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David I. Templeton

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  • Number Of S&P 500 Dividend Payers Rises: A Closer Look [View article]
    hjtheuns-your "pertinent question" is a valid one. I agree many investors don't, not that they can't, react to macro influences quickly enough. Maybe emotion surrounding certain stocks negatively influences ones sell decision. However, if one can adjust their portfolio on the margin based on strong fundamental analysis and macro expectations, they can avoid some portfolio downside. For example slowing dividend growth rates, etc. The concern with having broad exposure to an index is the fact correlations have increased significantly and ones downsidereturns are going to be just that...the indexes. ( I do agree with your favoring companies that exhibit consistent dividend growth rates. I would include companies that consistent have strong cash flow as well. This type of company tends to hold up better in down markets and they tend to be less leveraged. In this low interest rate environment, the structure and level of debt on corporate balance sheets is something investors should be looking at.
    Mar 25 11:28 PM | Likes Like |Link to Comment
  • Stock Buybacks Do Not Benefit Future Stock Performance [View article]
    J Mintzmyer,

    The TR report noted NFLX's ill timed buybacks. I would say they might be the poster child for bad buyback timing.

    Jan 29 05:28 PM | Likes Like |Link to Comment
  • For Growth, Washington Must Cut Spending [View article]
    I should point out that SeekingAlpha changed the original title of the post versus what is on our blog. I did not say "for growth" cutting spending in and of itself, results in economic growth. The last paragraph of the post was referring to "employment growth".
    Dec 12 02:09 PM | Likes Like |Link to Comment
  • Dividend Growth Stocks Are Attractive At This Point In The Market Cycle [View article]

    survivorship bias is certainly an issue with all index return results. Not addressing your question directly at this time, I thought you might find an article from GMO that addresses a way to get around survivorship bias in ones portfolio contruction by using dividend swaps.
    Nov 16 11:12 AM | Likes Like |Link to Comment
  • Could The Debit Crisis Spread To The U.S.? [View article]

    I agree the U.S.'s and Japan"s ability to print currency makes them different. Default by an inability to rollover maturing debt or inflating one's way out of its problem to me is still default. We will likely be paying back our debt with dollars that are worth less for sure.

    Thanks for the comment.
    Nov 13 05:41 PM | Likes Like |Link to Comment
  • Ditch The Nonsense, Build A Portfolio Like An Expert [View article]
    Many investment advisers indicate that one of the most important variables an investor needs to determine is their asset allocation. The reason behind this has to do with a study completed over 20 years ago by Brinson, Hood and Beebower (, cited above) that indicated that 93.6% of an investor's return is attributable to asset allocation.

    A number of researchers note financial planners and advisors have drawn an incorrect conclusion from the BHB study. The 92% figure cited in the study was referring to variation (or volatility) of ones returns and not the total returns themselves. This issue was highlighted in an article by William Jahnke titled Its Time to Dump Static Asset Allocation:

    In a study reported in the March/April 2010 Financial Analyst Journal titled, The Equal Importance of Asset Allocation and Active Management and written by James Xiong, CFA, Roger Ibbotson, Thomas Idzorek, CFA and Peng Chen, CFA, it is shown that asset allocation is not nearly as important as many believe. In another article in the March/April 2010 FAJ, The Importance of Asset Allocation (, Roger Ibbotson provides a summary of the aforementioned study.

    In the summary several important conclusions are noted:

    • "many investors mistakenly believe that the BHB (1986) result (that asset allocation policy explains more than 90 percent of performance) applies to the return level (the 100 percent answer). BHB, however, wrote only about the variation of returns, so they likely never encouraged this misrepresentation."

    • "in general (after controlling for interaction effects), about three-quarters of a typical fund’s variation in time-series returns comes from general market movement, with the remaining portion split roughly evenly between the specific asset allocation and active management."

    • "do the BHB (1986) time series have any meaning at all in explaining the incremental importance of a specific asset allocation policy? Not necessarily. Perhaps the simplest illustration was given by Mark Kritzman (2006) in a letter to the editor of this journal titled “‘Determinants of Portfolio Performance—20 Years Later’: A Comment.” Kritzman constructed an example in which stock and bond returns moved up and down perfectly together (i.e., were equal to each other each year) while underlying securities did not. The BHB methodology incorrectly ascribed all 100 percent of the return variation to asset allocation, whereas, in fact, all the variation came from stock selection and general market movement."

    • "the time has come for folklore to be replaced with reality. Asset allocation is very important, but nowhere near 90 percent of the variation in returns is caused by the specific asset allocation mix. Instead, most time-series variation comes from general market movement, and Xiong, Ibbotson, Idzorek, and Chen (2010) showed that active management has about the same impact on performance as a fund’s specific asset allocation policy

    Investors are encouraged to read the Ibbotson summary to get a clearer perspective on asset allocation decisions.

    I have written a couple of blog articles on the misconceptions surrounding MPT.
    Sep 20 09:22 AM | Likes Like |Link to Comment
  • Philly Fed Report Not a Good Predictor of Future Stock Market Action [View article]
    And mid 1980.
    Aug 22 12:06 PM | Likes Like |Link to Comment
  • Philly Fed Report Not a Good Predictor of Future Stock Market Action [View article]

    The red plot point in the second chart shows the one year historical return for the S&P 500 Index (see "Y-axis" label) that coincides with the release of the Philly Fed report. As noted in the last paragraph of my post, my review of the data is that one monthly Philly Fed Outlook report is not a good "predictor" of future equity market returns. In actuality, these low manufacturing reports tend to be more coincident indicators vis-a-vis the S&P Index. In a later post I will work on displaying the chart showing the data lagged by one year. The reason for my original post was the fact many articles indicated the recent release of the Philly Fed report signaled a contraction in future economic growth and future contraction in equity prices. This outlook report has had many negative prints over the last 20 years and the economy did not go into recession and equity prices generated positive returns. The longer term data cited in an earlier comment shows the Philly Fed report has even less of a market impact. The point for investors is this one data release tends to be volatile and does not necessarily portend a forthcoming stock market contraction or economic contraction.

    SCM, we have been concerned but not because of this release. In our accounts that were overweight in small cap and emerging market holdings, we began reducing the exposure in those allocations and moving them into alternative investments, i.e., long short funds etc. in part due to valuations.We continue to believe the economy will see growth albeit at a low rate and not high enough to reduce unemployment significantly.
    Aug 21 09:54 PM | Likes Like |Link to Comment
  • Philly Fed Report Not a Good Predictor of Future Stock Market Action [View article]
    Following is the 20 year look back.
    Aug 21 03:33 PM | Likes Like |Link to Comment
  • Philly Fed Report Not a Good Predictor of Future Stock Market Action [View article]
    The longer term data shows nearly the same result as the data back to '07.
    Aug 21 03:22 PM | 1 Like Like |Link to Comment
  • With Markets Short-Term Oversold, Little Chance of a Double Dip Recession [View article]
    At HCA we do not think the double dip risk is simply, "little chance" as seekingalpha has retitled our original post. We do think there is a chance of a recession, maybe 1 in 3 or 1 in 4. Our analysis suggests the weaknes we are seeing at the moment is temporary. We do not see a roaring recovery, but a bump along the bottom type recovery. And yes, crankyguy, we were adding money to equity for those clients that are under exposed. Given the strong bearish tone of the comments above, a contrarian would say the market will bounce from near this level.
    Aug 3 04:30 PM | Likes Like |Link to Comment
  • S&P 500: Positive Dividend Actions Now at 2006 Levels [View article]

    I posted an article you might find of interest on our blog that addresses your comment. The article shows the correlation coefficient equal to .7775 based on our analysis. Additionally, based on our analysis the strong dividend actions in the first four months of the year could be suggestive of stronger market returns in the second half of this year.

    May 8 10:02 PM | 2 Likes Like |Link to Comment
  • Berkshire Hathaway's Profits: Not As Strong As They Appear [View article]
    tlott1999, I agree with your comment and don't necessarily think growth by acquisitions is bad. For investors though, I think they need to realize that BRK looks more and more like an investment company versus a traditional conglomerate. In these type of cases, one needs to adjust the way in which they value the company.

    FD: no position in BRK
    Mar 1 10:36 AM | Likes Like |Link to Comment
  • Berkshire Hathaway's Profits: Not As Strong As They Appear [View article]
    The $2,835 and should be $2,837 comes from the operating section of the cash flow statement. It represents adding back the "non cash" loss. See page 32 of the annual report.


    If you look at the income statement and net Investment gains/losses with other-than-temporary impairment losses on investments you arrive at a similar number.
    Feb 27 04:43 PM | Likes Like |Link to Comment
  • Berkshire Hathaway's Profits: Not As Strong As They Appear [View article]
    One aspect of the annual letter that I thought was interesting was Mr. Buffett's focus on the rolling 5-year returns for the company's stock. I agree that investors should view stock returns over a complete market cycle, generally 3-5 years; however, I had the sense he was warning BRK shareholders that near term results might be constrained due to additional "larger" acquisitions.
    Feb 27 12:01 PM | 1 Like Like |Link to Comment