Insights on markets, emergent trends, history, innovation, risk management, global economics, strategy, policy, and other topics that catch our attention. Inspired by ongoing research, conversations and events. Written and edited by Osbon Capital Management and published every Thursday morning.
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Too much time is spent talking about price. Fundamentals are ultimately what drive equity prices higher over time. To say this another way, a company’s stock price can’t continue to rise unless it continues to be successful. The famous quote by Warren Buffett is, “In the short run, the market is a voting machine, but in the long run (...)
It’s okay to feel good
Here’s a headline you’re not ever likely to see: “Good news breaks out!” The media always prefers a crisis. Nonetheless, behind the relentless drumbeat of negative news coverage (Europe! Deficits! Slowdown!), there is unmistakably good market news across the board so far in 2012. Let’s look at a few facts.
Too big to succeed
First the “flash crash.” Then the Facebook trading debacle. Now, Knight Capital shoots itself, accidentally and critically. What’s going wrong with the basic market function of an orderly match between buyers and sellers? Let’s look closer look inside the maelstrom that is the cutting edge of modern trading for the answer, and perhaps some hidden good news for long term investors.
Investment jujitsu
Investors can sometimes feel like they are facing market opponents that hold all the advantages, be it fantastically rich hedge funds, privileged insiders, rigged markets, or bewildering news events. How can investors thrive in the face of such overwhelming odds stacked against them? I suggest investment jujitsu – using your opponent’s strength to your benefit. Here’s how to practice it.
Why is it so hard to beat an index?
Both practical experience and academic research show that active managers, on average, fight a losing battle when trying to beat indexes in their respective asset classes. Even managers who beat their benchmark for a year or two are not likely to continue for extended periods. Active managers come to the battle well armed – able to exploit limitless research, fundamental and…
Investing is not like tennis
On the tennis court, the top players dominate. At Wimbledon this past week, no singles player seeded below #8 made it past the quarterfinals. Roger Federer won his seventh title and Serena Williams won her fifth. We expect top players to win their matches and they generally do. The cream just rises to the top through superior physical talent, court…
Built to last: ETF selection
If you are going to build a house, use quality materials. Then it will last for a long time. The same philosophy applies to portfolio construction: use quality index ETFs (exchange traded funds). How can you pick the sturdiest oak, steel, and glass from the detritus of 1000+ ETFs available today? At Osbon Capital, we start with four tests, which…
Mistakes that never need to happen
JP Morgan’s startling trading loss of $2-5 billion is a good reminder to investors to watch out for hidden problems in their own portfolios – unknowns that should have been known. After the fact, it is easy to see how JPM went astray, but is it possible to see – or avert – one’s own problems ahead of time? Yes, and here’s what to look for.
Investing’s best cheat sheet
If I was asked to present the three or four most important ideas in investing and could only bring one sheet of paper with me, it would be no contest. I’d bring the Andex Chart from Morningstar. I’m not sure how they managed to get so much market history onto one sheet of paper, but I’m glad they did. In…
Bonds get no respect
Last week was remarkably good for many investors, but you’d never know it from the headlines. While big losses in the equity market got all the attention, bond prices surged. Bond reached new highs last week as investors couldn’t seem to get enough US 10-year Treasury bonds. The yield on that bond dropped below 1.5 percent, an all-time low since…
