Article Library

Category: Investing & Risk

Opinion: Hope to retire someday? See if you can answer these six simple questions

Mark Hulbert, MarketWatch, 09.22.2020

I was not surprised by the overconfidence aspect of this study, and I like to think I’m fairly realistic about the world around me, but even I was shocked with these conclusions.

Stocks Rallied, and Many Missed Out

Paul Vigna, Wall Street Journal, 09.13.2020

Interesting article on who owns equities in the United States. Data from past market cycles show a lot of investors raise cash as equities are in freefall and then don’t get back in until indexes have recovered – if at all. Looks like this market cycle will be no different. If this story describes your personal experience it might be time to seek help from a competent advisor.

Who’s Better For Your Retirement Portfolio: President Trump Or President Biden?

Taylor Tepper, Forbes, 08.17.2020

As we enter election season every commentator on Wall Street and the financial media is going to start telling you how you should trade this election. Even if we assume the Democrats hold the US House of Representatives there are still four different possible election combinations of power between the office of President and the US Senate. How on earth do these commentators know which one we’ll get? The article below reminds us that not only did most commentators get the result of the last election wrong, but even after a Trump victory, many still couldn’t analyze what it meant for markets. The moral of this story is to keep ploughing ahead executing your financial plan to achieve the goals that are important to you. Screen out the noise.

Robos Fail Their First Big Test

Robert Huebscher, Advisor Perspectives, 06.01.2020

Robos are failing to live up to the marketing hype with significant under-performance versus benchmarks – around 1%. Why give up these levels of return and deprive yourself of all the benefits beyond just your portfolio that a fiduciary advisor can bring to your situation?

Goldman Sachs analyzed bear markets back to 1835, and here’s the bad news — and the good — about the current slump

Steve Goldstein, MarketWatch, 03.14.2020

Useful historical context about bear markets from Goldman Sachs. We’ve already incurred losses equal to the average in the “Event Driven” category. The extent of long-term economic damage now depends on how effective the federal government can be in backstopping businesses against a partial, temporary, shutdown of the economy.

From the Archives: Why Not 100% Equities? Revisiting a 25-year old suggestion.

John Rekenthaler, Morningstar, 02.11.2020

A fascinating look back at how various portfolio mixes have performed since 1995. Three key takeaways from this: 1) the tailwind of falling interest rates that indiscriminately fueled asset prices over this period are largely behind us — you need to be more discerning going forward, 2) being outright pessimistic rather than just prudent can cost you a LOT of money, and 3) go into battle with a portfolio robust enough to cope and even prosper from surprises — because we’re almost always wrong at predicting the future.

A Decade After the Financial Crisis, Corporate Finance Must Contend with These New Ticking Debt Time Bombs

Larry Light, Fortune, 12.29.2019

Everyone should check their portfolio exposure to this part of the debt market. While lending standards tend to loosen as the economic cycle progresses, post-crisis quantitative easing has achieved its intended effect of pushing many investors to take on much more risk than they normally would.

How Long Can A Good Fund Look Bad?

C. Thomas Howard, Advisor Perspectives, 10.07.2019

A great synopsis of what most people who work in active investment management already know: outperformance doesn’t come in nice, steady, and predictable increments over a benchmark each year. In fact, winning investment strategies often underperform their benchmark for years. At Capital Endurance Group we focus on educating our clients about how our repeatable process orients their portfolios to the market factors that have been proven to drive long-term outperformance. Then we address all the other challenges they face in their lives.

The recent problems with IPOs are changing the way people are looking at ‘disruptor’ companies

Jeff Cox, CNBC, 09.27.2019

For all the criticism that public equity markets get for the pain their periodic bear markets bring to investors, they’re still the best mechanism we have to value different businesses. In 2019 they’ve brought a big dose of economic reality to a bunch of privately funded and over-hyped technology businesses.

A Recession Is Coming (Eventually). Here’s Where You’ll See It First.

Ben Casselman, The New York Times, 07.28.2019

Worried about a recession? Some good indicators to track.

The bond market is sounding an alarm on the economy as ‘yield curve’ spread hits narrowest in 11 years on Friday

Patti Domm, CNBC, 07.13.18

The media is whipping up hysteria about the flattening yield curve—ie short-term rates on US govt debt are rising faster than those on LT debt. A healthy economy has ST rates lower than LT rates. When ST rates exceed LT rates it usually signals recession. The problem with this recession indicator this time is we have a gigantic price insensitive owner of govt debt that is keeping LT rates below where they’d otherwise be. That owner: the Federal Reserve. Conclusion: the yield curve has been heavily managed at both ends in this cycle, which may compromise its relevance as a recession indicator.

It’s Hard To Predict How You’ll Respond To Risk

Morgan Housel, collaborative fund.com, 01.31.2018

“We are poor predictors of our future selves, and this is has implications for how to think about risk.” 

The cobra risk: When playing it safe makes your retirement less so.

Nick Magguilli, MarketWatch.com, 09.05.2017

Cobra risk! The law of unintended consequences as it relates to retirement planning. We cannot avoid risk, no matter what we invest in. We merely trade one risk for another. If you’re too “comfortable” with your equity allocation in your portfolio, it could indicate that you have just traded potential long-term growth of capital for short term downside mitigation. 

Here’s why stocks keep rallying despite the Trump-Russia headlines, DC paralysis

Evelyn Cheng, CNBC, 07.13.2017

Interesting conclusions regarding recent US equity strength from Ned Davis Research analysis of the Philadelphia Fed’s Partisan Conflict Index. Markets like divergent opinions between buyers and sellers of securities to achieve sustainable price increases, which is often called climbing a wall of worry. This research suggests markets also like divergent opinions between politicians. If either or both reach too much consensus, it could be time to reduce risk. 

A Recession Signal Is Hidden in U.S. Bond History

Stephen Mihm, Bloomberg, 06.13.2019

A fascinating report by Bloomberg on research by the St. Louis Fed regarding real interest rates and length of recessions. The researchers looked at the real interest rate at the moment of yield curve inversions before recessions, and then tracked how long those recessions lasted. Their results show a strong negative correlation between the two data series. Now, while you should never take studies like these as forecasts of the future, this one does highlight the bearish long-term view of economic growth held by the Treasury bond market.

This Is the Average 401(k) Company Match. How Does Yours Stack Up?

Alix Langone, Money.com, 06.04.2019

Interesting data point on the average company 401K match. How does your plan compare?

GDP Data Tells You Nothing About Recession Risk

ECRI, 03.27.2019

Avoid buying or selling investments based on GDP growth numbers. As the following article explains, GDP data is not predictive of recessions. In fact, the equity prices usually anticipate recessions well in advance of when they become evident in GDP figures.

Why private equity appeals

The Economist, 02.21.2019

Interesting (but not surprising) research from a highly regarded asset manager that finds private equity did not do any better during 1986-2017 than a basket of small capitalization value stocks. And over the last decade, private equity has not even outperformed the S&P 500. Given the huge leverage private equity employs in their investments, as well as the illiquid nature of the funds themselves, you should be earning a much higher return than that of the S&P 500. Caveat emptor!

What Investors Should Know About Yearly Performance Rankings

Mark Hulbert, Wall Street Journal, 01.06.19

Experienced investors know not to be fooled by a fund’s one-year returns—they’re basically a reflection of luck due to the short measurement period. Buying a mutual fund or ETF after a standout performance year is likely to ensure your timing is terrible, for a host of reasons, as explained by the article that follows.

Opinion: Why annuities are a bad idea for almost everyone

Marc Lichtenfeld, MarketWatch.com, 08.18.2018

Everyone should read this before considering buying an annuity product.

This was Warren Buffett’s ‘simple rule’ for investing during the financial crisis — and you can still use it today

Ali Montag, CNBC, 09.14.2018

Warren Buffet doesn’t just give this advice. Like other very successful investors, he actually invests by it. We should all keep this top of mind when we’re thinking about markets and investing.

Dear Investor, That Cocky Voice in Your Head Is Wrong

Jason Zweig, Wall Street Journal, 08.24.2018

Don’t try this at home!

We’re not smart enough to spot a coming stock-market crash

Scott Nations, MarketWatch, 06.17.2017

Nobody can consistently predict market downturns with any accuracy. Many pundits constantly warn about market dips, while indexes climb higher. Good retirement investing will: 1) acknowledge that market downturns are the price of consistently being invested in markets to capture their long-term positive returns, and 2) plan to weather the market downturns–and the short-term unpleasant feelings that they cause us–through appropriate portfolio structure and re-balancing. 

Investment Shock Absorbers

Jim Parker, Vice President, DFA Australia Limited, February 2017

Ever ridden in a car with worn-out shock absorbers? Every bump is jarring, every corner stomach-churning, and every red light an excuse to assume the brace position. Owning an undiversified portfolio can trigger similar reactions.

Why Trading in Retirement Is a Bad Idea

John F. Wasik, New York Times, 03.04.2016

“Stories get people to buy”. That is so true when it comes to the way Wall Street works. Read on to learn more about why trading—both in retirement and before it—usually results in disappointing results compared with what could be achieved with good advice. 

Wall Street Banks Warn Downturn Is Coming

Sid Verma & Cecile Gutscher, Bloomberg, 08.22.2017

Experience has taught me not to lend much credence to forecasts by “experts” and “gurus”. However, markets do tend to broadly follow cycles and mean-revert over time. This Bloomberg article nicely summarizes some of those broad cycle data series that suggest we are probably near the end of gains associated with the post-credit crisis economic expansion. Does that mean we go and sell stocks to try to time the market? NO! That’s a time-tested way to ruin your retirement. Younger investors should regard any correction or bear market as a great opportunity to invest at lower prices, while older investors should check their asset allocation and remind themselves that they too should be thinking of the future in terms of decades, not just months or years. Better still, hire a well-credentialed fiduciary wealth advisor to help you better assess risks and opportunities across your entire financial life. 

U.S. Investors Shun Foreign Stocks. Why You Shouldn’t.

Carla Fried, CNBC, 08.25.2017

Being too exposed to US markets is a risk that investors often don’t realize they’re taking, until they miss out on better performance overseas. Given about half of global equity market capitalization and three quarters of global GDP is non-US, global diversification of portfolios is essential to long-term risk-adjusted return. 

Tips On TIPS – Treasury Inflation Protected Securities

Adam Hoffman, Seeking Alpha, 08.25.2017

Worried about inflation? TIPS provide some purchasing power protection of principal, unlike traditional Treasurys. Many a smart bond trader in recent years has bet on a rebound in interest rates, and lost. At Capital Endurance Group we don’t make those kinds of bets with your money. We include an allocation to TIPS as part of our overall bond allocation, because while we know resurgent inflation is a possibility, we are also cognizant that this economic cycle is different from previous cycles—due to intensifying trends such as globalization, automation, and the North American shale oil boom. 

It’s Time To Get Into The Rebalancing Act

John P. Reese, Seeking Alpha, 09.19.2017

Are you suffering from portfolio drift? 

Investing Hot Shots Can’t Time The Market, Either

Nir Kaissar, Bloomberg, 09.14.2017

The insight in this article is that investors who did not get rich through market timing strategies, start getting asked about market timing once they get famous. Good for media ratings and bad for your financial health! 

Woody Brock: Global Growth is Mismeasured and Understated

Advisor Perspectives, 09.11.2017

Are government statisticians measuring inflation and by implication, real GDP growth, incorrectly? Emerging technologies are exceedingly difficult to measure accurately for GDP purposes, which could be understating real GDP growth and overstating inflation. This would be consistent with high corporate margins, low bond yields, and high stock valuations. The following article explains why this is a plausible theory. 

This is why almost everyone should invest in small-cap value funds

Paul A. Merriman, MarketWatch.com, 12.14.2017

The three critical drivers of strong performance in the stock portion of your investment portfolio are return premiums associated with (cheap) Value, (small) Size, and (high) Profitability. Exposure to these academically researched and tested premia are standard for Capital Endurance Group clients. Small cap value funds combine two of these premia, and must be in your portfolio. 

Why commodities and gold won’t protect you from inflation’s punch

Mark Hulbert, MarketWatch.com, 02.16.2018

Commodities are often offered up as a good inflation hedge. But the execution of this idea matters. Investors who have invested in commodities directly through funds using futures have often been disappointed with the results, as this article explains. A better way to execute this idea is to remain invested in the equity securities of sectors exposed to commodities, such as energy, materials, and real estate. 

A Shocking Fact With Staggering Ramifications

Dan Solin, 05.17.2018

It’s an open secret on Wall Street that stock market strategists are overly optimistic bunch. Every year! Analysts of particular sectors of the stock market tend to be even more bullish. Their earnings estimates start most years high, and then get cut steadily through the year as reality sets in. They’re just a small part of the Wall Street persuasion machine that can throw you off course with your investing discipline. Don’t let it happen. Put a sensible plan together and then stick to it.