Small Caps, Cheap or Expensive?

It always surprises me when people have not heard of The Leuthold Group.  (Maybe because they are based in MN?!)

They put out some great research so check out their site!  Below on small cap valuationsScreen Shot 2013-11-13 at 9.37.57 AM Screen Shot 2013-11-13 at 9.38.49 AM:

 

 

 

Screenshots from Tactical Backtester

Almost done cobbling together this backtester, aiming to send it out later this week.  A few screenshots below from the current model…

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In addition to the regular benefits of subscribing to The Idea Farm, which include 2-3 research reports each week as well as free copies of my new books, we have another cool new feature coming!

I’m going to make a simple asset allocation backtest Excel sheet available to the readers of The Idea Farm.   (Below are some screenshots.) The goal is to have a buy and hold and tactical backtester available that will let you backtest allocations and strategies to the early 1970s. I was going to do it as a website but want to see what sort of interest there is first…so, let me know what you think…probably send it out before Thanksgiving…

 
So, sign up this week to The Idea Farm so as not to miss out!  
 



The Investment Brief

It is good to see people tackling our 5 Million Dollar Ideas in FinTech.  Below is one such example, and I’ve talked the founder into letting my readers have a free three month subscription.  See below:

 

  1. Download The Investment Brief app for free from the Apple app store.
  2. Once downloaded, open up The Investment Brief, where they will see a yellow subscribe button.
  3. Click this button and from the dropdown list select “Current Subscribers”.
  4. Type in 3freebrief and press select.
  5. They will now have complementary access to the magazine for 3 months.

Supply and Demand

Same amount of money chasing reduced supply = PE multiple expansion.

Nice piece from Barron’s this wknd.

 

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Bubbles

This is a fun video I had never seen before on John Law (HT @ValueWalk)

Some readings at the end…

Learning to Love Investment Bubbles

 

 

John Law and the Mississippi Bubble by Richard Condie, National Film Board of Canada

Market Bubbles

Behavioral Psychology and Evolutionary Biology

 

When Funds Go Out of Business

I used to write a lot about the managed futures space.  I love the strategy, but still think it is ripe for disruption.  Add on the fact that it has been a poor environment for these funds the last few years and HALF of all funds in existence since 2007 are now gone.  Time for the strategy to start outperforming?  (This chart only through 2012, expect worse #s this year.)

Source Altegris, HT @JBoorman  

man

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Why You Should (NOT) Invest in Hedge Funds through 13Fs

I’ve done more articles on 13Fs than I can remember.  But I often get tired of hearing people repeat nonsense about 13Fs with no data to back it up.

Mark Yusko has a great oberservation in the below video, namely, the largest holdings are the WORST to follow.  However, there are a lot of people and funds that track the largest holdings.  Why?  Who knows, but likely they haven’t done the research.

For example, want to follow Baupost?  Great idea, top 10 holdings beat the markets but about 9% a year since 2000.  Want to follow Baupost’s top holding?  BAD IDEA.  Returns -0.9% a year, over 4% a year worse than the S&P.

Want to follow Warren?  About the same difference, 9% a year.

Across 20 of my favorite managers since 2000, investing in the top 1 idea underperforms investing in the top 10 ideas by 4% a year.  Massively bad idea. 70% of the funds top holding clone underperforms the top 10.

Still think the top holding is their high conviction idea?

(Source AlphaClone)

 

Risk Parity : The Interrogation

Gonna try and listen to this on the plane back to LA.

Webcast Replay

Download Slides

 

More from Bwater, Salient, and Invesco:

The All Weather Story

 

Investment Insights – When Yields Rise

 

Risk Parity in a Rising Rates Regime

 

 

 

 

Where in the Bitcoin Bubble Are We? Just Starting or About to End?

Investors should love bubbles.  That is where are lot of big money can be made.  Avoiding their destruction can be challenging of course.  A valuation anchor will help you recognize and avoid them, while a trendfollowing approach may help you ride them and get off before you crash and burn.  We published a paper a few years ago titled:  

Learning to Love Investment Bubbles: What if Sir Isaac Newton had been a Trendfollower?

For all my Bitcoin friends, where do you think we are on this chart?  (No position but having fun watching the show.) My guess is right about where “Newton’s friends get rich”.  Chart is in my paper courtesy of my crazy uncle Marc.

Screen Shot 2013-11-18 at 6.08.16 PM

 

Next Generation of ETFs

I sent this out to The Idea Farm this past weekend, but it is worth sharing.  From PWC

Download here:

Screen Shot 2013-11-17 at 12.04.00 PM

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