The Ascent of Money on PBS

Parts 1-4 of the PBS Ferguson series, about an hour each.

UPDATE:  I can’t get these to embed so you can goto PBS and watch them here.

Macro Pessimism, Micro Optimism

Everyday the news bombards us with negative macro headlines.  Troubles in Europe, war in Syria, asset bubbles, and politicians acting idiotically are the norm – which makes it hard to not be depressed about the future.

But on the micro level, the level of the entrepreneur and the individual, I don’t see how one can be anything but massively optimistic about the future.

I was having coffee this morning (ok so my view maybe a little influenced by having coffee overlooking the ocean but not my point) and flipping through the new Entrepreneur magazine.  They have an article titled 100 Brilliant Companies, and there are so many people pursuing world changing ideas it is impossible to not be excited about the future.  (And this new product would have helped my crap coffee from going cold in 2 minutes.)

Anyways, below are a few great ideas.  Some are not life or world changing but simply lifestyle improvements (much like this earlier post we did on similar companies.)  Mainly I’m just happy my iPhone will be protected from snow and getting dropped in the toilet.

 

Liquipel: Ship your phone to the HQ in Santa Ana, Calif., and they’ll give it a virtually undetectable water-safe coating–without hindering performance.

Kaggle: Bringing crowd-sourcing to heavy data, this website allows scientists to compete to produce the best solutions to presented problems. Corporate sponsors pay prize money in exchange for the intellectual property.

Ringadoc: Connects patients to licensed physicians 24/7, via phone or videoconference (on average, within five minutes) for medical advice, diagnoses and prescriptions.

Society6: A marketplace where indie artists sell their work as prints, iPhone cases and T-shirts–without giving up control to the rights.

GTX Corp: Developed a shoe with a miniature GPS tracking device embedded in the heel for wandering Alzheimer’s patients.

Miso Media: The company’s Plectrum app uses note-recognition software to teach iPhone and iPad users how to play the guitar, ukulele, bass, banjo or mandolin. Jam on a real instrument or tap the screen of an iOS device.

Senseg: Patented haptic technology creates “feel screens” that enable users to feel textures, contours and edges on their touchscreen devices.

Bikn: To ensure that nothing goes missing (phone, keys, dog), Treehouse Labs’ system uses an app, smart case and tags to stick on your stuff.

FastCustomer: Spares iPhone and Android users the aggravation of waiting on hold. Register your phone number, then get a call back from any of 3,000 companies.

Burn Note: E-mailing sensitive information such as social security numbers, PINs and passwords via Burn Note ensures there’s no electronic trace left anywhere on the internet.

PrintEcoA plug-in that automatically optimizes documents for printing in order to save paper.

Nimble: Pulls together Facebook, LinkedIn, Google+, Twitter, e-mail, contacts and calendars onto one screen with a brilliantly simple CRM.

Blu Homes: These green, modular homes are economical to ship and quick to set up. A 3-D configurator lets customers design their dream homes online.

Adafruit Industries: Founded by an MIT engineer, this e-tailer sells cool DIY electronics kits–instrumental in fostering the burgeoning “maker movement.”

Reversion System Triggered

Most risk based assets got clobbered in May, but the worst was foreign stocks (EAFE and EEM both around -11%).

That would trigger our old reversion system that we wrote about way back in 2007 and 2008, and it has performed great since.  Here is a good summary post, and a bit of a rehash below.

The challenge, of course, is not catching a falling (and falling) knife, or as my friend here demonstrates the problem with jumping in too early…

 

Old post below:

With most equity-like asset classes putting in some terrible numbers for May, I thought we would dredge up some old research on returns following terrible months in asset classes.

I have written about this subject a number of times.   For background you can check out some earlier posts linked at the end of the article.

My research has shown that negative returns 2 and 3 years ago produce approximately 6% outperformance in the current year. If you are lucky enough to have 3 down years in a row, the outperformance jumps to well over 10%.  (Supported heavily by the academic literature.)

On the monthly time frame,  I examined asset class performance after a really bad month.

The take-aways from this study were:

– It does not pay to buy an asset class after a really bad month for the following 1 month.

– 12 Months later the return is not much different than average.

– 3 and 6 month returns, however, are stronger. You pick up on average about 3-4% abnormal returns buying after a terrible month.

A simple strategy would be:

After an asset class has a terrible month, wait a month then take a 2 month position.   i.e. after this (probably) terrible month, buy July 1 for a two month hold.  Those with a little longer time frame could move out to a 5 month hold.

 

It looks like a good “trigger” for equity like asset classes is around -10%, and for bonds around -4%.  That equates to about the worst 2% of all months.  The worst 5% of all months is around a -7% trigger for equities and -3% for bonds.

Below is a summary chart of this strategy for the five asset classes I mentioned in my paper. The returns are simply the excess returns (nets out the average monthly return over the entire time period) to a strategy of buying an asset class a month after a really bad month, with a two month hold.

Note that this does not work for the commodity index, and one could speculate that is due to differing risk premiums and sources of return to that asset class.

study

Here are the real time results for all the occurences in 2008 and 2009, not bad!

I imagine if you broke out the asset classes into further subdivisions (sectors, countries, etc.), the same principles would apply but the triggers would widen due to the increases in volatility.

 

If you have nothing to say….

This blog will never be one of the more prolific or popular blogs for a host of reasons, and often weeks may pass between posts.  Anyways, this Twain quote resonated with me, as did a lot of the quotes below from the very good book Seeking Wisdom: From Darwin to Munger by Bevelin.

(Also included is that Munger quote in bold that I was looking for a few weeks ago.)

—-

“If you have nothing to say, say nothing” – Mark Twain

—-

“Around here I would say that if our predictions have been a little better than other peoples, its because we’ve tried to make fewer of them”

“You can’t avoid wrong decisions.  But if you recognize them promptly and do something about them, you can frequently turn the lemon into lemonade.”

“We have a passion for keeping things simple”

“I believe in the discipline of mastering the best that other people have ever figured out.  I don’t believe in just sitting there and trying to dream it up all yourself.  Nobody’s that smart” 

“Mark Twain used to say “A mine is a hole in the ground with a liar on the top.”  And a projection prepared by anybody who stands to earn a commission or an executive trying to justify a particular course of action will frequently be a lie – although its not a deliberate lie in most cases.  The man has come to believe it himself.  And that’s the worst kind.  Projections should be handled with care – particularly when they’re being provided by someone who has an interest in misleading you.”  –  Charlie Munger

—-

“If you desire a ride to Baghdad, here is a magic carpet; if you desire your enemy dead, here is a magic doll; if you desire unlimited riches, here is a forecast of interest rates.”  – Donald McCloskey

—-

“Techniques shrouded in mystery clearly have value to the purveyor of investment advice.  After all, which witch doctor has ever achieved fame and fortune by simply advising, “Take two aspirins”?”  – Warren Buffett

—-

“There is nothing wrong with changing a plan when the situation has changed”  Seneca

—-

“A man should never be ashamed to own that he has been in the wrong, which is but saying, in other words, that he is wiser today than he was yesterday”  – Jonathan Swift

—-

“The chains of habit are too weak to be felt until they are too strong to be broken”  Samuel Johnson

—-

“Why oh why are human beings so hard to teach, but so easy to deceive?” – Chrysostom

—-

“Be warned that if you wish, as I do, to build a society in which individuals cooperate generously and unselfishly towards a common good, you can expect little help from biological nature.  Let us try to teach generosity and altruism, because we are born selfish” – Richard Dawkins

—-

“A man who has committed a mistake, and doesn’t correct it, is committing another mistake.” – Confucius

S&P to 400?

As a follow up to my posts on global CAPEs, Timely Portfolio had a mention of Russell Napier of CLSA here, here, and a video here.

Secular Lows

If you look at the history of country CAPEs, they tend to bottom out in single digits around 7.  Bull markets can push this number up into the 40s, with the median around 18.  These may be slightly skewed by most of these markets being in existence since 1970.  (Note: All time lows register at 3 (Thailand and Korea) and top out near 100 (Japan).

Belgium, Netherlands, France, Spain, Russia, and Italy are all trading at CAPEs below 10.  Generational buying opportunity or prelude to more pain?

Global Shiller CAPEs

I have yet to find a source anywhere that tracks global Shiller CAPEs so I had my analyst Prabhat update this older post with a bunch of CAPEs for markets globally.  This is for the end of April so likely lots of these have gone down from here…We track the top 30 countries or so across a number of valuation metrics (old dividend post here), let me know if you are interested and we will post a summary.  Regardless, those Euro countries I’m getting ready to visit are getting cheap(er)…

 

 

Trading System Backtesters and Updates

I get a lot of emails asking about good software to use for X.  We do almost everything in Excel with macros, but I have periodically used the below…email in any I am missing and we will udpate this list.  I don’t include any black box websites or timing newsletters.

Caveat:  You have to be super careful here when evaluating software and databases.  Some of these have had survivor bias problems (Zack’s) and some are not total return and exclude things like dividends (Portfolio123 a reader now says they incorporate dividends).  And some are very, very, expensive.

Reader Suggestions included.

STOCK and ETF SCREENERS

ETF Table

ETF Trends

ETFdb

ETF Screen

Validea

AAII

AlphaClone

MarketInOut

SumZero

Value Investors Club

Estimize

 

STOCK BACKTESTERS

FactSet 

S&P Clarifi Capital IQ

Backtest.org

Keelix

Zack’s

Portfolio123

 

TRADING SYSTEM / ALLOCATION BACKTESTERS & UPDATES

Tableau 

RiskCog

OfficeAdvisor

Panopticon

Axioma

MyPlanIQ

Asset Play

Turnkey Analyst

Empiritrage

The Stingy Investor Asset Class Backtester (Canadian focus)

Palantir

ETF Replay  (Free; Premium $360)

R Blogger

ETF Prophet

Trading Blox

Trading Recipes

Quantpedia

Amibroker

Profitly

XTF

Mechanica

The Idea Farm

We are going to start rolling out some interesting ideas this summer in the content space.  Would like to hear your feedback on a few logo ideas for the new website…

…so would appreciate it (anonymous if you want) if you voted on your top 3 favorites!  

Feel free to leave some comments as well.

Sentiment Update

Quite a shift in sentiment from a few months ago from AAII:

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