In the investment world, there’s no shortage of data. But how useful is it? To help get to an answer, let’s consider these four questions: When the economy is strong, is that good for stocks? The simple answer is yes. According to textbook finance, the value of any company should represent the [...]
What we’ve learned
This year saw the passing of two giants of the investment world. The first was Harry Markowitz, who in the 1950s developed a concept now known as Modern Portfolio Theory. Markowitz’s key insight was one that today we view as so fundamental that it’s easy to take it for granted: Markowitz was the [...]
Stein’s Law
A favorite concept in economics is Stein’s law. It states that, “if something cannot go on forever, it will stop.” It’s named for Herbert Stein, an economist who was influential in the 1970s and served as chair of the president’s Council of Economic Advisors. Stein first made this comment when he [...]
Which way the wind is blowing
This winter, do you expect it to be warmer in Minneapolis or in Miami? This isn’t meant to be a trick question. We’d probably all agree it will be warmer in Miami. But what if I asked you to predict the precise temperature in either city on January 1st. This is a much more difficult question. In [...]
Measure for measure
As the old saying goes, there are lies, damned lies and statistics. And then there is investment performance, which may deserve a category of its own. This topic came to mind recently when I saw a press release heralding the accomplishments of a retired non-profit executive. Among the claims: [...]
