Showing posts from May, 2012

Sunday Spectacle CLXXVII

The Modern Theory of Stock Market Investing (source: Dilbert , illustrated by Scott Adams. Image downloaded from Monevator .)

Sunday Spectacle CLXXVI

Barron's Top Hedge Funds in America Thought I would post the tables listing the top hedge funds in America from an excellent pice on Ray Dalio (Macro-oriented investors should check out the article). Hedge funds are in a parallel universe from me (for the most part) but it's interesting to see what type of strategies have done well in the recent past. A lot of the hedge funds posting good 3-year returns likely fell off a cliff 3 years ago so it's not clear how good they really are. It looks like the Barron's Top 100 hedge fund index has returned a spectacular 25.55% per year over the last 3 years vs BarclayHedge Fund Index of 9.05% S&P 500's 14.11%. There is likely huge suvivorship bias in the Barron's Top 100 Hedge Fund index. (source: " Ray Dalio's World ," Sandra Ward, Barron's. May 19, 2012. Data sources: BarclayHedge, Morningstar)

Sunday Spectacle CLXXV

Technology Adoption in America It's not easy to measure how quickly technology is adopted. One can come up with numerous methods, and the result can differ depending on how you count the starting point. Sometimes it is also hard to distinguish between devices. For instance, one of the sources below seems to count 'tablets' as something starting with the iPad, when a stricter view may place the starting point back in the late 90's or early 2000's (there were some tablets running Microsoft OS back then). Similarly, some people separate 'smartphones' from mobile 'feature phones' whereas others do not. In any case, the following graphs provide some insight into adoption rates. As to be expected, technologies that required building out huge physical infrastructure (like the electricity grid or the telephone network) took a very long time. Based on the results quoted by The Atlantic , it looks like the 'boom box' had the fastest adoption a

Sunday Spectacle CLXXIV

Macro-economic Drivers of Corporate Profits (source: " What Goes Up, Must Come Down! - March 2012 ," Exhibit 5, James Montier, GMO, March 2012) One of the reason people like me are bearish, and don't trust the trailing and forward P/Es, is because corporate profit margins are quite high. Most of this, as can be seen above, is driven by government "savings" (i.e. deficit spending). IANAE—I Am Not An Economist—and can't say I understand this chart very well or agree with it entirely. For instance, I always thought the fact that consumers (in USA and Canada) were living outside their means and running big deficits was accretive to corporate profits; whereas this chart implies it is a drag. If consumers start increasing their savings (i.e. positive savings), does this mean corporate profits would be even higher? I don't get that — can anyone explain that to me? In any case, this chart does provide a rough view of what may be driving corporate pr

John Hussman on the unsustainability of high-growth and Apple

John Hussman isn't a stock picker—he's more of a macro guy—but he did comment in his April 30th Weekly Market Comment on how high sales growth declines as market share increases, and commented on Apple (AAPL). Kind of obvious but investors, particularly growth investors, often tend to ignore this, often to their peril. [as usual, bold highlights by me] Consider a very large, untapped market for some product. We can model the growth process in terms of how quickly that product is adopted by new users, whether there are any "network" effects where new buyers are attracted to the product because other people already use it, how frequently existing users replace their products, whether late-adopters come in more slowly than early-adopters because of budget constraints, how quickly the untapped market grows , and a variety of other factors. Whether you do this sort of modeling with a spreadsheet or with differential equations, you'll get essentially

Sunday Spectacle CLXXIII

Marketing Innovations (source: " Eloqua x JESS3: Disruptive Innovations Infographic " by Eloqua and JESS3.