First, a lesson on stock dispersion in investing.
Low stock dispersion means that stocks are generally moving in the same direction. High stock dispersion means that individual stocks are headed in more unpredictable directions, as has been the case so far in 2014. While the so-called financial experts are always calling it a ‘stock picker’s market’ (because they make money on trading), they are louder about it during those periods of high dispersion.
If stocks have low dispersion, presumably an active stock picker should find it more difficult to beat a relative benchmark index. Conversely, when stocks are acting more independent of one another, there should be more opportunity for skillful (or lucky) investors to outperform. Of course, there is also a greater opportunity for the less skillful (or unlucky) investor to underperform.
A new study titled Dispersion: Measuring Market Opportunity, by S&P Dow Jones, suggests there is no evidence to support the notion that stock picking is easier or better done when there is wide dispersion among individual stock returns. In fact, the data suggest the probability that actively managed mutual funds will outperform the market (already a less than 50% chance after expenses) is no higher during periods of high dispersion than low dispersion.
It all makes sense. Why should a greater percentage of active fund managers outperform during periods of high dispersion? Their skill doesn't suddenly increase during these periods.
Money managers who masquerade as financial advisors have lots of marketing ploys they use when promoting their services, and saying it’s a ‘stock picker’s market’ is among the most used. But the truth is the same as always – there’s no extra benefit to the guesswork of active management. Use a passive, index-type approach to investing, and you’ll be farther ahead in the long run.
Monday, April 28, 2014
Friday, April 18, 2014
Swimsuit Power
When I was around 10 years old, my parents acceded to my request to subscribe to Sports Illustrated magazine. In those days, this was one of the only ways to get national sports information beyond a daily paper or local newscast, plus get good photos illustrating the action.
Even back then, once a year in February, SI published a swimsuit edition. There really wasn't much to it then, in the 1970s. Kind of a boring issue, really, until 1978, when Cheryl Tiegs and her fishnet top created a controversy that would quickly go viral by today's standards. Short-term, this meant a lot of canceled subscriptions for SI; long-term, it meant that annual edition would become a cultural icon.
This past February, SI published its 50th anniversary swimsuit edition. I just bought it this week. (While I stopped subscribing to SI several years ago after a run of about 30 years, I've always purchased the swimsuit issue -- to keep up on the pop culture of it!) Because of the anniversary, SI had photos of the cover models it made famous over the past 50 years, along with their comments about how being on the cover changed their lives.
Here's the gist: Many of the models mentioned how SI not only launched them to supermodel status, but also how they were able to parlay that fame and fortune to help others. Not only was this done through charity work, but also by the way SI empowered them -- they felt their success helped other women know they could be successful in their endeavors.
I loved reading this. So many times over the years people would criticize SI for how the swimsuit issue 'exploited' women. I received that comment many times from others for just owning that particular magazine. But my reply was basically always the same, which was to assert that these women are the opposite of exploited. They are willing and wealthy and healthy, and how could that be a bad thing for other women?
Maybe I'm not able to comprehend the gender-specific argument, but you can bet if I get that exploitation argument anytime soon, I'll be using the 50th anniversary swimsuit edition to be its own defense.
Even back then, once a year in February, SI published a swimsuit edition. There really wasn't much to it then, in the 1970s. Kind of a boring issue, really, until 1978, when Cheryl Tiegs and her fishnet top created a controversy that would quickly go viral by today's standards. Short-term, this meant a lot of canceled subscriptions for SI; long-term, it meant that annual edition would become a cultural icon.
This past February, SI published its 50th anniversary swimsuit edition. I just bought it this week. (While I stopped subscribing to SI several years ago after a run of about 30 years, I've always purchased the swimsuit issue -- to keep up on the pop culture of it!) Because of the anniversary, SI had photos of the cover models it made famous over the past 50 years, along with their comments about how being on the cover changed their lives.
Here's the gist: Many of the models mentioned how SI not only launched them to supermodel status, but also how they were able to parlay that fame and fortune to help others. Not only was this done through charity work, but also by the way SI empowered them -- they felt their success helped other women know they could be successful in their endeavors.
I loved reading this. So many times over the years people would criticize SI for how the swimsuit issue 'exploited' women. I received that comment many times from others for just owning that particular magazine. But my reply was basically always the same, which was to assert that these women are the opposite of exploited. They are willing and wealthy and healthy, and how could that be a bad thing for other women?
Maybe I'm not able to comprehend the gender-specific argument, but you can bet if I get that exploitation argument anytime soon, I'll be using the 50th anniversary swimsuit edition to be its own defense.
Thursday, April 10, 2014
Terrorists > VEISHEA
For the uninitiated, VEISHEA is an annual week-long celebration held each spring on the campus of Iowa State University. VEISHEA is an acronym for the original 5 colleges of the university: Veterinary Medicine, Engineering, Industrial Science, Home Economics, Agriculture. It's presumably the largest student run festival in the nation,
VEISHEA has been marred in the past two decades by off-campus, late night, alcohol-induced, party-goer rioting on the last weekend, causing mostly minor but some significant damage and injuries. The last time it had happened was 2004, and the university president at the time canceled VEISHEA for the following year. Another riot happened again this week (this time early in the week), and in response the new university president, Steven Leath, suspended the rest of -- which is to say most of -- VEISHEA for the year.
Lots of losers in this, but hands down the biggest losers in all of it are.....the ISU university presidents.
While there is no defending the instigators or participants in these, neither is there a rational defense of canceling VEISHEA in response. By all accounts, it wasn't so much a riot as a social-media inspired mob scene with a few drunken idiots. To make matters worse, Leath acts as if his action has the full support of the university leadership.
Let's drop the public posturing and consider the facts that Leath is ignoring, and would like others to ignore:
1) He says he's thinking of the institution and safety in making his decision to cancel, but what exactly does he mean by institution? The administration? The faculty? Because the university institution doesn't exist without the students, and the vast majority of them want VEISHEA to go on. So do the surrounding campus businesses.
2) Speaking of the administration and faculty, while they made be around for dozens of VEISHEA festivals (thank you, tenure!), the students are only there for a few. Many of them volunteer and put many hours of work into it. Now Leath has taken away the fruits of their labor, because of a few folks who might not even be students. It's bad enough that the majority are made to suffer for the few in elementary school or high school, but this is college. C'mon, man.
3) By canceling VEISHEA, Leath has unquestionably increased the probability of more trouble. Now there will be no alcohol-free alternative activities, and more students are likely to attended the off-campus parties, which have always been a source of mob-like behavior. This probability has already become reality, as police have stated that in the following two days after the 'riot' there have been about twice the usual off-campus incidents reported than in past years. (Note: This year's riot was in part a result of police closing down an off-campus party. Is it really that hard for Leath and his institutional cronies to put 2 and 2 together?)
4) Leath could easily allow VEISHEA to commence while law enforcement reviews the volumes of video evidence (something other riots didn't have), and both they and he can ultimately take action against the few who deserve it. Instead, he chose to rush to judgement, and punish the many who don't deserve it. When are educational institutions, at any level, going to accept that they effectively govern behavior that goes on beyond their physical territory?
This continues a pattern of questionable, socially-conservative decisions from Leath. He was the pansy for the conservatives on the state board of regents a year ago in stopping the Harkin Institute at Iowa State, and by not allowing freedom in their research, valuable senatorial papers will now go to Drake University instead. And no one has any idea why he's single-handedly prohibited a player from participating on the men's basketball team this year, even though said previously-suspended player has been cleared by the legal system.
How much longer before the contributing alumni just suspend their donations in the same way Leath seems to arbitrarily suspend things? Maybe they should -- then I'm guessing he'll suddenly find ways to make things work, instead of thinking of reasons for things to not work. I noticed one alumnus already commenting that if there was a student uprising at a sporting event, the president wouldn't cancel the rest of the athletic season. But apparently, canceling VEISHEA is OK, because it only hurts students and not the big donor fans.
By canceling VEISHEA and threatening its future, Leath and his predecessor have simply allowed the terrorists to win at the expense of the students. At Iowa State, this is called leadership, but it's really just retreat.
VEISHEA has been marred in the past two decades by off-campus, late night, alcohol-induced, party-goer rioting on the last weekend, causing mostly minor but some significant damage and injuries. The last time it had happened was 2004, and the university president at the time canceled VEISHEA for the following year. Another riot happened again this week (this time early in the week), and in response the new university president, Steven Leath, suspended the rest of -- which is to say most of -- VEISHEA for the year.
Lots of losers in this, but hands down the biggest losers in all of it are.....the ISU university presidents.
While there is no defending the instigators or participants in these, neither is there a rational defense of canceling VEISHEA in response. By all accounts, it wasn't so much a riot as a social-media inspired mob scene with a few drunken idiots. To make matters worse, Leath acts as if his action has the full support of the university leadership.
Let's drop the public posturing and consider the facts that Leath is ignoring, and would like others to ignore:
1) He says he's thinking of the institution and safety in making his decision to cancel, but what exactly does he mean by institution? The administration? The faculty? Because the university institution doesn't exist without the students, and the vast majority of them want VEISHEA to go on. So do the surrounding campus businesses.
2) Speaking of the administration and faculty, while they made be around for dozens of VEISHEA festivals (thank you, tenure!), the students are only there for a few. Many of them volunteer and put many hours of work into it. Now Leath has taken away the fruits of their labor, because of a few folks who might not even be students. It's bad enough that the majority are made to suffer for the few in elementary school or high school, but this is college. C'mon, man.
3) By canceling VEISHEA, Leath has unquestionably increased the probability of more trouble. Now there will be no alcohol-free alternative activities, and more students are likely to attended the off-campus parties, which have always been a source of mob-like behavior. This probability has already become reality, as police have stated that in the following two days after the 'riot' there have been about twice the usual off-campus incidents reported than in past years. (Note: This year's riot was in part a result of police closing down an off-campus party. Is it really that hard for Leath and his institutional cronies to put 2 and 2 together?)
4) Leath could easily allow VEISHEA to commence while law enforcement reviews the volumes of video evidence (something other riots didn't have), and both they and he can ultimately take action against the few who deserve it. Instead, he chose to rush to judgement, and punish the many who don't deserve it. When are educational institutions, at any level, going to accept that they effectively govern behavior that goes on beyond their physical territory?
This continues a pattern of questionable, socially-conservative decisions from Leath. He was the pansy for the conservatives on the state board of regents a year ago in stopping the Harkin Institute at Iowa State, and by not allowing freedom in their research, valuable senatorial papers will now go to Drake University instead. And no one has any idea why he's single-handedly prohibited a player from participating on the men's basketball team this year, even though said previously-suspended player has been cleared by the legal system.
How much longer before the contributing alumni just suspend their donations in the same way Leath seems to arbitrarily suspend things? Maybe they should -- then I'm guessing he'll suddenly find ways to make things work, instead of thinking of reasons for things to not work. I noticed one alumnus already commenting that if there was a student uprising at a sporting event, the president wouldn't cancel the rest of the athletic season. But apparently, canceling VEISHEA is OK, because it only hurts students and not the big donor fans.
By canceling VEISHEA and threatening its future, Leath and his predecessor have simply allowed the terrorists to win at the expense of the students. At Iowa State, this is called leadership, but it's really just retreat.
Tuesday, April 1, 2014
April Fools
In honor of April Fool's Day (or is it April Fools' Day?), I wanted to set out a list of a few facts that should be April Fool's/Fools' Day jokes, but aren't:
* There are now successful reality TV shows based on hoarding, pawn shops, doomsday prepping, housewives, duck whistles, alligator catching, arm wrestling, dance moms, teen moms, naked survivalists, and other narcissistic freaks.
* Climate change.
* Most Major League Baseball teams start the year with virtually no chance of making the playoffs, and this is supposed to keep sports fans occupied all summer.
* A full jumbo jet was lost in the south China Sea and no one has the faintest clue exactly how or where.
* Fox News.
* This winter wasn't the coldest and windiest on record.
* Steve King is a U.S. Congressman.
* [This one gets added effective on April 2, 2014: The U.S. Supreme Court again rules that there is a First Amendment protection given to those who want to make unlimited financial donations to political campaigns, and that said protection won't corrupt politics.]
* There are now successful reality TV shows based on hoarding, pawn shops, doomsday prepping, housewives, duck whistles, alligator catching, arm wrestling, dance moms, teen moms, naked survivalists, and other narcissistic freaks.
* Climate change.
* Most Major League Baseball teams start the year with virtually no chance of making the playoffs, and this is supposed to keep sports fans occupied all summer.
* A full jumbo jet was lost in the south China Sea and no one has the faintest clue exactly how or where.
* Fox News.
* This winter wasn't the coldest and windiest on record.
* Steve King is a U.S. Congressman.
* [This one gets added effective on April 2, 2014: The U.S. Supreme Court again rules that there is a First Amendment protection given to those who want to make unlimited financial donations to political campaigns, and that said protection won't corrupt politics.]
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