Gaining Some Perspective

Normal market returns are extreme.  Listening to the media and following the comments on Twitter one would think the world is ending every 1% move in stocks and bonds.  Makets are volatile, and that is “normal”.

Outliers have a big impact on performance, and below are charts of the Worst/Best days since 1928 in the US stock market.  As you can see, you should have about two or three days every year that are around -4 to -5% (as well as +4 to +5%).  And every few years you will have some -9 or -10% days (as well as +9 or +10%).  Since volatility tends to cluster, and that tends to happen after markets have begun declining, you usually see the most volatile days when markets are below long term moving averages.  On average about 70% of the best AND worst days occur below long term moving averages simply because markets become more volatile.

New White Papers Coming…

We have a few new papers coming out over the next few months, and below are some of the teaser headlines:

Learning to Love Investment Bubbles: What if Newton was a Trendfollower?

Where the Black Swans Hide

S&P 300, S&P 2600

Total Yield:  Building a Better Dividend

BP CEO Oil Forecast

Last quotes from Future Babble I promise:

“I can forecast confidently that it will vary.  After that, I can gossip with you.  But that’s all it is, because there are too many factors which go in to the dynamics of the pricing of oil.”

-Lord John Browne, the legendary former chief executive officer of British Petroleum, worked all his life in the oil business, and he is convinced the price of oil is fundamentally unpredictable.

“Those who claim to foresee the future are lying, even if by chance they are later proved right.”

-Arabic saying

People Run Out of the Store

Remember when everyone hated bonds six months ago?

Long term bonds have rallied about 10% since that post on bond drawdowns:

When Things Go On Sale, People Run Out of the Store

An updated chart of the long bond ETF TLT below….

Useless Forecasts

Another great quote from Future Babble:

“The Commanding General is well aware the forecasts are no good.  However, he needs them for planning purposes.”

- Kenneth Arrow, Nobel Laurate Economist, recalling the response he and colleagues received during the Second World War when they demonstrated that the military’s long-term weather forecasts were useless.



This is a great passage from the book Future Babble:

Be articulate, enthusiastic, and authoritative.  Be likable.  See things through a single analytical lens and craft an explanatory story that is simple, clear, conclusive, and compelling.  Do not doubt yourself.  Do not acknowledge mistakes.  And never, ever say, “I don’t know.”

People unsure about the future want to hear from confident experts who tell a good story, and Paul Ehrlich was among the very best.  The fact that his predictions were mostly wrong didn’t change that in the slightest.

Days of Summer

From the looks of these photos everyone seems to be having a much better summer than I am…



As my company grows we are always looking to add new A+ candidates.  If you are a hungry, brilliant person looking to join a young organization trying to shake up Wall Street, fire over a note and a resume (but please be very familiar with who we are and what we do!).

While we do have some specific needs, we are more open to finding killer candidates looking to aggressively grow and improve upon the work we do.   Are you a currency strategist with years of trading experience with forwards, futures, swaps and foreign bond experience?  Or a FactSet/Modelstation expert looking to explore new ideas? Love operations and spend all nite thinking about compliance?  Or an even a content creator wanting to help out with research, etc we would like to hear from you.  We will take some time to review (read: rest of the summer) so please don’t expect a response in the short term…

Brain Pickings

I’ve been doing my best to try and crank out of a few new papers this summer, slow going as usual.  It doesn’t help when one comes across a deliciously wonderful blog like Brain Pickings that has reams of time-sucking articles….there is a nice weekly newsletter as well.  Fun links to 5 All Time Favorite TED Talks and Companies Changing the Future of the Publishing Industry.

Real Money Funds Face a High Hurdle This Year

Funds that have a fiscal year ending June 30th are going to face a high return hurdle:

60/40:  18.33%

ENDW:  24.27%

(Equal weighted 5 asset classes:  US STOCKS, FOREIGN STOCKS, BONDS, REITs, COMMODITIES)

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