Stocks and Valuations

Nice article by USA Today on the number of stocks listed declining over the years.  Did you know there are only 3700 stocks in the Wilshire 5000?  

I am surprised this doesn’t have much of an effect on market cap / GDP but guess it is dominated by the largest of cap stocks?  May run the numbers later…via @AlexRubalcava

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“Why do people love dividends? Because they don’t understand either corporate finance or taxes.”

Slowly but surely the world is waking up to the silliness of just focusing on dividends in isolation. (via YCharts (via Aleph) that also has a Net Payout Yield screener.)

Why do people love dividends? Because they don’t understand either corporate finance or taxes.”

Dumb Idea: Dividends Are Good For You

Cashing In On Stealth Dividends

Stock Valuations and Inflation

I’ll be updating the country CAPE values at the end of the quarter, but I thought this examination was really interesting.  Earlier this week we talked about how the US was allowed to have a higher CAPE valuation due to low inflation.  The question then arose from readers, should we be making adjustments for CAPE values based on inflation in each country?

Below is a table of CAPE values, inflation values, and an inflation adjustment.  We look at each country’s valuation both with and without the adjustment.  Which countries are most impacted by their inflation regime?

Keep Reading…

Cyprus : The Key is a Long Term Time Horizon (aka Buy and Hold This)

Nothing like a 99% drawdown (if/when the market reopens) to rattle the nerves of a buy and hold apologist.  Remember, just tell the local Cypriot that they need to just hold through this downturn, and return 10% a year for the next 40 years to breakeven.  Remember to have a long term perspective, that’s what’s important here!  Stocks are the right place to be for the long term, you just have to hold, and if you’re already 60 and retiring, you better hope to live to 110!  

(Heavy sarcasm)

Just for fun here is the Cyprus market with a 10 month SMA and then an equity curve below.  Any trendfollowers in Cyprus are probably doing just fine (as long as they didn’t put all their cash in the bank!!)

And for some background here is our whitepaper Learning to Love Investment Bubbles.  An enterprising investor could probably spend some time with the Cyprus stocks ex-banks and find some interesting gems…


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First Q in Review

I know the first quarter isn’t over yet but I have some other things on my plate this week.  Below are 10 broad ETFs and their return for Q1 (that despite all of this Cyprus hand-wringing was a fantastic quarter for US Stocks).  

perf1 perf2

The Idea Farm Goes Private – (ie This is Why I Ask)

A few years ago when we were publishing our first book Wiley sent us a few covers, and I hated all of them.  I proceeded to hold a design contest on 99Designs, and then sent Wiley a few of the entrants that I thought were much better.  Wiley disagreed, so I threw a tantrum and then said “let’s let the people decide” and had a vote on the blog.  The result?  My cover got 5% of the vote and Wiley’s won and became the current cover (which I now like).   I don’t pretend to have any design ability (or style according to my girlfriend).

I recently asked readers of The Idea Farm how they wanted to receive the info, by email or on a blog.  A whopping 92% said email (which is stunning to me).  

I hope you have enjoyed the Idea Farm emails as much as we have enjoyed sending them.  We’ve sent out over 50 emails that have granted access to over $50,000 in subscriptions.  However, a lot of our publishers that charge their clients $1,000 to well over $10,000 per year often don’t want their content freely available out on the web.  (One has been emailing me all day to take down one of their PDFs they gave us permission to send since it shows up in Google search.  You understand how the internet works right?)  To continue to send out this exclusive content we are making a few changes:
  • We are taking down all social media for The Idea Farm, including Twitter, Facebook, and the blog.  Again, many of the publications we send out are very exclusive with their content and they don’t want it out on the web for everyone to read.  
  • The list is moving to subscription-only for $195 per year.  I will still curate the research, but I want to be able to hire an analyst to help out with sourcing ideas as well as running the operations of the site.  I also don’t want to take affiliate revenue or clutter up the site with advertising to ensure all of the emails are unbiased and conflict-free.  
  • Some may think $195 is expensive, but realize you are getting access to over $50,000 in research (if not $100k, I’ll tally up the total cost at end of year 1).  That is a 99.9% discount.
We have lots of great newsletters coming out soon, so stay tuned!  And remember, if we get enough subs on The Idea Farm I’ll return MFR to free.  
Please email me if you have any questions…
PS If you subscribe I’ll send you a copy of our new book Shareholder Yield…

Asset Allocation Strategies

I’m doing a white paper/blog posts (or book depending) on some of the most popular asset allocation strategies.  Below are a few we are going to write about….any good ones I’m missing?



Equal Weight

Coffee Can





Minimum Variance


Risk Parity (All-Weather)




Five Million Dollar Investing Ideas (Part 5/5), Best Ideas/Emerging Managers Newsletter

5.  Investment newsletter focused on Best Ideas.  Each month interview a hedge fund or other manager and outline their 1-3 best ideas.  Manual of Ideas does this a bit with their online conferences, and I know periodically Barron’s does their roundtable, Private Investment Brief is a spinout of Santangel’s, and SumZero or VIC have private networks where people volunteer their ideas. But I haven’t seen much here on an ongoing basis. (There are also our list of “ideas” conferences.)    

We are going to do it as an extension of Hedge Fund Letters.  Let me know if you’re interested!

(Update:  I penned most of these articles awhile ago, but in the meantime it looks like Mauldin has launched something similar called Just One Trade - although it is going for a whopping $2,500.)

How to Get Compustat Backtesting for Cheap

I used to use Portfolio123 years ago but stopped since they didn’t include dividends.  And not including dividends is like having a car with no engine.  I was pleasantly surprised to see they have now integrated S&P Compustat (which along with FactSet are the two best institutional quality backtesters but both cost well over $50k per year).  

Worth checking it out.

Why We Moved to Premium

I received a lot of emails from readers on the shift to a premium offering, so I thought I would summarize the why and the what.


The What

1.  If you subscribe to MFR or Idea Farm you will get first look at our publications, including the recently completed QTAA paper 2012 update.

2.  You get a free copy of all upcoming books – including Shareholder Yield out in a few weeks.

3.  Updates to data series readers want – ie quarterly CAPE updates.

4.  Mailbag questions from readers.

5.  Most interesting I think, quant research systems and ideas not available to the general public.


The Why

1.  The reality is that it is expensive to run a research shop.  I wish I had a team of analysts that worked for free, but we paid ~$250-300k in data and research costs in 2012, on top of another $200k in lawyer fees (in addition to rent, salaries, etc).  Once the money management biz gets to scale I’d love to have all of the research published for free again.  

2. I am hoping it forces me to write more.  A lot more.  

3.  We are taking The Idea Farm private next week and charging a small fee.  Preferably, if we convert enough readers I’ll return MFR to totally free and refund the charges (so make sure to signup!).  


Again, this is a new experiment for me so we’ll see how it goes!  Any feedback is certainly helpful…



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