Don’t Be Fooled by the Yield Curve

Laurence Articles

For the first time in at least 40 years, there’s a fundamental economic reason that a yield curve near-inversion might not herald a recession. The U.S. Treasury yield curve is currently flatter than usual, not quite inverted but close enough to make some people nervous — since, in the past, recessions have almost always followed. I will make the case …

Don’t Be Fooled by the Yield Curve

Laurence Articles

For the first time in at least 40 years, there’s a fundamental economic reason that a yield curve near-inversion might not herald a recession. The U.S. Treasury yield curve is currently flatter than usual, not quite inverted but close enough to make some people nervous – since, in the past, recessions have almost always followed. I will make the case …

Foreword to: Popularity: A Bridge Between Classical and Behavioral Finance

Laurence Articles

Why does value investing work? Why do other factor strategies work? For that matter, why does any active strategy — meaning, any strategy other than cap-weighted indexing — “work” in the sense of having a reasonable chance of beating the cap-weighted index other than by random variation? The Classical Answer The answer could arise in classical finance, or behavioral finance, …

Byron Wien on Trump, Trade, Deficits and Thucydides

Laurence Articles

On June 27, 2018, I spoke with Byron Wien of the Blackstone Group, a longtime friend of Advisor Perspectives and the author of the widely-followed Ten Surprises series of predictions, which Byron has produced for 33 years. For many years, Byron was chief U.S. investment strategist at Morgan Stanley. If you are in the camp of those who think Donald …

The People versus Themselves: Two Views on Populism

Laurence Articles

These are tough times for lovers of freedom and democracy. After a quarter-century of spectacular progress following the fall of the Berlin Wall, liberal democracy has yielded to autocracy in a variety of countries. And, even in thriving democracies such as the United States, voters are embracing populism in reaction to perceived economic stagnation, widening income disparity, and disruption of …

Conference Roundup: Bubbles for Fama

Laurence Articles

At the Q Group in Palm Beach, Florida, on May 7, 2018, Robin Greenwood, a Harvard finance professor, presented a paper, “Bubbles for Fama,” that he co-authored with Andrei Shleifer and Yang You. The Q Group is a discussion group where directors of research and other senior investment professionals interact with finance academics. Founded in 1966, and conducting two seminars …

Is Life Improving? Documenting the Remarkable Progress of Humankind

Laurence Articles

The rise of populism has been fueled by rhetoric bemoaning the downward plight of the middle class, and that chorus has been joined by many from the left. But are we really worse off than we were a generation or a century ago? Not according to Steven Pinker, whose new book documents the dramatic improvement in lives across the globe. …

Byron Wien on Trump, Trade, Deficits and Thucydides

Laurence Articles

On June 27, 2018, I spoke with Byron Wien of the Blackstone Group, a longtime friend of Advisor Perspectives and the author of the widely-followed Ten Surprises series of predictions, which Byron has produced for 33 years. For many years, Byron was chief U.S. investment strategist at Morgan Stanley. If you are in the camp of those who think Donald …

Conference Roundup: The Annotated Russell Napier

Laurence Articles

On April 5, 2018, I attended the Foundation Financial Officers Group (FFOG) joint conference with a European foundation group, EFFIO, in Milan, Italy. The most engaging and erudite speaker was Russell Napier, a former asset manager with Baillie Gifford, Foreign & Colonial, and CLSA, and now independent. Napier founded Electronic Research Interchange (ERIC), a platform for independent investment research; and …

Why Nassim Taleb Thinks Leaders Make Poor Decisions

Laurence Articles

Why do experts, CEOs, politicians, and other apparently highly capable people make such terrible decisions so often? Is it because they’re ill-intentioned? Or because, despite appearances, they’re actually stupid? Nassim Nicholas Taleb, philosopher, businessman, perpetual troublemaker, and author of, among other works, the groundbreaking Fooled by Randomness, says it’s neither. It’s because these authorities face the wrong incentives. They are …

She Caught the CATY, and Left Me a Mule to Ride: Improving on Dividend Yield as an Indicator of Stock Valuations and Expected Returns

Laurence Articles

The title of this essay refers to two things: (1) a great Blues Brothers song; and (2) a new measure of market valuation set forth by Philip Straehl and Roger Ibbotson, the CATY or cyclically adjusted total yield. Straehl and Ibbotson [2017] developed the CATY as a substitute for Robert Shiller’s CAPE or cyclically adjusted price-earnings ratio, a measure that …

What Investment Risk Really Is, Illustrated

Laurence Articles

Investment advisors, managers, and their clients talk about balancing risk and return when advising clients about their strategic asset allocation (SAA) policy for the overall portfolio. This is true whether the client is an individual, a pension plan, a foundation or endowment, or a sovereign wealth fund. SAA investment policy or strategy is typically set by choosing from among a …

“Uneasy lies the head that wears a crown”: A Conversation with Jack Bogle

Laurence Articles

On January 8, 2018, I interviewed John C. (Jack) Bogle, the founder of Vanguard, the largest manager of U.S. index funds and the second largest investment management organization in the world. Bogle, born in 1929, founded Vanguard in 1974 and launched the first index mutual fund, designed to track the S&P 500, in 1975. He served as chairman and CEO …