Throwing caution to the wind has been very profitable – so far. But if history is any guide, there are many reasons for investors to consider taking a much more cautious stance.
Here are the facts: according to every valuation metric that matters (i.e. with statistical significance through history), stocks are quite expensive.
Keep ReadingOne of the most mind-blowing implications of portfolio theory is that a well conceived portfolio has the potential to be much better, in terms of risk adjusted performance, than what we might expect from the sum of the individual portfolio holdings.
Keep ReadingThe question of whether to commit new funds to stocks here is nuanced and complex, not least because it isn’t obvious that traditional alternatives – bonds or cash – offer any better value. We are very near all-time low interest rates across most developed government bond markets, credit spreads are near all-time tights, and rates are negative out to 5 or more years in real terms.
Keep ReadingTo be crystal clear, the commentary below makes no assertions about whether markets will carry on higher from current levels. Expensive markets can get much more expensive in the intermediate term, and investors need look no further back than the late 2000s for just such an example.
Keep ReadingWe know from studies of expert judgement that gurus who make nuanced predictions and hedge their bets attract much less attention than experts who spin dramatic predictions with unswerving confidence. As a result, firms are predisposed to encourage gurus to voice strong opinions and divergent views that stand out from the crowd.
Keep ReadingThe investment management industry knows that you are influenced by percent symbols preceded by large numbers, so they market products with the best 1, 3 and 5 year track records, prominently featuring them in newspaper and TV advertisements, knowing that you will be unable to resist the urge to chase into those funds to avoid missing another year of riches.
Keep ReadingLong-time readers will know that we periodically publish a statistical forecast for U.S. stock market returns over horizons from 5 to 30 years, which we generate from a variety of long-term valuation metrics.
Keep ReadingOur last few articles dealt with the Permanent Portfolio, a widely embraced static asset allocation concept proposed by Harry Browne in 1982. To review, the simple Permanent Portfolio consists of equal weight allocations to cash (T-bills), Treasuries, stocks and gold to ward against the four major financial states of the world…
Keep ReadingIn Part I of the Permanent Portfolio Shakedown we investigated the history of the approach, tracing it back to Harry Browne in 1982. The company he helped to found, The Permanent Portfolio Family of Funds, has been running their version of the strategy in a mutual fund for almost 30 years, with fairly impressive results.
Keep ReadingThe Permanent Portfolio is an asset allocation concept first introduced by Harry Browne in 1982. The Permanent Portfolio Family of Funds website has this to say about the strategy, which they have been running in mutual fund format for about 20 years.
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