right into this pattern, and as unusual as this election is, there are reasons to believe that the same may happen here. Either way, we have limited exposure to US stock markets — but that's because of valuations, not concerns about the election. (read more)