Most investors do not have the time horizon they claim to have. Instead, they have the time horizon they reveal through their behavior. In fact, I believe most people have three investment time horizons: Stated Time Horizon-What they tell their advisor (or themselves)...
One basic principle of finance is that stocks are riskier than bonds and should therefore provide a premium return. With stocks generating annual returns of 10% and bonds 4.5%, this equity risk premium has averaged 5.5% since 1928. Of course, the key question...
Bloomberg just published an article challenging the traditional notion that institutional investors represent “smart money” whereas retail investors are hapless. The article is based on data collected by State Street showing the equity weighting of a large universe of institutional investors. First, note...
A number of my recent posts have focused on the high level of risk taking in the capital markets. To name a few, I cited narrow high yield bond spreads, flows into crypto, trading of zero-day options, flows into leveraged ETFs, and so...
Last week, I posted a blog identifying a number of signs that investors are very much in a “risk-on” if not speculative mood. Do you remember the meme stock mania in 2020 and 2021 when the price of Game Stop stock went from...
As shown below, just shy of 40% of the S&P 500 market capitalization consists of just ten stocks which represents an all-time record of concentration. The next chart indicates that these companies sell at a significant P/E premium to the remainder of the...
