Apparently a passive portfolio of 50% bonds and 50% stocks wins out in most markets.
There are probably a few things going on here: First bonds and stocks provide great diversification. Second, because the weights are fixed, there is no market timing going on here. Market timing, as we know is a fast way to loose wealth. Third, the stock portfolio is indexed.
In otherwords: diversify, don't market time and index. Simple.
Tuesday, November 29, 2011
Tuesday, November 22, 2011
Ratings changes lag the market.
An important aspect of bond ratings is that when they are changed they usually lag the market. In other words, investors usually price the declining credit quality of the bond into yields before the ratings agencies get around to issuing a new rating. Case in point: France.
IGM Forum - what economists think.
The IGM forum is a group of economists that publish opinion pieces on major policy issues. It all sounds very academic - but the topics that they address are pretty interesting and very relevant.
For example:
For example:
- Buy American requirements in the 2009 stimulus bill did not have a big impact on US manufacturing employment.
- Investors cannot reliably forecast stock prices.
- A 1% increase in the top Federal tax bracket would half cumulative budget shortfalls.
GE's tax return.
Apparently GE's tax return is 57,000 pages long. The Marginal Revolution blog makes an excellent argument as to why this is not efficient.
The Warning
InvestorCookbooks blog talks about the must see Frontline documentary "The Warning" which looks at how policy makers avoided calls to regulate the derivatives market. I'll be adding it to my Netflix queue.
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