Luck or Skill? Focus on the Process, not Performance.

By John Reese (@guruinvestor) —  Is it better to be lucky or smart? When it comes to investing, I think we can all agree that success arises from a combination of the two, but to what degree has been the subject of much debate. Those who are well-studied in behavioral finance would tell you that investing is rife with the illusion of skill—an investor’s inflated, misplaced confidence in their own abilities to choose winning stocks. In fact, in his book Thinking, Fast and Slow, Nobel Laureate Daniel Kahneman makes the argument that much of the investment industry is built on […]

Reasons to Worry About the Market in 2018

Highlighting the fact that, as of December 1st, the world’s stock markets closed within “touching distance of $100 trillion for the first time,” a recent Bloomberg article provides data charts to illustrate how the markets have performed this year and argues that some of the trends are worrisome. Here are some takeaways: The record-high market value has occurred in tandem with decreased volatility, which has dipped below that of bonds. “Pockets of the bond market,” the article argues, “look troublesomely bubble-like.” As the ECB continues to expand its balance sheet, European government bond yields are being driven lower. This is causing […]

Most Read Posts on Validea’s Guru Investor

Below are links to our most popular posts for this week on Validea’s Guru Investor blog. [1] Focus on Fundamentals Rather than “Expert” Forecasts [2] The Dangers of Data [3] Goldman Sachs: High Valuations Mean Pain is Coming [4] Undervalued Value Stocks Could Rebound ——- Photo: Copyright: arcady31 / 123RF Stock Photo  

The Buyback Binge is Ending

The market is seeing an end to the era of share buybacks to “one where capital spending matters,” according to a recent article in Barron’s. Companies in the S&P 500, it reports, are going to repurchase $500 billion shares this year, the lowest number since 2012 (data from INTLFCStone). The timing for this is appropriate, however, given the slowdown in quantitative easing (which had provided cheap money for repurchases). Higher borrowing costs together with high share valuations, the article says, means companies will get “less bang for their buyback buck.” Instead, it explains, “companies will need to spend on capital […]

Goldman Sachs: High Valuations Mean Pain is Coming

The current environment in which stocks, bonds and credit have been expensive at the same time—a situation last seen in the 1920’s and 1950’s–will eventually bring “pain for investors,” according to Goldman Sachs Group Inc. This according to a recent Bloomberg article. In a recent note, Goldman argues that the slowdown in quantitative easing is “pushing up the premiums investors demand to hold longer-dated bonds” which will suppress returns over the medium term. Another possibility, it says, is that both stock and bond valuations would suffer a sudden decline, the degree of which would depend on whether it is triggered […]