They Really Are The Smartest Guys In The Room

One of the tenets of Osbon Capital is to seek out and partner with industry-leading service providers for the benefit of our clients. Perhaps the best example of this is Windham Capital Management, our risk management and asset allocation provider. Its research and portfolio building tools are at the core of every client account. Windham held its biennial Research Summit on Monday in Boston. As always, we learned a great deal and are so glad to have them on our side.

Factor Fashion

Among the many things we like about Windham is its dedication to research and solutions, wherever that may lead. Founder Mark Kritzman began the Summit with his presentation of Facts About Factors, namely, do they work in building portfolios? (Factors are ways to tilt a portfolio’s exposure toward certain aspects of investments.) His answer: not how you think. He cautioned to beware of fashionable factor investments based on inflation, growth, term or credit premiums, or size and value premiums. His research shows that mapping error, the ability to accurately replicate and represent the factor, can erode their impact. Yet, factors have value according to Mark in understanding, creating insight and exposing concentration risks or unintended exposures, and he talked about where and how to use them. The audience was hungry for this one; Mark’s information and application was prime rib for carnivores.

The Billion Prices Project and Inflation

Roberto Rigobon, MIT professor, is obsessed with new ways to use information to measure and improve our lives. He goes way beyond just big data to measure inflation and purchasing power worldwide. How does he do it? With a team of 25 programmers at MIT he screen scrapes the internet for prices, literally billions of data points across 20 countries, and tracks the changes day to day. Through this method he’s been able to accurately predict inflation generally two to three months before the official release. Actual spending on goods and official inflation reports don’t always match. See more about the US here.

Are We In A Bubble?

Professor Robin Greenwood of Harvard posed the questions, “Do bubbles exist, how do you measure them, and can you forecast a crash?” His extensively documented short answer is “Yes, here’s how…and yes.” Call us for details on this one, it’s a juicy story.

A Word From George Mitchell

Former Senator George Mitchell, the keynote speaker, has done so much it takes a full page to list his contributions – like Senate Majority Leader, architect of the Irish Good Friday Agreement, Chairman of Walt Disney Co. and author of the Mitchell Report on performance-enhancing drug use in professional baseball. Two of his intriguing comments Monday were “World war is unlikely due to US military dominance” and “Population growth imperils peace.”You can find out more in his book The Negotiator.

Ideal Teammates

There was more in the Windham Summit than I can summarize here. It is sufficient to say that we are grateful to have the Windham folks in our corner. A day spent with them reminds us that investing is truly enhanced by their expertise and insight. If you’d like to know more about how Windham helps to shape and optimize every Osbon Capital account, give me a call or drop a note anytime.

John Osbon – josbon@osboncapital.com