Wishing You A Happy Tax Season

Tax season is a good time to evaluate whether your investment approach is minimizing your tax bill. This article explains the importance of two straight forward strategies SEED employs: tax loss harvesting and optimization of tax-deferred accounts.

Is Now A Good Time to Buy Bonds?

Writing in November of 2023, I answer “yes”. My advice isn’t a reflection of my views on the direction of interest rates but rather a recognition that there is finally a reasonable term structure premium, unlike my earlier article on treasuries when real rates were negative.

Leading EMH Economist John Cochrane Advocates for Advisor Fees

I admittedly made the headline as clickbait. But leading financial economist John Cochrane gave an important keynote address on how investors should form portfolio and his advice is important: although passive 60/40 strategies have their place, generating cash flows that match the risks and needs of their client should be the primary goal of advisors.

A Curious Combination: Momentum, Tesla and November 9th

The anecdote of Tesla’s recent stock surge this year [2020] gives us some insight into the Momentum Factor and the dramatic reversal of the Momentum Factor’s performance on November 9th, 2020 following good news on a COVID-19 vaccine reveals some needed warning concerning the risk inherent in the strategy.

Do Treasuries Have a Place in a Modern Portfolio?

I say no. The basis for my decision is not that treasuries don’t have value for some entities — despite their paltry yield, $18 trillion have found a home — but their portfolio insurance attributes they offer to individuals don’t compensate for the lousy expected return they now provide.

“Price”, ETFs and Bond Market Liquidity argues that for many less liquid assets, the definition of “price” is nebulous at best. The gap that can occur between the market price of an ETF backed by less liquid assets like leveraged loans and its reported Net Asset Value (e.g., NAV) is thus natural. In fact, by providing greater transparency, the ability for the ETFs market price to diverge from its NAV is an enhancement not a bug. I’m also interviewed in this adjunct podcast to the article.

In The Perils (and Inevitability) of Forecasting, I look back at my 25 year experience as a contrarian who questions the usefulness of forecasting and conclude that even contrarians make implicit forecasts. Although as the respected contrarian Howard Marks says, “trees don’t grow to the sky, and few things go to zero”, California Redwoods can grow very high and plenty of things do in fact go to zero.

Published by Alpha Architects in the early winter of 2019, Rebalancing…Not so Fast is a companion article to the one below on Warren’s options. Rebalancing, I argue, isn’t as well of a supported strategy as many investors often assume. Investors first priority should be survival.

Published by Alpha Architects in the winter of 2018, the article Warren Buffett is Wrong About Options (Except) exposes Warren’s misrepresentation of option pricing in an effort to reveal the larger truth about risk. In short, Warren (and in this case, his options) are unique so investors shouldn’t attempt to mimic his tolerance for risk.

Published by Alpha Architects in the summer of 2018, the article Buybacks: Why They Don’t Matter, Why They Do, And Why You Should Care explores both the theory (they don’t matter) and the practical evidence (actually, they do) regarding the impact of stock buybacks. The important point is to recognize the limits of both theory and data by themselves.

Published by Alpha Architects in the Spring of 2018, the article Market Volatility? Hold on and Enjoy the Ride explains why investors should largely ignore volatility given the nature of changing discount rates and expected returns.

Selected for Meb Farber’s “Best Investment Writing Vol 2”, “Passive” Investing, Theory and Practice in a Global Market argues that pure passive investing is a myth. As such, investors shouldn’t try to track an ad hoc index at the expense of cost and tax efficiency.

Your benchmark is up [or down] this year, but you’re not. Should you care?

This is a less academic and more practical companion piece to the “Passive” Investing article. The answer is yes, but not too much given we have neither a good definition of “the market” nor then of relative risk-adjusted performance.

2017, A Lesson in Investment Humility

As is common, experts failed to predict the strong market performance of 2017 because the market is by its nature unpredictable. Investor should learn from that poor record and apply a heavy dose of humility to their own outlooks and focus on areas they can control like fees and taxes.

Published in December of 2016 by Alpha Architects, Interest Rates and Value Investing, reviews how the market determines interest rates and why real returns, independent of market forecasts, indicate that few bonds offer investors much value.

Published in October of 2016 by Alpha Architects, Digging Deeper into Closed End Fund Investment Opportunities, explores Closed End Fund valuation and theory. This is an asset class that at times can offer investors compelling risk adjusted returns.