World Beta Blog

Fun article on timing stocks.

I was thinking about putting together a piece about “Indexing 2.0″.  ie What is the best was to build a portfolio that incorporates most of the factor anomalies, and maybe a chart with all of the ETFs filled in for the spaces.  This article reminded me of the project…with an interesting quote from Bill Bernstein:

IU.com: So, short-term T-bills remain appropriate on the fixed-income side, and on the equities side, would you hew to the classic broad-market passive investment frames of reference you’ve long embraced?

Bernstein: Yes, but I’ve always believed in factor tilts. And there are some new factors. There’s profitability and momentum, and I think those will hold a premium in the future.

Updated with great article from Gestalt.

I took a look at the CAPE values at year end 2012 to see how those markets were performing in 2013.

The 10 cheapest are up around 1%, and the 10 most expensive are down around 6%.

The five most expensive countries by CAPE at end 2012 are -11% YTD, led by expensive Peru and Columbia.  

We sent out the CAPE update to the Idea Farm list the other day, but fair warning, the US is now in the top 3 most expensive out of 40 countries…

I am a glutton for punishment.  First, Palm Springs in a 120 degree sauna last weekend and NYC next week (9-12).

Drop me a line if you want to meetup somewhere with AC.

You see a lot of articles that like to compare investing to X (Poker, Moneyball, relationships, death, etc).  While they are a bit tiresome,  I was loving these photos from Sabine Pearlman Photography.  Kind of amazing to see the intricate differences in design that are largely used for the same purpose.

I’ll very likely be in attendance…

Tuesday, July 16th, 2013

Speakers:

Alex Greyserman, PhD
Chief Investment Officer – ISAM Systematic

and

Jack Weiner
Head of Sales, Americas – ISAM Systematic

Chair: Erik Einertson, CFA
 

An Alternative Investments Group Event

The presentation entitled “Trend Following: An Overview of Methodology and Return Characteristics” or as we refer to it the Trend Following Teach-In, is designed to further educate and demystify the strategy for several of our largest institutional clients.  It offers a general overview of the strategy and includes explanations around the source of risk premia that delivers the strategy’s returns, expectations of risk, methods of benchmarking, and strategy for risk allocation within a broader portfolio.  The analysis draws upon detailed research papers on the nature of trend following, which are produced by the ISAM Research team as well as analysis from academia.  The aim is to provide clarity and deep insight for both current and prospective investors into what can be described as an uncorrelated asset class with strong Crisis Alpha characteristics.

How are most asset classes performing so far in 2013?  The best performers list is dominated by US stock categories, and the other end is largely commodities, foreign stocks, and bonds.

US Small caps lead the pack up 18%, while precious metals are down the most at -30%.  

SumZero and Value Investing Congress are partnering up for their annual stockpicking contest…

We’ve had a few five figure winners from blog readers in past contests, let’s get some more!

$65,000 in prizes for the 3 finalists! Like last year, our grand prize winner will take the stage at the 9th Annual New York Value Investing Congress, taking place September 16th & 17th at Jazz at Lincoln Center’s Fredrick P. Rose Hall, and present their winning idea to an audience of elite investors. But this year he or she will also take home a robust cash prize of $50,000, and our 2nd and 3rd prize winners will also receive cash prizes of $10,000 and $5,000, respectively. All 3 finalists will receive a one year subscription to FactSet as well as free admission to the Value Investing Congress and Pre-Congress workshop. All contestants are eligible to receive a special trial offer to FactSet products as well.

How Can I Enter?
Starting July 15th, submit your finest investment idea in written form to this site. Your pitch must be 500 – 3,000 words in length and the company/opportunity you focus on must have a market capitalization of at least $500 million (USD). Preference will be given to write-ups on companies with greater liquidity, as well as those with a significant discussion of valuation factors and catalysts.

Beyond these minimal requirements, any and all types of investment ideas and strategies are welcome. This includes spin-offs, special events, turn-arounds, shorts as well as various asset classes outside of common equities, including preferreds, credit, derivatives and others.

Eligibility requirements include being an active SumZero member working on the buyside.

Some other conferences below…

Most are offered once a year with various deadlines:

Research Papers

S&P SPIVA ($30,000 + $15,000)

AQR Insight ($100,000 prize)

Whitebox Research ($25,000 prize)

NAAIM Wagner Award ($10,000 prize)

MTA Dow Award ($5,000 prize)

- See more at: http://www.mebfaber.com/2013/02/05/my-1-read-of-the-year-185k-in-prizes/#sthash.DHCL5od0.dpuf

We’ve done a lot of articles on value and drawdowns on the blog before (search the archives).  I was curious what happens when you bought the US equity sectors back when they were really hammered (French Fama to 1920s).  

Average 3 year nominal returns when buying a sector down since 1920s:

60% = 57%

70% = 87%

80% = 172%

90% = 240%

Average 3 year nominal returns when buying an industry down since 1920s:

60% = 71%

70% = 96%

80% = 136%

90% = 115%

Average 3 year nominal returns when buying a country down since 1970s:

60% = 107%

70% = 116%

80% = 118%

90% = 156%

It’s hard to buy something down 80%, especially if you owned it when it was down 30, 50, then 80%.  But usually that is a great time to be wading in…Some recent examples of assets that have gotten clobbered include tech in 2002, homebuilders in 2009, and Greece and (Junior) Gold Miners now.  

After a month or so of having self published our first book, a few takeaways.  

1 – The most important is that, while expected, the vast majority of sales (90%) came through Amazon.  Realizing this, we are now moving the eBook exclusively to Amazon so that Prime Members can download the book for free (see below).

2 – The biggest complaint about the book is that it is short (about 60 normal pages).  This is funny since I literally spent months editing it down to that length.  I hate books being long for the sake of being long, but it seems like lots of people still equate length with value.  My first book was $50, and to reflect the shorter length of this one I reduced the price to $5, or roughly the cost of a latte.  But, people still complain that it is too short.

Along the same lines is the problem of producing a lot of free content.  Once you do this, people begin to expect it.  I have received a number of emails stating they thought the book should have been a free white paper (to which I offer to refund their $4.99).  Investors have no problems paying for loads and high fees often in the tens of thousands of dollars, but $5 for an eBook, the horror!

3 – The third takeaway is that lots of people still love physical books (myself included).  We uploaded a large CreateSpace book so that people can get the physical book for about $7.  I was shocked at how good it came out after having seen early CreateSpace books years ago – the quality is much improved.

How to Borrow a Book on Amazon for Free