Feb 8, 2009 The
IFA Challenge - IFA issues a challenge to all individual
or professional investors. Submit monthly statements covering the
period from Jan 1, 2000 (when IFA started) to Jan 31, 2009 and
see if the risk and return of the portfolio you managed is more
optimal than any IFA Index Portfolios. We have yet to see one.
Nov. 19, 2008 - When
will the buyers be right again? About 10 Billions shares
are bought and sold every day around the world. At each new price,
buyers think it is a good time to buy and sellers disagree. Since
prices are set at fair
market value, there is a 50/50 chance that future prices
will be higher or lower than the approximate 0.03%/day
or 10%/year expected return for equities. Here are some interesting
charts about past market declines
(source: dshort.com) - Here are some more interesting charts
showing recoveries
since 1950. See ifacalc.com data
here.
Nov. 18, 2008 -
Climbing the 12 Steps is not easy. See the new 48"x72" masterpiece
painting by Lala Ragimov: "Journey
to Tradeless Nirvana". This painting will be the centerpiece
of the lobby in IFA's new 1st floor, 8,200 sq. ft. office.
"It
is very tempting to try to time the market. But neither individuals
nor investment professionals can consistently time the market." - Keep
Your Money in the Market, WSJ 10/13/08
Is It Different This Time? If
you compare the 1907 crisis that struck U.S. and European financial
institutions with 2008’s economic emergencies, you will discover
striking similarities. Each time capitalism was
resilient. - The Panic of 1907, Lessons Learned From the Market's Perfect
Storm - Abstract from getAbstract - buy from amazon -
Also see Manias,
Panics and Crashes.
Oct 26, 2008Advice
IFA agrees with from Larry Swedroe: " What we do know
is that trying to time the market is a loser's game. And most of
the time investors simply get it wrong, selling AFTER market drops
and only buying well after it recovers. That results in the dollar
weighted returns they earn being well below the market's time weighted
returns." - My
Take on This Market, by Larry Swedroe - 10/26/08
Oct 17, 2008From
Warren Buffett: "Equities will almost certainly outperform cash over
the next decade, probably by a substantial degree. .. "A simple rule dictates
my buying: Be fearful when others are greedy, and be greedy when others are
fearful." ..."What is likely, however, is that the market will move
higher, perhaps substantially so, well before either sentiment or the economy
turns up. So if you wait for the robins, spring will be over." - Buy
American, I Am. NYT.com
Oct 16, 2008 We are advising all clients to consider two important
portfolio maintenance topics, tax
loss harvesting and rebalancing.
Oct 10, 2008Talk
to Chuck Schwab. "During times of uncertainty, some investors
make the mistake of trying to time the market by simply stepping
out. History suggests that asset allocation, diversification and
periodic rebalancing are the tools that investors should use to weather
market downturns."
Oct 9, 2008Concerned
About the Markets? Read "The Four Pillars of Investing" by
William Bernstein, Chapter 6, titled Market Bottoms: The Agony and
the Opportunity. It’s only 10 pages and it is worth the read.
In his section titled How to Handle the Panic Bernstein says, "What
separates the professional from the amateur are two things: first,
the knowledge that brutal bear markets are a fact of life and that
there is no way to avoid their effects; and second, that when times
get tough, the former stays the course; the latter abandons the blueprints,
or, more often than not, has no blueprints at all."
Oct 8, 2008“Some
investments do have higher expected returns than others. Which ones? Well,
by and large they’re the ones that will do the worst in bad
times.” - William F. Sharpe Nobel Laureate in Economics,
1990, Stanford Professor of Economics, as quoted in Money Magazine’s
July, 2007 issue
Oct 3, 2008A
Classic from 1998 (nothing has changed): MARKET
TIMING: A PERILOUS PLOY -- "Why do timers seem so inept? The
stock market makes dramatic moves in relatively short periods, and
those who miss them effectively miss a lot of the gains."
Oct 3, 2008 "The
only people who get hurt on a roller
coaster are the ones who try to get off while it’s rolling!" Submitted
by Daren.
Sept 25, 2008 We
are pleased to announce that financial economist and 1990 Nobel
Laureate Harry Markowitz has joined the IFA Advisory Board. Dr.
Markowitz is also the recipient of the 1989 John
von Neumann Theory Prize. He is best known as the father of Modern
Portfolio Theory. We are pleased to have this finance
legend join IFA's team.
Sept 15, 2008:
From Wikipedia: "The
notion of creative destruction is found in the writings
of Mikhail Bakunin, Friedrich Nietzsche
and in Werner Sombart's Krieg und Kapitalismus (War and Capitalism)
(1913), where he wrote: "again out of destruction a new spirit of
creativity arises". The economist Joseph Schumpeter popularized
and used the term to describe the process of transformation that accompanies
radical innovation. In Schumpeter's vision of capitalism, innovative
entry by entrepreneurs was the force that sustained long-term economic
growth, even as it destroyed the value of established companies that
enjoyed some degree of monopoly power." Sept 12, 2008: from
WSJ
Lehman's Fate
"And Lehman took more risks than most. Like Bear, it was leveraged
at more than 30 to 1, which made for bigger profits in the mania of 2005-2006
but also greater losses when the music stopped. Lehman also went all
in with mortgage products, even getting deeper into Alt-A
loan bets as late as this year. Its CEO, Richard Fuld, appears to
have managed the crisis with less skill and dispatch than has, for example,
John Thain at Merrill."
Aug
19, 2008: “It's like waking
up in a world where 91 million Americans
drive Ford Pintos while wearing flammable
pajamas. Why, in gleeful
defiance of the data, do more people
keep buying [actively managed] mutual
funds every year?
Read Dan and Chip Heath’s article: Made to Stick: The Myth of
Mutual Funds
July 26, 2008:
Are stock prices accurate? If they are, there is no reason
to trade, unless you need the money. Definition
of Fair Market Value: The price that a given property
or asset would fetch in the marketplace, subject to
the following conditions:
1. Prospective buyers and sellers are reasonably knowledgeable
about the asset; they are behaving in their own best interests and
are free of undue pressure to trade. 2. A reasonable time
period is given for the transaction to be completed. Given
these conditions, an asset's fair market value should
represent an accurate valuation or assessment of its worth.
Source: investopedia.com July 14, 2008:
The Prescient Are Few -- 99.4% of Managers
deemed to be UNSKILLED in stock picking. Mark
Hulbert, NY Times article, “The Prescient Are Few”,
7/13/08 (see
the full academic study)
July 21, 2008:
This is IFA's YTD estimate of commissions and bid ask spreads paid by buyers
and sellers to brokerage firms, NYSE traders and other silent partners as the
result of the trading on just the NYSE and NASDAQ. That's about $645
Million per day or about 5 cents/share for buyers and sellers! Now
you may appreciate why we hear constant "BREAKING NEWS" on the daily
infomercials for the trading industry that lures us into trading. Please resist
the urge! Don't be a bettor, be an investor. Invest right and sit tight.
July 8, 2008: August 13, 1979 Issue of BusinessWeek “Dow
Jones Industrial Average: 875.25. The U.S. economy probably
has to regard the death of equities as a near-permanent
condition.”
June 25,
2008
What do academics say about the relationship between economic conditions
and expected investment returns? - 1) Expected returns on bonds and stocks
are higher when economic conditions are weak and lower when economic
conditions are strong.
- Fama and French, "Business Conditions
and Expected Returns on Stocks and Bonds," (November 1989), Journal
of Financial Economics
The
Million-Dollar Waitress A
woman who has never bought a stock in her life has bested the financial
pros in CNBC's stock-picking contest. Like a monkey throwing darts,
she was the lucky winner. See
video.
Primal
Picks: "In the four years since Mr. Monk has chaired and inspired
this contest, his stocks have posted annual returns of 37 percent,
36 percent, 3 percent and, in 2006, 36 percent, beating the major indexes
every time. It's proof that you don't have to be an insider CEO, an
insider hedge-fund manager or a loudmouth on CNBC to make money in
the market."
News and Articles about
IFA, DFA, and Index Funds:
IFA's
concern with iShares: "To generate more revenue, Barclays
has worked in recent years to build up its actively managed funds
like hedge funds. About 21% of BGI's assets are actively managed,
some of in hedge funds. A recent report by Sanford C. Bernstein & Co.
says BGI has been successful in subtly shifting
to the higher fee, actively managed funds." WSJ
08/13/07
William
F. Sharpe was interview by Jason Zweig in the June 2007 issue of Money
Magazine, p. 107 -
Sharpe said, "Some investments do have higher expected returns
than others. Which ones? Well, by and large they're the ones that will
do the worst in bad times." and "What if your advisor talks
only about returns, not risk? ...It's his job to take risk into account
by telling you the range of possible outcomes you face. If he won't,
go to a new planner, someone who will get real." Warren
Buffett says, "Just Index!" Hear
the CNBC Buffett interview HERE.
"Wall
Street's most optimistic strategist on US stocks, Ed Keon of
Prudential Group in New York, just became one of the most pessimistic."Economist,
Bloomberg News, "Strategist Turns More Bearish, Advises
Clients to Cut Stocks," Los Angeles Times, February
7, 2006. [More
Bad Predictions for 2006]
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The
New IFA Canadian Joint Venture 
William
F. Sharpe was interview by Jason Zweig in the June 2007 issue of 
