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  • Analyzing the Analysts - Part II [View article]
    Appreciate the kind words.
    Apr 29, 2012. 03:59 PM | Likes Like |Link to Comment
  • Alpha, Beta, Risk, And Performance Measurement - Again [View article]
    Appreciate your thoughtful comments Rbovich.

    You are very astute in your observation about the Behavioral Finance. As a matter of fact I just submitted another article for publication dealing exactly with this subject... except that it attempts to analyze the behavior of analysts rather than that of the public. It is a new concept for the public although it was started at least 25 years ago and was tested with real money for well over 11 years now. If you want, I will send you a link, if and when the all-powerful publishers decide to let the world know what goes through my head.

    Apr 20, 2012. 06:08 PM | Likes Like |Link to Comment
  • Alpha, Beta, Risk, And Performance Measurement - Again [View article]
    Jimmy: you are right, albeit you sound a tad bitter. Do you know of anyone who is making constantly money in the markets? Should you be so kind as to recommend that person to the readership, you may provide a true humanitarian service.

    I know some people who did make money in the market every now and then and I wrote this article in order to propose a way to measure those who claim they can make money for others and to explore opinions of those who may agree or disagree with these methods.
    Apr 20, 2012. 07:33 AM | Likes Like |Link to Comment
  • Basics Of Alpha Revisited ... For The Investor - Part 2 [View article]
    Nice of you Dave to chime in. Your encouragement does matter... particularly considering your background which truly impressed me.
    Apr 6, 2012. 08:24 AM | Likes Like |Link to Comment
  • Basics Of Alpha Revisited ... For The Investor - Part 1 [View article]
    You are essentially right jimmy46. Just thrown out as a catchword, it is indeed meaningless. And, while alpha depends on the risk taken, you are correct that it does not describe "risk". It is Beta's job to do that albeit we can quibble about how well it does its job.

    Alpha and Beta are a help in comparing performance of PM's and of chances for that performance to continue. They are far from perfect but if understood and used correctly they are better than nothing... or than comparing just performances, which most people unfortunately tend to do... and that REALLY does not take into account risk.

    As a long time practitioner in serving (mainly institutional) clients, with my article I attempted to make a modest contribution toward improving the understanding of this ubiquitous term which is little understood.

    If I failed, please accept my humble apologies.
    Apr 4, 2012. 04:39 PM | 1 Like Like |Link to Comment
  • Basics Of Alpha Revisited ... For The Investor - Part 2 [View article]
    Fair comments Todd. There is no question that "What really matters is the thought process a PM uses to pick investments, the execution of strategy" as you say. But how do you know whether the PM really has done (and will do) as s/he says? What if the strategy is so complicated that few will understand it? What if it is secret, as in the case of most hedgefunds? The Alpha and Beta are some simple tools that you can use to check on the PM. They are far from perfect and I may address that in another article. But they are better than nothing... provided the client understands what they really are. That's what I was trying to help people do.

    I fully realize that a client cares about/wants absolute returns: it is cold comfort that I lost "only" 15% of my money while the bencmark lost 35%! But ANY measures can be ONLY relative because what you want to use them for is to compare PM's and decide which one is likely to be a better guardian of your interests. And any comparison is by its very definition "relative". If you did not compare with a benchmark, you would have to compare PM's to each other. It is almost like barter vs. using money. Not a very appealing prospect, particularly since, whatever the past performance, which would appear to be a nice way to compare, tells you little, if anything about the likely future performance... unless (a) you fully understand the process (back to the starting statement I quoted from your post) or (b) you have some "objective" measure of how that performance has been achieved. This where Alpha and Beta come in.... And, lo-and-behold, I already started writing my next article. So I better stop and do it right, some time soon if I can find a moment...
    Apr 4, 2012. 04:00 PM | Likes Like |Link to Comment
  • Basics Of Alpha Revisited ... For The Investor - Part 2 [View article]
    Thanks mbkelly75. Appreciate the compliment.

    Based on some comments received, I may write a sequel, mainly to clarify the difference between investing in stocks independently and doing it with help from someone else, i.e. a mutual fund a RIA or a friend whose track record you envy.
    Apr 4, 2012. 03:22 PM | 1 Like Like |Link to Comment
  • Basics Of Alpha Revisited ... For The Investor - Part 2 [View article]
    Bad guess Joe.

    But in a way you are correct: I wish my desk was organized... but it ain't...

    Just trying to get my mind organized: and that's an up-hill struggle too.
    Apr 4, 2012. 09:56 AM | Likes Like |Link to Comment
  • Dividends Are Dead. Long Live Dividends. [View article]
    Good article indeed. I can't help wondering though whether the success of dividend paying stocks has anything to do with the thirst for income in a ZIRP environment.
    Mar 28, 2012. 06:29 PM | 1 Like Like |Link to Comment
  • Inflation And Investing: A Different View [View article]
    You wrote many comments flow5... But "tripe"...?

    Your observations regurgitate Fischerian concepts with his MV=PT and (sort of) Wickselian ideas with the setting of interest rates somewhat above the GDP roc... Fair enough: both are respectable economists. You do not appear to be a (modern) Keynesian either so you would also probably disagree with the gallery of characters patronizing with an incredible level of arrogance and contempt Austrian concepts in the video clip I included. But I may be wrong. Have you looked at those videos? Aren't they a terrible embarrasement in view of the facts we now know for sure? Or are those people in such elevated positions that they are beyond such lowly feelings, reserved for us, the plebeians.

    Would love to know what were your views before 2008... or may be quotes from that period of those with whom you agreed at the time.
    Mar 27, 2012. 11:41 PM | 1 Like Like |Link to Comment
  • 2 Thoughts On The Evolution Of S&P500 Earnings [View article]
    Fair comments cyclingscholar: the "fitting" is not for the purpose of "getting rich" though. It just suggests that the tops and valleys of the market do bear some tantalizing ressemblance to a well known and widely studied physical phenomenon and that finding a way to detect in good time the tops and bottoms of the market can protect a professional investor from the hype that the financial media, not to mention the lay media, is oh, so prepared to proliferate. Like for example last year at about this time there were three bearish arguments being widely promoted. I will leave out names of the promoters as they know who they are: a further housing collapse, a double dip recession and Greece will sink us all. We opposed all three to the derision of most... and the benefit of the few followers.

    As for the 12 years, it addresses the ability to benefit from the next next likely but by no means certain 5-7 years to the top, rather than "fitting a line" which I am far from attempting to do. Incidentally, the word likely, is meant to convey in this context a 75-80% probability which, in matters of investment, are as close as one can hope to come: 100% does not exist. Run from those who claim otherwise. The past success and the potential for success of such an analysis is reflected in the bar graph at the end of the article, included specifically in reply to your correct objection which was expected. But how many fund promoters give you a lot less than 12 years of track record, measured in a much less relevant way?

    You do not say so but it is fair to assume that, most likely, you are refering with your objections to what is called "technical analysis" which indeed does attempt to draw, often but not always, investment conclusions from "fitting" lines. The merits or demerits of one or the other technical analysis method are a separate subject, may be worth discussing; but bringing it into this conversation is meaningless. Note that the earnings graph is not a "technical" graph (which by definition uses prices and sometimes volumes) but rather an assumption that aggregate earnings reflect the manifestation of the economy as a whole. The assumption is debatable in itself, as pointed out in the article, but dismissing it out-of-hand may be imprudent too. After all, we know that cycles exist and we know that their amplitudes, however you measure them, have been growing. If someone has found a way to come close to predicting the peaks and valleys and shows invstment results that make such a find credible, is it not worth at least listening? Not for the purpose of "getting rich" but rather to fulfill the fiduciary duty of preserving wealth of clients which any and all professional managers are held to... but depressingly few actually heed.
    Mar 20, 2012. 10:51 AM | Likes Like |Link to Comment
  • Market Top Seems To Be In [View article]
    The article is certainly serious and the arguments cannot be dismissed out of hand. However, let me remind everyone that last year about this time the bear case was being made because of: (a) new real estate drop, (b) double dip recession and (c) Europe in general and Greece in particular. Do you know anyone who said all three are bunk, nothing more than media hype? My belief is that this market has a few more years to go. It will certainly top ... some time. The real skill is to see the top coming not too soon and certainly not too late; and in the meanwhile buy the right stocks and, even mor important, sell what must be sold. Can that be done? No guarantees but the last few tops (and bottoms) show it is not impossible. I know: after the fact plenty of heroes. But some are heroes before the fact too. Finding them though is a challenge.
    Mar 15, 2012. 01:57 PM | Likes Like |Link to Comment
  • How To Deal With mREITs Plummeting Due To Rumors [View article]
    Good level headed comments Todd. And helpful too. Well worth reading.

    If one is long an mREIT purely for return purposes, how useful is it to spend money on protective puts? Assuming I know I will not need this money for at least 2 years, is it not a better strategy (for me) to wait for the stock to go up and sell some time closer to when I may need the money?

    Your comments will bge much appreciated

    Disclosure: I am long NLY and considering using your dividend capture strategy for AGNC.
    Sep 2, 2011. 12:31 PM | Likes Like |Link to Comment
  • Here's How To Get Sustainable 7% Dividend Yields When Markets Crash [View article]
    A word of caution RLJ3033: I bought a utility stock at 23 for an approx 9% dividend yield. It went to 29 and as I expected it to hit 33, I put in a stop loss order at 25. Guess what: the stock did indeed go to 33 within a few weeks... but not before declining at one point, just for a few minutes to 25, just enough for my stop loss order to be executed. The down-spike in the chart was quite obvious. There are professionals watching for these opportunities, provided the nummber of shares is not too small to make it not worth bothering.
    Aug 23, 2011. 12:19 PM | 3 Likes Like |Link to Comment
  • Here's How To Get Sustainable 7% Dividend Yields When Markets Crash [View article]
    Very good article... albeit I agree with No Free Cake's comment. Would you not agree that selling at a capital gain that exceeds sufficiently the dividend return may be an acceptable risk control strategy? You may use the proceeds to find some other stocks that are declining for reasons other than fundamental problems in the company. Sure, you accept this way an opportunity risk if you do not find appropriate stocks to reinvest in. But that may be worth it for some not too greedy investors.
    Aug 23, 2011. 12:19 PM | 1 Like Like |Link to Comment