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Date: Saturday, 19 Apr 2014 12:56

The weekend is a great time to catch up on some posts that were either too long or simply didn’t fit in during the week. Hope you enjoy!

Investing

Over the long term” doesn’t mean “always.”  (Bason Asset)

Things that matter to investors and things that don’t.  (A Wealth of Common Sense)

When it comes to your finances you should focus on systems vs. goals.  (Morgan Housel)

On the differences between professional and amateur investors.  (Above the Market)

Eddy Elfenbein talks market history.  (Crossing Wall Street)

Research

Does rebalancing really pay off?  (Advisor Perspectives)

The home bias phenomenon may slowly be ebbing.  (SSRN via @jasonzweigwsj)

Two centuries of trend following.  (arXiv via @quantivity)

Personal finance

It’s going to take awhile to build the new wave of robo-advisors into household names.  (Zack Miller)

Financial advisors shouldn’t ignore the new tools that are out there.  (Carl Richards)

Is there a “robo-advisor bubble“?  (Nerd’s Eye View)

Business

The rise of the “executive headquarters.”  (New Geography)

Why AOL ($AOL) was not happy about the success of AIM.  (Mashable)

A look behind the doors of Google X.  (Fast Company)

Why Amazon ($AMZN) and other tech companies are so interested in the use of voice commands.  (Wired)

Startups

A talk with Fred Wilson.  (Business Insider)

Ameet Ranadive, “If you don’t pick a startup idea that you’re truly passionate about, you’re at risk of being a mercenary, not a missionary.”  (Medium)

Can Dropbox be both a consumer and enterprise provider?  (stratechery)

Can the Midwest build a self-sustaining tech cluster?  (Points and Figures)

$30 million in venture capital: the controversial story of Clinkle.  (Business Insider)

The new venture capital landscape.  (K9 Ventures)

How one startup allocates equity.  (Quartz)

Science

Why scientists increasingly need to be salesmen?  (Priceonomics Blog)

How the rise of solar will upend the global order.  (The Telegraph)

What do you do with graphene?  (Bits)

Health

Want younger looking skin? Exercise.  (Well)

A single exposure to loud noises can affect your hearing permanently.  (Scientific American)

Booze

The state of American beer.  (The Atlantic)

Why does Constellation Brands ($STZ) sell so much Corona?  (Businessweek)

Americans increasingly love Scotch “whisky.”  (Quartz)

The craft beer revolution is going global.  (The Atlantic)

Food

Michael Ruhlman explores the perfect food, eggs, in his new cookbook, Egg: A Culinary Exploration of the World’s Most Versatile Ingredient.  (Seattle Times)

How small plates have conquered America.  (Quartz)

Why fast food companies are now so focused on breakfast.  (Time)

You can create great olive oil just about anywhere.  (Businessweek)

Shrimp prices are at a fourteen-year high.  (Bloomberg)

There is a sea urchin crisis.  (The Atlantic)

Baseball

A major league pitcher’s guide to doctoring a baseball.  (Deadspin)

MLB’s instant replay program needs to be fixed.  (Slate)

Want a stronger pitching arm? Think long-toss.  (SI)

Sports

Athletes are no longer the stars of sports movies.  (Businessweek)

The value of an NBA franchise has soared in the past few years: inside the exclusive club.  (Grantland)

Inside the dangerous world of “extreme cavers.”  (New Yorker)

Books

An excerpt from James Picerno’s Nowcasting The Business Cycle: A Practical Guide For Spotting Business Cycle Peaks Ahead Of The Crowd. (Capital Spectator)

The Hard Thing About Hard Things: Building a Business When There Are No Easy Answers by Ben Horowitz is a great business book that shows the messy world of business.  (Farnam Street)

What should you feed your dog? A look at Dog Food Logic: Making Smart Decisions for Your Dog in an Age of Too Many Choices by Linda P. Case.  (Scientific American)

Earlier on Abnormal Returns

Active vs. passive: try harder or do something easier?  (Abnormal Returns)

Automated investment management as a transitional moment for advisors.  (Abnormal Returns)

What you may have missed in our Friday linkfest.  (Abnormal Returns)

Mixed media

In the face of long odds should you “try harder” or “do something easier”?  (EconLog)

Will Moleskin break out of its niche into a luxury brands company?  (New Yorker)

How Twitter helped a middle-aged IT guy get a job as a professional comedy writer.  (Vulture)

You can support Abnormal Returns by shopping at Amazon. Don’t forget to follow us on StockTwits and Twitter.

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Date: Friday, 18 Apr 2014 14:56

Quote of the day

David Merkel, “Be skeptical of complexity in exchange traded products.  Avoid complexity.  Complexity works in favor of the one offering the deal, not the one accepting the deal.”  (Aleph Blog)

Markets

Uh oh. Late cycle sectors are outperforming.  (All Star Charts)

Americans increasingly think real estate is a good investment.  (Gallup)

Hedge funds are taking a hit on the technology pullback.  (WSJ)

Technology

Why is Yahoo’s ($YHOO) core business valued at less than $0?  (Matthew Levine)

The great stock buyback craze is coming to an end: the case of IBM ($IBM).  (Zero Hedge)

Why Tesla ($TSLA) needs a partner to build batteries.  (Quartz)

Ben Horowitz author of The Hard Thing About Hard Things: Building a Business When There Are No Easy Answers on whether we are seeing a tech IPO bubble.  (Daily Ticker)

Marc Andreessen on why technology M&A numbers are often so big.  (Dealbook)

Finance

Lending Club is nearing an IPO.  (WSJ, FT)

Wal-Mart ($WMT) wants to undercut the money transfer giants.  (BusinessweekWSJ)

Flash Boys: A Wall Street Revolt fallout: high-frequency trader Virtu postpones an IPO.  (WSJ)

Just about anything constitutes insider trading these days.  (Bronte Capital)

ETFs

In praise of home-grown fund companies.  (Morningstar)

In search of a one-stop natural resources fund.  (Morningstar)

Global

The iShares Frontier Markets 100 ETF ($FM) is going to undergo some big changes.  (ETF)

Not all frontier funds are created alike.  (Frontiers)

Economy

2014 is shaping up as a good year for hotels.  (Calculated Risk)

Workers are earning decent raises.  (Real Time Economics)

Earlier on Abnormal Returns

Active vs. passive: try harder or do something easier?  (Abnormal Returns)

Automated investment management as a transitional moment for advisors.  (Abnormal Returns)

What you may have missed in our Thursday linkfest.  (Abnormal Returns)

Mixed media

The 50 television shows on Netflix includes Breaking Bad.  (Paste)

The top 100 animated movies includes Fantastic Mr. Fox.  (Time Out NY via kottke)

You can support Abnormal Returns by shopping at Amazon. Don’t forget to follow us on StockTwits and Twitter.

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Date: Thursday, 17 Apr 2014 18:46

Robo-advisors have been all over the news this week. Two of the bigger players in the space Betterment and Learnvest both announced they had raised large chunks of additional venture capital. I had a post up this week talking about how the rise of these services could disrupt traditional providers.

Even as venture capital floods into this space there are doubts that these firms will ever be able to garner enough assets quickly enough to create self-sustaining business models that will provide for a profitable exit for outside investors. There is no shortage of potential competitors that could in a certain sense, disrupt the disrupters.

For example, there was much discussion this week that fund giant Vanguard was expanding their offerings in managed portfolios. Vanguard already known for their low costs could with its already existing client relationships and marketing prowess could become a viable competitor.

Nor should we ignore the possibility that other incumbent managers could enter this space in large part to defend their existing businesses. Meb Faber recently tweeted:

Michael Kitces has written a great deal about the robo-advisor trend and in a recent post tried to measure how much these new players would have to scale to become profitable. This is a worry that is echoed by others in the industry. This argument has some validity but it does not offset the reality of steadily declining costs. Kitces writes:

Ultimately, I do think we’ll look back at this 2009-2014 era as the one where the core construction and implementation of a passive, strategic portfolio became commoditized by technology for an ultra-low cost, in a transitional moment as seminal as what Vanguard’s first launch of the index fund has been slowly and steadily doing to the world of stockpicking and mutual fund managers for the past 40 years. In truth, this trend towards lower cost portfolio implementation is not new – it dates back to the de-regulation of trading commissions on Wall Street, which brought on the rise of the discount broker in the 1980s and 1990s, the rise of online discount broker in the 2000s, and now the rise of the online portfolio construction solution in the 2010s. It will lead to a few winners, and some traditional players that will be losers.

In a certain sense investors need all the help that they can get at this point. Despite the evidence that it is a great time to be an individual investor there are macro headwinds facing investors. Matthew Klein notes that while a growing percentage of society has come to rely on capital income the available returns have been shrinking over time. When you add on top of that the prospect of an ever decreasing equity risk premium you see the need for investors to safely maximize returns from their portfolios.

For most investors two of the easiest ways to do that is lowering their costs and better managing their taxes. These are two things that the robo-advisors are capable of doing well. There are a number of other ways in which human advisors can help investors better manage their financial lives but it hard to see how the trend toward lower cost, automated investment management goes away any time soon.

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Date: Thursday, 17 Apr 2014 17:55

“Advice that works on average” is also known as “good advice.” – Bryan Caplan

In a post up at EconLog Caplan discusses why it is so much socially acceptable to tell people to “try harder” when in fact the best advice would be to “do something easier.” Caplan applies this logic to opening a restaurant, choosing an occupation or going to college. He writes:

Say it with me: Risk of failure is a reason not to try.  Not a decisive reason, but a reason nonetheless – and the higher the risk of failure, the stronger the reason.  True, if you have no alternatives, you may as well try your best and hope for the best.  But would-be restaurant owners and would-be students always have alternatives.  And as long as you have alternatives, willingness to Do Something Easier in the face of crummy odds is not cowardice.  It is good economics – and common sense.

This same logic could easily be applied to investing as well. In this framework active management represents “trying harder” and passive management represents “doing something easier.” The financial services industry is built on the idea that your money needs to work harder to earn better returns.

“Working harder” is usually accompanied with additional fees to pay for this additional effort. Barry Ritholtz at Bloomberg View talks about why it is that despite relatively tepid performance over any reasonable time span hedge funds continue to attract (and retain) assets under management. That is why Ritholtz argues that unless you can get access to a truly top-tier hedge fund you are better off focusing on low-cost beta.

We all know the old adage, if you want a friend, get a dog. Perhaps an amended version should be, if you want alpha, get into a top-tier hedge fund; if you can’t, then stick to beta.

It seems like Americans are taking this advice. From 2003 to 2013 the percentage of mutual fund and ETF assets that are passively managed has increased from 12% to 27%. By all accounts this percentage is set to continue to go higher. Part of the reason may be that the growing wave of automated investment managers, or robo-advisors, almost exclusively use passively managed ETFs to help build client portfolios. That is why Adam Zoll at Morningstar writes:

But in a larger sense, the growing use of passive investment vehicles reflects the times in which we live. With algorithms helping determine which online ads we’re exposed to each day and new metrics being invented all the time to aid in arenas as diverse as business, politics, and sports, perhaps it should come as no surprise that more people are willing to rely on an inexpensive, systematic, formula-based approach to investing rather than on the judgment and decision-making ability of a living, breathing fund manager.

One of the big problems with active management today is they are simply charging too much for their services. That gap will only continue to grow as passive strategies continue to see their costs pushed towards 0%. Cullen Roche at Pragmatic Capitalism argues that active managers can add value especially in a bear market but the fees charged are still too high. He writes:

And that’s the thing – as long as there are bear markets there will be active managers implementing strategies designed to reduce tail risk in portfolios. And they will be providing their clients with an extremely valuable service.  In general, I think it’s probably safe to say that there’s an excess of more active managers at present and that many of these active managers are charging fees that they can’t justify. But that doesn’t mean they’ll become extinct.

Indexing is no panacea. As Phil Pearlman at Yahoo describes indexing as: “the worst form of retirement investing except for all the others.” As Pearlman notes if you take active management off the table there are still plenty of ways that investors can muck up their portfolios through all manner of bad behaviors. But in the active vs. passive debate for now it appears that investors are choosing to “do something easier” than “try that much harder.”

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Date: Thursday, 17 Apr 2014 16:54

Quote of the day

Barry Ritholtz, “We all know the old adage, if you want a friend, get a dog. Perhaps an amended version should be, if you want alpha, get into a top-tier hedge fund; if you can’t, then stick to beta.”  (Bloomberg View)

Chart of the day

XLU 0414 390x420 Thursday links:  sticking to beta

Hard to ignore the recent strength in utility stocks.  (Afraid to Trade)

Markets

Why you should be worried by the surge in profitless IPOs.  (MoneyBeat)

Bullish sentiment has ebbed in the face of the market pullback.  (Bespoke)

This model predicts zero excess returns on risky bonds going forward.  (House of Debt)

The stock market has risen despite punk inflation expectations.  (Capital Spectator)

Bonds vs. Stocks

People often forget that bonds make up a majority of the global market portfolio.  (Meb Faber)

Is the equity risk premium still worth the bother?  (FT Alphaville)

Strategy

A look at how story stocks play out.  (Finance Trends Matter)

Good reasons to streamline your portfolio.  (Morningstar)

Backtesting requires a lot more rigor that commonly used today.  (Focus on Funds, FT)

Is there any investment value in collectibles?  (Rick Ferri)

Companies

Can Facebook ($FB) successfully evolve into a “multi-app” platform?  (NYTimes, Daily Ticker)

Why does Apple ($AAPL) keep subsidizing competitor Google ($GOOG)?  (Recode, Pando Daily)

Why the valuation disparity between Twitter ($TWTR) and Weibo ($WB)?  (Quartz)

IBM ($IBM) analysts are confused.  (Herb Greenberg)

The case for the fixer-upper that is Micron Technology ($MU).  (Vitaliy Katsenelson)

Finance

How long should a CEO stay? The case of GE ($GE).  (FT)

Banks are ramping up business lending.  (WSJ)

Can IEX capitalize on its 15 minutes of fame?  (Buzzfeed)

Can robo-advisors survive in their current form?  (ETF)

ETFs

John Rekenthaler, “I don’t know why an investment-management firm would wish to buy Nuveen.”  (Morningstar)

Inside the business of starting an ETF.  (Meb Faber)

How active ETFs make sense for taxable investors.  (Evolution Trading)

Global

Eurozone stocks are trading, valuation-wise, at the top of their recent range.  (Dr. Ed’s Blog)

Another sign that investors are interested in Africa.  (NetNet)

Economy

Weekly initial unemployment claims continue to trend lower.  (Calculated Risk, Bespoke)

The Philly Fed is pointing toward a stronger economy.  (Bespoke)

Walter A. Friedman’s Fortune Tellers: The Story of America’s First Economic Forecasters is a “darned good read.”  (Reading the Markets)

Markets in everything: sneakers.  (NYTimes)

Earlier on Abnormal Returns

What you may have missed in our Wednesday linkfest.  (Abnormal Returns)

Mixed media

How The Wirecutter and The Sweethome upended the idea of a comparison shopping site.  (The Atlantic)

Om Malik, “Most publishing companies in particular cannot say what they are and what purpose they serve.”  (GigaOM)

Capital is rushing into the news business. Disappointment awaits.  (Justin Fox)

You can support Abnormal Returns by shopping at Amazon. Don’t forget to follow us on StockTwits and Twitter.

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Date: Wednesday, 16 Apr 2014 16:48

You can keep up with all of our posts by signing up for our daily e-mail. Thousands of other readers already have. Don’t miss out!

Quote of the day

Charles Bilello, “Overall, most investors would do well to ignore the allure of “stock picking” and any notion that they have an innate ability to pick winning stocks.”  (Pension Partners)

Chart of the day

Comm 0414 536x420 Wednesday links:  the allure of stock picking

Commodities do not all move in lockstep.  (All Star Charts)

Markets

Is the IPO market signalling a top?  (Barry Ritholtz)

Valuation and the spectrum of returns.  (Meb Faber)

Remember the “Rule of 20“?  (Bloomberg)

A look at the correction across sectors and markets.  (VIX and More also Dragonfly Capital)

If you know where the 10 year is going…. (Market Anthropology)

How much longer will the credit market party last?  (FT Alphaville)

PE and VC

Private equity fundraising is going gangbusters.  (MoneyBeat)

Private equity vs. venture capital: on the mix of luck and skill.  (SSRN via @jasonzweigwsj)

There is a big difference between managing small vs. large funds.  (A VC)

Companies

On the remarkable transformation of Apple ($AAPL) stock.  (Millenial Invest)

Yahoo’s ($YHOO) provides a window on very strong Alibaba earnings.  (Dealbook, WSJ)

Can anybody catch up to Amazon ($AMZN) in the cloud?  (Quartz)

Investors are reassessing the prospects for Weibo.  (Quartz, FT)

The cloud and SaaS has a long way to go to take over the enterprise.  (Fortune)

The problem with paying employees with shares.  (Breakingviews)

Finance

Joseph Stiglitz doesn’t have much good to say about HFT.  (Felix Salmon also Real Time Economics)

Noah Smith, “Flash Boys: A Wall Street Revolt is an excellent book. It’s fun and readable.”  (Noahpinion)

Is Goldman Sachs ($GS) ready to pull the plug on Sigma X?  (WSJ)

Matt Levine, “The more a company complains about naked short sellers driving down its stock price, the more worried you should be.”  (Bloomberg)

Investment bank Moelis ($MC) struggled to go public. What next?  (WSJ, Bloomberg, Dealbook)

Funds

When bloat becomes a problem for fund managers.  (research puzzle pix)

The ETF Deathwatch for April 2014.  (Invest with an Edge)

Global

Asset managers are the new banks.  (Businessweek)

GDP is a flawed statistic only takes you so far.  (John Kay)

Economy

The housing market is getting off to slow start this Spring.  (Calculated Risk, WSJ)

Industrial production is headed higher.  (ValuePlaysCalculated Risk, Bloomberg)

Has US inflation bottomed?  (Sober Look)

More signs the labor market is tightening up.  (Business Insider)

Connectivity need not equal productivity.  (Salil Mehta)

Lower capital market returns is the solution to income inequality.  (Matthew Klein)

Earlier on Abnormal Returns

What you may have missed in our Tuesday linkfest.  (Abnormal Returns)

Mixed media

Five tips for talking about money at cocktail parties.  (ETF)

Why you should turn off financial television.  (Brian Lund)

More reasons to skip finance blog comments.  (Aleph Blog)

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Date: Tuesday, 15 Apr 2014 16:55

Quote of the day

Carl Richards, “We can’t unbundle risk and return, but I keep seeing people giving it their best shot.”  (Bucks Blog)

Chart of the day

WSMC 0414 565x420 Tuesday links:  unbundling risk and return

As of March global stock markets stood at all-time highs in market cap terms.  (Carpe Diem)

Markets

The earnings cycle is pretty weak.  (The Reformed Broker, ibid)

How has the stock market done on tax day?  (Quantifiable Edges)

The payoff to rebalancing varies over time. (Capital Spectator)

Markets are not pricing in much in the way of default risk.  (FT)

Strategy

Great traders often have a “quirky” approach to markets.  (TraderFeed)

Four steps to avoid money losing behaviors.  (Chuck Jaffe)

Female investors are more “risk aware” not “risk averse.”  (Above the Market)

How early life disasters affect CEO risk taking.  (SSRN via @jasonzweigwsj)

Trading is a “team sport.” A list of worthwhile sites for traders.  (TraderFeed)

Companies

Marissa Mayer’s job gets kicked into high gear post-Alibaba IPO.  (Quartz also Risk Reversal)

Google ($GOOG) is buying another drone startup.  (WSJ, TechCrunch)

Twitter ($TWTR) brings data reseller Gnip in-house.  (Recode, Pando Daily)

News flash: corporate America has a whole host of juicy tax breaks.  (Dealbook)

Online advice

Yet another online asset manager, Betterment, raises a big round from VCs.  (TechCrunch)

Learnvest raised a big round as well.  (BetaBeat)

How technology can improve financial planning.  (Nerd’s Eye View)

Financial advisors have a choice about technology: use it to better serve clients or risk becoming obsolete.  (Carl Richards)

The disruption of Wall Street is here.  (The Felder Report)

Finance

The Nasdaq correction could not have come at a worse time for the IPO market.  (FT)

The SEC is looking into the ‘maker-taker‘ market model.  (WSJ)

The forex market is increasingly embracing options and futures.  (Institutional Investor)

AngelList is now raising a fund to invest in the site’s angel investors.  (Digits, FT)

Economy

Three signs the economy is perking up.  (Fortune also BCA Research)

New homebuilder sentiment has leveled off.  (Calculated Risk)

Why has US construction productivity been stagnant?  (FT Alphaville)

Earlier on Abnormal Returns

Software is eating investment management. Get used to it. (Abnormal Returns)

What you may have missed in our Monday linkfest.  (Abnormal Returns)

Mixed media

On the high cost of procrastination.  (Dan Ariely)

The psychology of persuasion.  (Farnam Street)

Why you should take all your vacation time.  (Fast Company)

You can support Abnormal Returns by shopping at Amazon. Don’t forget to follow us on StockTwits and Twitter.

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Date: Tuesday, 15 Apr 2014 02:28

Some trends seem like no-brainers in retrospect. Two-plus years ago in the concluding chapter of my book, Abnormal Returns: Winning Strategies from the Frontlines of the Investment Blogosphere, I talked about the rise of algorithmic investment managers:

Of late we have seen some tentative steps taken to provide investors with algorithmic investment services. This represents a natural evolution for the investment business because much of the everyday work inherent in investing can be done algorithmically. And it represents another way in which algorithms have become a part of our lives, oftentimes without our knowledge. More sophisticated, automated investment plans will make life easier for a wide swath of American investors who would be happy to take routine, everyday investment decisions off their plate. Automation or not, investors need to educate themselves along the way. It will allow us to spend more time thinking about the bigger, more impactful questions surrounding money.

A great deal has happened since then. It has taken a little time but it is becoming increasingly clear that “Online financial startups are starting to take root with investors.” We have even discussed the possibility that investing in a few years will be virtually free. Startups, albeit well-financed, have been driving this trend. Now the big boys are paying attention.

Vanguard Investments, the world’s third largest money manager, has now gotten into the game in a significant way. Vanguard’s Personal Advisor Services is now offering to manage client portfolios for a 0.30% per year. When you take into account that fact that Vanguard’s fund (and ETFs) are already low it makes for a compelling package.

Vanguard is not alone in this space but their entry validates what the other companies are doing. In surveying the bevy of companies trying to provide low cost financial Ron Lieber writes:

..Vanguard is all but admitting that the start-ups were right in identifying an enormous advice gap in the financial services industry…Not all of these players will survive, but their sheer number will probably bring prices down even further or force established advisers to do more to justify their existing fees.*

Competing against robots, or in this case, robo-advisors, is not easy. This trend toward “tech-sourcing” has been going on for a long time and is now coming to areas of finance that many thought were untouchable. Daniel Nadler writes:

Like outsourcing, tech-sourcing jobs does not replace a set of tasks; it simply replaces the people who do them with an alternative process that is cheaper, faster and more efficient – and often less American, whether the sourcing comes from Bangalore (as it did for the customer service sector) or from bits and bytes, as it did for the financial sector.

The most immediate impact of low-cost algorithmic investment management services will be for consumers who either couldn’t access (or afford) such services or those investors who get a cost benefit from increasing competition. Cullen Roche writes:

..the good news is that these low fee providers are driving down costs, automating processes (portfolio management is all about process, process, process) and driving out bad advisors. I also think they’re perfectly positioned to help the lower income investor which is great news for people who are hesitant to pay up for something they might not need.  Those are huge wins for everyone who’s an investor. But the Vanguard product is cool because it takes Vanguard’s low cost platform, embeds automation AND offers you the personal touch that is often necessary with financial planning and portfolio advisory.  As Erik Brynjolfsson says, we have to learn to work with the machines, not against them. Vanguard seems to have gotten the message.

That message is going to be a bitter pill for some to swallow. For those advisors who were earning high fees without providing value added services this trend will be a wake-up call. There are a number of ways that advisors can add a great deal of value for investors but it doesn’t come from the fruitless pursuit of alpha. It comes largely from preventing investors from being their own worst enemies.

Much has been written in the past week or so about the cost of high-frequency trading on investors. Which may very well be true, but less talked about is the high (net) cost of portfolio management. As Cullen notes the potential for algorithms to help investors is vast and we are just beginning to see it take shape. Software is eating the world and now it is coming to manage your portfolio.**

*I would also recommend checking out the table that accompanies this article comparing the cost, balances and services of the dozen or so most prominent algorithmic advisors.

**Clarification: As the Vanguard white paper notes there is an important role for human advisors. The reality is that is not in the management of portfolios. Michael Kitces at Nerd’s Eye View has a piece up talking about the importance of real human financial advisors in the process. Important financial decisions still require a dialogue that is not yet replicated by software. However that bifurcation of portfolio management and “real” financial planning will still radically transform the industry.

Items mentioned:

Abnormal Returns: Winning Strategies from the Frontlines of the Investment Blogosphere  (Amazon)

The rising challenge of robo-advisors.  (Abnormal Returns)

Robo-advisors gobbling billions in assets.  (ThinkAdvisor)

If investing were free how would it change what you do?  (Abnormal Returns)

Wealthfront raises $35 million.  (TechCrunch)

The world’s largest money managers.  (24/7 Wall St.)

Financial advice for people who aren’t rich.  (NYTimes)

Michael Lewis and the tech-sourcing of white collar jobs. (Institutional Investor)

Robo-advisors – awakening the giant for the benefit of all.  (Pragmatic Capitalism)

Putting a value on your value: Quantifying Vanguard Advisor’s Alpha.  (Vanguard)

Everything you need to know about high frequency trading.  (The Atlantic)

As software eats the world, non-tech companies are eating startups.  (TechCrunch)

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Date: Monday, 14 Apr 2014 16:49

Quote of the day

Patrick O’Shaughnessy, “History teaches us that we should avoid lottery stocks like the plague.  Just like the actual lottery, the probabilities of a big payoff are just too low.”  (Millenial Invest)

Chart of the day

TWTR 0414 624x303 Monday links:  lottery stocks

Twitter ($TWTR) execs (and big shareholders) have pledged not to sell shares on the initial unlock. (Recode, Dealbook)

Video of the day

Rob Arnott defends fundamental indexing with Consuelo Mack.  (Wealthtrack)

Markets

2014 has been the inverse of 2013.  (Pension Partners)

There is no shortage of excuses for why the stock market has corrected.  (Barry Ritholtz)

Hedge funds have dumped their high growth/valuation names.  (Business Insider)

Investors are deleveraging.  (Investing with Options)

Why value should continue to outperform.  (MoneyBeat)

Why a correction is not all that surprising.  (Humble Student)

The Treasury rally is likely to run out of steam.  (Sober Look)

Investors are hedging their bets.  (FT Alphaville)

Strategy

On the use of dividend stocks for retirement income.  (Jonathan Clements)

Let go of your sunk costs.  (A Wealth of Common Sense)

Companies

Many startups are taking money they don’t need right now, but VCs are offering.  (NYTimes)

What is Yahoo ($YHOO) going to do in the TV game?  (NYTimes)

Some shareholders are urging Walgreens ($WAG) to move overseas.  (FT, 24/7 Wall St.)

The cable overlords are keeping the US in the Internet dark ages.  (FT)

Deal talk

TIAA-CREF to purchase Nuveen Investments.  (BloombergWSJ)

Doing the math on the Nuveen deal.  (Felix Salmon, Term Sheet)

ETFs

What a hedge fund failure looks like.  (All About Alpha)

Smart beta investors need to understand the risks they are taking.  (ETFFT)

How much fund companies pay for ‘shelf space‘ at the big brokers.  (Barron’s)

Economy

Retail sales were strong in March.  (Calculated Risk)

Is the Great Moderation back?  (Gavyn Davies)

The Tesla ($TSLA) kerfuffle is just another example of misplaced regulation.  (James Surowiecki)

Forecasters have a hard time calling turns in the economy.  (voxEU)

Where your tax dollars go.  (Vox)

Earlier on Abnormal Returns

What you may have missed in our Sunday linkfest.  (Abnormal Returns)

Mixed media

In praise of a regular workday.  (FT)

Why you should never read the comments.  (Priceonomics Blog)

The next steps for bring the StockTwits vibe to the physical world.  (Howard Lindzon)

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Date: Sunday, 13 Apr 2014 12:34

Quote of the day

Brett Steenbarger, “True confidence comes, not from believing that you must be right, but from knowing that you can survive and even thrive if you’re dead wrong.”  (TraderFeed)

Chart of the day

Why managed futures are such a tough sell at the moment.  (Attain Capital)

Markets

The tape is not well…”  (Phil Pearlman)

Investors are pouring money back into emerging markets funds.  (Business Insider)

The junk bond market is getting frothy.  (The Reformed Broker)

The correction seems to be a stock market-only affair.  (Bloomberg)

How experienced traders approach a “crazy market.”  (TraderFeed)

Investors are going to focus on earnings this week.  (A Dash of Insight)

Strategy

A sign that the robo-advisors are on to something.  (NYTimes)

Why it’s a good idea to hold momentum stocks alongside value stocks.  (Jason Zweig)

A quick primer on portfolio correlations.  (A Wealth of Common Sense)

Companies

Amazon ($AMZN) is reportedly getting into the smartphone business.  (WSJ)

Why IAC/Interactive ($IACI) values Tinder so highly.  (Wired)

How Google ($GOOG) became a big player in Washington.  (Washington Post)

HFT

Michael Lewis has “hit a nerve” with Flash Boys: A Wall Street Revolt.  (Salon)

How to make HFT “irrelevant.”  (The Atlantic)

The SEC was asleep at the wheel as HFT went mainstream.  (WashingtonPost)

Global

Five reasons Greece was able to (so easily) issue bonds this week.  (Felix Salmon)

Economy

Are speculative bubbles a good thing for the economy?  (Rational Irrationality)

The farmland boom has run out of steam.  (Marketwatch)

A look back at the economic week that was.  (Bonddad Blog, Big Picture)

The economic schedule for the coming week.  (Calculated Risk, Turnkey Analyst)

Earlier on Abnormal Returns

Top clicks this week on the site.  (Abnormal Returns)

Four building blocks for investment success.  (Abnormal Returns)

What you may have missed in our Saturday linkfest.  (Abnormal Returns)

Mixed meida

Why you should bet on people “prematurely.”  (Hunter Walk)

Why you should train your people: a big lesson learned from Ben Horowitz’s The Hard Thing About Hard Things. (Jeff Matthews)

On the importance of leaders who “understand the human condition.”  (Om Malik)

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Date: Sunday, 13 Apr 2014 11:42

Thanks for checking in with us this weekend.  Here are the items our readers clicked most frequently on Abnormal Returns for the week ended Saturday, April 12th, 2014. The description reads as it does in the relevant linkfest:

  1. The markets are undergoing some serious rotation.  (Macro Man)
  2. Notes from the 2014 Value Investing Congress.  (Market Folly)
  3. Why it helps to have someone else buy the really ugly stuff.  (The Reformed Broker)
  4. Great investments often look stupid at the outset.  (Clear Eyes Investing)
  5. The best traders in the world miss trades all the time.  (Andrew Thrasher)
  6. A simple valuation model shows stocks as being extended.  (StockCharts Blog)
  7. On the divergence between credit ETF assets and dealer inventories.  (FT Alphaville)
  8. Investment talent is rare. Why do you think you are going to find it?  (NYTimes)
  9. Five worrisome charts for the global economy.  (Quartz)
  10. Now even the lowly towel is getting disrupted.  (TechCrunch)

Check out what you might have missed on this buy week on the site:

  1. Four building blocks for investment success.  (Abnormal Returns)
  2. Avoiding the personal finance monsters.  (Abnormal Returns)
  3. Recency bias in fund flows.  (Abnormal Returns)

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Date: Saturday, 12 Apr 2014 11:55

The weekend is a great time to catch up on some posts that were either too long or simply didn’t fit in during the week. Hope you enjoy!

Investing

Howard Marks on why great investors need to be willing to be different (and wrong).  (Oaktree Capital)

Why do investors make bad decisions?  (Cass Sunstein)

For better or worse we are story-telling creatures.  (ThinkAdvisor)

ERP

The equity risk premium is seemingly shrinking over time. The question is why?  (SSRN)

On the challenges of managing a lump sum in a low ERP world.  (Aleph Blog)

Personal finance

Personal finance is a design problem that software can help solve.  (Mick Weinstein)

Why financial management fees are likely to “fall like a rock.”  (Morgan Housel)

Research into the how and why of 401(k) loans.  (Knowledge@Wharton)

Quantifying the value financial advisors can add.  (Vanguard)

Finance

Ashby Monk, “How did the financial services industry secure such a dominant position over its customers?”  (Institutional Investor)

A nice discussion with Justin Fox and Michael Covel talking The Myth of the Rational Markets.  (Trendfollowing Podcast)

Profiles

Lunch with T. Boone Pickens.  (Motley Fool)

Can Bill Gross make a comeback?  (Businessweek)

Business

Companies are turning their backs on their HR departments.  (WSJ)

The power of CEOs: to accept reality (or not).  (stratchery)

Where Vegas makes its money on gaming.  (Priceonomics Blog)

The inside story of how the CEO of American Eagle ($AEO) became the ex-CEO.  (Buzzfeed)

Startups

How an angel investor became a fully fledged VC on AngelList.  (Hunter Walk)

Why Silicon Valley is always the next Silicon Valley.  (The Atlantic)

The problem with profitless start-ups.  (NYMag)

These guys are trying to build an Excel for big data.  (Wired)

Transportation

Uber isn’t just a taxi company.  (Wonkblog)

Inside the plan to build a solar-powered plane to fly around the world non-stop.  (Economist)

Why we can’t help changing lanes in heavy traffic.  (Felix Salmon)

Why small airports are in big trouble.  (WSJ)

Health

Sleep is the new frontier in health.  (Time)

Are some of us genetically programmed to enjoy exercise?  (Well)

Going under anesthesia is not a benign procedure.  (Scientific American)

Psychology

Are extroverts really happier than introverts?  (Fast Company)

Data from eHarmony shows a clear pattern: “people are interested in people like themselves.”  (FiveThirtyEight)

Academia

What can you do with a humanities PhD?  (The Atlantic)

Running a philosophy department is pretty darn cheap.  (The Epicurean Dealmaker)

Sports

Inside the world of college football bag men.  (SB Nation)

How being ‘Mr. Irrelevant‘ inspired three football players.  (Sports on Earth)

On the use of running to help combat PTSD.  (Runner’s World via Slugball)

Baseball is becoming an exurban game.  (The Week)

Entertainment

What is late night television going to become after Letterman retires?  (Grantland)

Country is now America’s dominant radio format.  (NYTimes)

Don’t discount the power of Vice.  (Bob Lefsetz)

On the rapid rise and long influence of Tom Lehrer.  (Buzzfeed)

Books

Felix Salmon reviews Flash Boys: A Wall Street Revolt.  (Slate)

On the lost art of idleness, insights from Andrew Smart’s Autopilot: The Art and Science of Doing Nothing.  (Farnam Street)

Earlier on Abnormal Returns

Four building blocks for investment success.  (Abnormal Returns)

What you may have missed in our Friday linkfest.  (Abnormal Returns)

Mixed media

The American craft brewing revolution is 30 years old.  (The Guardian)

Is there a Wonk Bubble?  (Politico, Felix Salmon)

Why early childhood memories fade.  (NPR)

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Date: Friday, 11 Apr 2014 18:49

Earlier this week I had a post up noting that despite the “monsters” of the personal finance industry there is a great amount of solid educational materials out there for investors. The sad reality is that most investors need some remedial education in investing. Howard Gold at Marketwatch is losing faith that investors are capable of anything but playing out tired patterns:

Not only do most individual investors not know what they’re doing; they seem incapable of improving, according to DALBAR, a Boston-based market-research firm that measures and evaluates practices of financial-services firms…

After citing familiar figures on how individual investors substantially underperform the market averages because of terrible market timing, the firm, which has reported these statistics for 20 years, calls out investors’ obtuseness and the miserable failure of the financial-services industry to change their dysfunctional behavior.

This need to chase performance and the often inevitable underperformance is noticeable in this chart from a recent Vanguard report: Vanguard’s Principles for Investment Success.*

VPIS 624x237 Four building blocks for investment success

This chart comes from the first of four sections of the report which are designed to help an investor put together a coherent and comprehensive investment plan:

  • Goals: create clear and appropriate investment goals;
  • Balance: develop a suitable asset allocation using broadly diversified funds;
  • Cost: minimize costs;
  • Discipline: maintain perspective and long-term discipline.

It should be surprising that these four bullet points jibe with what William Bernstein writes about in his new e-book for novice (Millennial) investors If You Can: How Millennials Can Get Rich Slowly. Not surprisingly the Vanguard report costs even less than Bernstein’s new book, $0.00. Investor who read, comprehend and implement a plan congruent with the above four points will be ahead the vast majority of their peers when it comes to investing. It may not be sexy but it is important.

Hat tip: Pragmatic Capitalism

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Date: Friday, 11 Apr 2014 16:48

Quote of the day

Barry Ritholtz, “The human love of narrative is a dangerous cognitive failing that constantly leads investors astray.”  (Bloomberg View)

Chart of the day

XLKXLU 0414 624x372 Friday links:  human love of narrative

Sector rotation visualized.  (StockCharts Blog)

Markets

The IPO market has cooled.  (WSJ)

Risk off behavior illustrated.  (Howard Lindzon, Herb Greenberg)

The market is rewarding quality over momentum.  (SL Advisors also Alliance Bernstein)

Price compression happens.  (Pragmatic Capitalism)

Strategy

Most investors have no idea what they are doing.  (Marketwatch)

An introduction to the momentum ‘anomaly.’  (Capital Spectator)

Why sell-side analyst estimates matter: social anchoring.  (Turnkey Analyst)

Companies

Internet ad spending has now surpassed broadcast television.  (FT)

Whole Foods ($WFM) wants to get into the delivery business.  (Buzzfeed Business)

How the American Airlines ($AAL) bankruptcy played out.  (Fortune)

HFT

On the ‘dead weight costs” of high-frequency trading.  (Floyd Norris)

The outrage over HFT is displaced anger.  (Math Babe via @ritholtz)

A happy ending for Flash Boys: A Wall Street Revolt would be increased regulatory scrutiny of HFT.  (James Stewart)

Fidelity and other buyside firms are exploring starting their own stock trading venue.  (WSJ, FT)

Finance

A review of the JP Morgan ($JPM) 2013 annual report.  (The Brooklyn Investor)

Foreign companies are rushing to issue dollar-denominated bonds.  (FT)

Why investors are pouring money into Greek bonds.  (Dealbook)

ETFs

A deep dive into Build America Bond ETFs.  (ETF)

ETF statistics for March 2014.  (Invest with an Edge)

Alternative funds are tough to benchmark.  (Mutual Fund Wire via Focus on Funds)

Global

Finland is at risk of losing its AAA rating.  (FT)

Why is Japan hiking consumption taxes?  (Business Insider)

Checking in on the Fragile Five after the EM rally.  (Real Time Economics)

Economy

Investors want to see increased capital expenditures.  (Pragmatic Capitalism)

Is the jobs market finally perking up?  (The Atlantic)

Is it time to stop subsidizing solar energy?  (Pando Daily)

Deli meat prices are surging.  (Real Time Economics)

Earlier on Abnormal Returns

What you may have missed in our Thursday linkfest.  (Abnormal Returns)

Analysts

The “perfect” candidates applying for jobs on Wall Street are generally pretty boring.  (The Epicurean Dealmaker)

Hubris is still alive on Wall Street. A review of Kevin Roose’s Young Money: Inside the Hidden World of Wall Street’s Post-Crash Recruits.  (NYTimes)

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Date: Thursday, 10 Apr 2014 16:50

Quote of the day

Howard Marks, “I’m convinced that everything that’s important in investing is counterintuitive, and everything that’s obvious is wrong. Staying with counterintuitive, idiosyncratic positions can be extremely difficult for anyone, especially if they look wrong at first.”  (Oaktree Capital)

Chart of the day

RiskApp 0414 577x420 Thursday links:  idiosyncratic positions

Risk appetites are fading.  (Humble Student of the Markets)

Strategy

The best traders in the world miss trades all the time.  (Andrew Thrasher)

Great investments often look stupid at the outset.  (Clear Eyes Investing)

Organics

Wal-Mart ($WMT) is muscling in on the organic food business.  (Washington Post)

Whole Foods ($WFM) clones are having a hard time of it.  (WSJ)

Technology

Comparing the ZenDesk and Box IPOs.  (TechCrunch)

Why teens drive technology adoption.  (Asymco)

Vintage business models are under assault everywhere.  (Institutional Investor)

Did patent trolls pick on the wrong podcaster in Adam Carolla?  (DailyFinance)

Finance pros

Why finance professionals need to think about their “brand.”  (Brian Lund)

Young bankers are working the same hour just not on weekends.  (Dealbook)

Finance

The SEC is a captured regulator.  (Felix Salmon)

The definition of a MLP is getting stretched these days.  (WSJ)

Michael Lewis’ Flash Boys: A Wall Street Revolt mistakenly emphasizes commercial solutions over regulatory ones.  (Haim Bodek)

Wealthfront has a solution to the single stock diversification problem.  (Michael Santoli)

Funds

Star fund managers still have to perform.  (Quartz)

Two ETFs for the socially responsible crowd.  (ETF)

Global

The fundamental problems facing Europe have not been fixed.  (FT also Bloomberg View)

The misery index is falling around the world.  (MoneyBeat, Dr. Ed’s Blog)

Economy

Weekly initial unemployment claims continue to trend at expansionary levels.  (Calculated Risk, Crossing Wall Street)

Mortgage originations are at a 14-year low.  (Real Time Economics)

Why Thomas Piketty’s Capital in the Twenty-First Century is a game-changer.  (NY Books)

Earlier on Abnormal Returns

What you may have missed in our Wednesday linkfest.  (Abnormal Returns)

Mixed media

Why we shouldn’t encourage kids to drop out of college.  (Recode)

Why people say they go to college: “Being very well off financially.”  (EconLog)

Are internships more valuable than college majors?  (Marginal Revolution)

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Date: Wednesday, 09 Apr 2014 16:49

You can keep up with all of our posts by signing up for our daily e-mail. Thousands of other readers already have. Don’t miss out!

Quote of the day

Cam Hui, “Value works. Growth works. Momentum works. Quality works. They just don’t all work at the same time.”  (Humble Student of the Markets)

Chart of the day

 Wednesday links:  simultaneous success

Rydex traders are historically super-bullish.   (@AndrewThrasher)

Markets

What does weakness in the high profile momentum names mean for the broader market?  (Phil Pearlman)

Investors are cooling on IPOs.  (Dealbook)

The internal correction rolls on.  (Dr. Ed’s Blog)

Trading a bear market in bonds is “hard.”  (FT Alphaville)

Strategy

Why it helps to have someone else buy the really ugly stuff.  (The Reformed Broker)

Market noise is not information.  (Barry Ritholtz)

Cognitive flexibility does not come without emotional flexibility.  (TraderFeed)

Quality as a factor works in the emerging markets as well.  (ETF)

Letters to a Young Analyst is a “a great book for young analysts, and serious amateur stockpickers.” (Aleph Blog)

Companies

Is Google Chromecast already in “jeopardy”?  (Minyanville)

Quora is raising money at a near $1 billion valuation.  (Term Sheet, Recode)

What do we really need by the ‘mobile web‘?  (Daring Fireball)

Lodging

Warren Buffett is pushing shareholders to use Airbnb.  (Dealbreaker)

Google ($GOOG) is muscling in on hotel reservations.  (WSJ)

HFT

An ‘irrational sense of fairness‘ fuels the debate over HFT.  (Michael Santoli)

Why does HFT happen? Because it can.  (Uneasy Money)

Finance

Is financial social media finally coming of age?  (Integrity Research)

Why the SEC is nosing around private equity firms.  (Term Sheet, Pension Pulse)

Hedge funds

Do activist campaigns actually improve company performance?  (Brett Arends)

How age (and size) affect hedge fund performance.  (Focus on Funds)

Payments

On the future of payment processor Square as an independent company.  (Recode)

How Kabbage is making inroads with small businesses.  (TechCrunch)

Funds

A short history of the US fund industry.  (Rekenthaler Report)

Passive investors need not ignore bad managements.  (FT)

WisdomTree Investments ($WETF) is doubling down on Japan.  (InvestmentNews)

Global

Remember when Greece was going to crash the world economy?  (A Dash of Insight)

Parsing ten big risks to the emerging markets.  (beyonbrics)

On the rise of the “secular stagnationist.”  (Pragmatic Capitalism)

Economy

Welcome to the “Downtime Economy.”  (The Atlantic)

The average workweek is too high for a recession.  (Business Insider)

Four reasons why capex is headed higher.  (Sober Look)

Why it is a good sign that fewer Americans are starting their own businesses.  (Washington Post)

The Federal Reserve Board is once again short-handed.  (Mark Thoma)

A cheat sheet to Thomas Piketty’s Capital in the 21st Century.  (Vox)

Earlier on Abnormal Returns

What you may have missed in our Tuesday linkfest.  (Abnormal Returns)

Mixed media

Stanford beats Harvard when it comes to applicants.  (Bloomberg)

NBC is crowdsourcing new comedy talent. (Grantland)

What to do with your electronic gadgets.  (David Pogue)

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Date: Tuesday, 08 Apr 2014 16:31

Quote of the day

Carl Richards, “High-frequency trading isn’t about real life. It’s about Wall Street. It makes for an incredibly entertaining story, but it’s really just a distraction from the often boring work of making smart investing decisions.”  (Bucks Blog)

Chart of the day

Credit 0414 381x420 Tuesday links:  an entertaining distraction

On the divergence between credit ETF assets and dealer inventories.  (FT Alphaville)

Markets

April is a typically a strong month.  (Dynamic Hedge)

Value in the junk bond market is hard to find.  (FT)

Why you should fear stock buybacks.  (Fortune)

Notes from the 2014 Value Investing Congress.  (Market Folly)

Strategy

Joshua Brown, “Remember – if investing or trading feels good, it’s probably being done wrong.”  (The Reformed Broker)

On the dangers of backtest overfitting.  (The Mathematical Investor via TraderFeed)

On the return premium for earnings quality.  (ETF)

Companies

The mobile web is dying on the vine as apps take over.  (Chris Dixon, A VC)

Content producers are throwing money at the YouTube ecosystem.  (Pando Daily)

Is Netflix’s ($NFLX) business model broken?  (SumZero)

Ranking the TV box strategies.  (stratechery)

Twitter ($TWTR) is becoming more and more like Facebook ($FB).  (Quartz)

Finance

Can the Box IPO withstand the pullback in the Nasdaq?  (Quartz)

KKR ($KKR) wants a piece of the technology pie.  (FT)

HFT and the economics of discount brokerage.  (SL Advisors)

SEC lawyer says the SEC was too timid in going after Wall Street post-financial crisis.  (Bloomberg)

Global

The idea behind the Cambria Global Value ETF ($GVAL).  (ETF)

Five worrisome charts for the global economy.  (Quartz)

German stocks have lagged of late.  (MoneyBeat)

Economy

Small business optimism jumped in March.  (Calculated Risk)

Slow business investment isn’t holding back the recovery.  (Pragmatic Capitalism)

Good news: the US economy has a demographic tailwind.  (Business Insider)

Markets at work: the value of a NYC taxi medallions has flattened out.  (Pando Daily)

Earlier on Abnormal Returns

Recency bias in fund flows.  (Abnormal Returns)

What you may have missed in our Monday linkfest.  (Abnormal Returns)

Mixed media

A good description of Bitcoin.  (Business Insider)

Now even the lowly towel is getting disrupted.  (TechCrunch)

The next wave of online shopping is greater personalization.  (Slate, Washington Post)

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Date: Tuesday, 08 Apr 2014 14:32

Yesterday Matt Boesler at Business Insider put up another edition of “The Most Important Charts in the World” which includes a scad of entries from a bunch of Wall Street strategists, bloggers and me. My entry was less about current market or economic conditions and more so highlights the importance of avoiding ‘recency bias.’ The Morningstar helps us highlight some sectors that market participants have shunned and may be worth a second look. So far this year that trade has worked out as gold and commodities have strongly outperformed.

MIC 0414 560x420 Recency bias in fund flows

Source: Business Insider

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Date: Monday, 07 Apr 2014 16:47

Quote of the day

John Authers, “From any given valuation, human nature being what it is, it is always possible for stocks to grow even more wildly cheap or expensive.”  (FT)

Chart of the day

CAD 0414 521x420 Monday links: wildly cheap

Traders have little love for the Canadian dollar.  (SentimenTrader via The Short Side of Long)

Markets

Investors have been lapping up IPOs this year. Wall Street is teeing more up.  (The Reformed Broker)

The shift from new tech to old tech is now a theme.  (Big Picture)

Investors are going for dividends. (WSJ)

The markets are undergoing some serious rotation.  (Macro Man)

Companies

On spending Apple’s ($AAPL) big wad of cash.  (Bits)

A review of postmodern computing.  (Asymco)

Internet TV and Legacy TV are converging.  (The Atlantic)

Finance

Whom can you trust with M&A rumors?  (Quartz)

The SEC is investigating “unjustified fees and expenses” charged by private equity firms.  (Businessweek)

Activist investors are attracting big bucks.  (Marketwatch)

Hedge fund advertising is off to a slow start.  (Dealbook)

HFT

“To what extent are our asset markets characterized by superfluous financial intermediation?”  (Rajiv Sethi)

40% of stock trades happen off exchange.  (Reuters)

A financial transaction tax is not a fix for HFT.  (Daily Ticker)

Tyler Cowen “liked and enjoyed” Flash Boys: A Wall Street Revolt. Just don’t consider it a balanced view of HFT.  (Marginal Revolution)

Michael Lewis’ book is more of an event than a fully realized book.  (Felix Salmon)

Funds

Are non-transparent active ETFs about fees or performance?    (Turnkey Analyst)

On the challenges of using ‘fulcrum fees‘ in mutual funds.  (Marketwatch)

Global

Are the economy (and markets) simply too complex for us to understand?  (Pragmatic Capitalism)

The future of real interest rates.  (Gavyn Davies)

Economy

Good news! Tax witholding revenues are up.  (Bloomberg View)

Mortgage origination has fallen off dramatically in Q1.  (Quartz)

Why the growth in the Fed’s balance sheet should end this year.  (Econbrowser)

US wind power is steadily rising.  (Bloomberg)

Earlier on Abnormal Returns

Avoiding the personal finance monsters.  (Abnormal Returns)

Recency bias in fund flows.  (Business Insider)

What you may have missed in our Sunday linkfest.  (Abnormal Returns)

Books

Recessions rarely come from out of the blue. A look at James Picerno’s Nowcasting The Business Cycle: A Practical Guide For Spotting Business Cycle Peaks Ahead Of The Crowd.  (Capital Spectator)

A book list to build your master’s degree in investing including Success Equation: Untangling Skill and Luck in Business, Sports and Investing by Michael Mauboussin.  (A Wealth of Common Sense)

Book picks from Bill and Melinda Gates including Getting Better: Why Global Development Is Succeeding–And How We Can Improve the World Even More by Charles Kenny.  (Farnam Street)

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Date: Sunday, 06 Apr 2014 21:02

The world is awash in personal finance advice and commentary. There is no shortage of free (and paid) advice out there. While at the same time we are in the midst of what can best be described as a period of gross financial illiteracy.  Part of the problem is that consumers have a difficult time distinguishing between good and bad advice.

The bad advice is often a function of a writer or financial advisor simply talking their book. This is the if you all have is a hammer everything looks like a nail problem. That is why investors need enough education so that in the very least they can tell the difference between self-serving advice and more fair-minded advice. Fortunately this weekend there were a couple of piece of financial advice that are worthy of your time and attention.

The first is short, nearly free e-book from author William Bernstein, If You Can: How Millennials Can Get Rich Slowly, that provides younger investors with a primer on how to get started investing. Bernstein notes five things that all investors need to do including focusing on saving and avoiding the “monsters that populate the financial industry.” Getting started in investing is often one of the biggest hurdles. So there really is no excuse not to spend $1 and the time to read a short booklet to help get you started financially on the right foot.

The other resource worth noting was the most recent episode of Wealthtrack with Consuelo Mack. She interviews two WSJ columnists, Jason Zweig and Jonathan Clements who do a great job of taking an independent look at the world of money and finance. For example Zweig’s latest column highlights the importance of keeping your retirement account beneficiary designations up-to-date. Not exactly hot stock tips but important nevertheless. Clements in his return to the WSJ notes that truth that good financial advice is not particularly time-specific. Good financial advice six months is likely still relevant today.

You can check out their entire discussion below. It is well worth your time.

 Source: Wealthtrack

www.FeedBurner.com) Avoiding the personal finance monsters

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Author: "abnormalreturns" Tags: "Personal Finance"
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