Disqus - Latest Comments for tom_brakke

Re: Investors Pay for Hedge-Fund Illusions

tom_brakke — Thu, 14 Aug 2014 09:09:42 -0000

The Sharpe ratio is wildly misused by the investment community. The "Sharpe edifice": http://researchpuzzle.com/b...

Re: $20 billion MainStay Marketfield fund struggles to stay relevant

tom_brakke — Thu, 12 Jun 2014 19:56:59 -0000

Here's a posting from late April about the fund, which graphically shows the performance and asset trends: http://rp-pix.com/qu. "It is likely that past performance won’t be very helpful in assessing future prospects, given the assets then and the assets now. Unfortunately, many buyers and gatekeepers will proceed as if it is."

Re: Dueling degrees: Weighing what's best for Wall St.

tom_brakke — Sun, 23 Feb 2014 12:29:46 -0000

One of my "letters to a young analyst" is about earning credentials, especially as to whether to get an MBA or a CFA: http://researchpuzzle.com/b...

Re: The Five Stages Of Growth In A Financial Planning Firm

tom_brakke — Mon, 10 Feb 2014 09:16:33 -0000

If you think about that growth curve, the nature of investment decision making changes as an organization is being built. Perhaps the biggest challenges occur before the capacity wall is hit, because few single practitioners have the combination of time and skill to be able to deal with the range of investment issues that they confront. But, even as they grow big and profitable, advisory firms often neglect building a proper investment infrastructure. One aspect of the maturation process is embracing that need and creating a true investment organization as well as an advisory one.

Re: Family Blind Spots

tom_brakke — Wed, 18 Dec 2013 18:07:34 -0000

This is a great piece. I tacked onto it with a posting of my own: http://rp-pieces.com/post/7....
The importance of organizational dynamics in the investment world is too often overlooked.

Re: Confessions of an Institutional Investor

tom_brakke — Thu, 08 Aug 2013 10:14:41 -0000

In many ways, this gets at the big issue of the day (something par for the course for TRB).

A couple of my recent postings that dovetail with it:

On the "useless extraction" that people see in the investment management world of today:
http://researchpuzzle.com/b...

A look at Bob Maynard's questioning of the endowment model: http://researchpuzzle.com/b...

Re: Just How Useless Is the Asset-Management Industry?

tom_brakke — Wed, 05 Jun 2013 18:33:11 -0000

I am an investment professional. As a follow-on to this piece, I did a posting on the reputation of the industry for "useless extraction" and what needs to happen for that to change.

Here it is: http://researchpuzzle.com/b...

Re: Scott Minerd: Here’s What Happens When Rates Rise

tom_brakke — Thu, 07 Mar 2013 17:30:56 -0000

Here's what I call "the big question" (written in November): http://rp-pix.com/mj
Not just what happens with bonds or with all of the yield vehicles that people are buying that they don't think of as yield vehicles, but the stuff we haven't thought about that will come under pressure when this all is finally undone. There always is something that shows up at the skunk party that you didn't expect to be there.
What will it be this time?

Re: Should Secular Market Cycles Matter to You?

tom_brakke — Wed, 12 Dec 2012 17:45:31 -0000

I'm with Merkel that it's always easier in hindsight, but I do think valuation should inform allocations on an ongoing basis. (Ferri says to do it only in certain situations, when you otherwise have an allocation change upcoming within a few years.)
The notion that you should have held your equity allocation at a normal level in 1999 makes no sense to me, just as holding your fixed income allocation at a normal level does not now. Valuation measures act as an odds board; why would you maintain the same approach when the odds are getting less in your favor (or more in your favor)?

The hardest part is the waiting, but (as studies show) today's valuations form the foundation of returns for the upcoming years. Whether investing with indexes, as Ferri would do, or via active management, as others would do, adjusting your approach based upon a standard of value makes sense.

Re: out of office reply | The Reformed Broker

tom_brakke — Wed, 10 Oct 2012 08:50:15 -0000

To #3, here's today's pix on hedge funds: http://rp-pix.com/mb

Re: Sell-Side Research: Like Trees Falling in the Forest | The Reformed Broker

tom_brakke — Sun, 20 May 2012 16:24:36 -0000

I think the brokers have been and will be in search of a business model, in general and when it comes to research.

There are regulatory issues that come into play here and I also think that brokers should be careful with preferential access to research information, issues I addressed in 2009 regarding the Goldman huddles. I did say then that they were being "long-term stupid" in that regard and have proven to be in other ways since then.

http://researchpuzzle.com/b...

Re: A surfeit of surveys Abnormal Returns

tom_brakke — Thu, 09 Dec 2010 12:37:38 -0000

I have done a number of surveys over the years using students and investment groups of one kind or another, in which the respondent has to answer with his or her own opinions, plus predict how the group overall will come out.

It's an interesting way of doing it, because you are forced to think about where you are versus where everyone else is, and you can really explore how expectations are formed using the results. It's a great tool, but an interactive and impressionistic one, not a scientific one.

I'd be glad to share some examples with anyone trying to work with a group on investment decision making.

Re: Kass: In Bernanke We Trust? - TheStreet

tom_brakke — Mon, 06 Dec 2010 14:35:57 -0000

While Bernanke doesn't receive the adulation of his predecessor, it's a good time to remember how in him we trusted.

Re: More adventures in Delhi

tom_brakke — Tue, 03 Aug 2010 09:04:10 -0000

You went to India to see "Inception"?

Enjoying your posts; glad to hear you are having a good trip.

tom

Re: Unstretch that screen

tom_brakke — Thu, 24 Jun 2010 09:36:50 -0000

I wrote about this awhile ago in this posting aimed at investment decision makers (but applicable to anyone):

http://researchpuzzle.com/b...

Re: Why They All Got The BP Call Wrong The Reformed Broker

tom_brakke — Sat, 19 Jun 2010 08:17:16 -0000

Every investment strategy has its strengths and weaknesses, and fundamental analysis is fair game for critical examination, just as is any other approach.

Technical analysis, quantitative analysis, even high-speed trading algorithms. They all can go aground based upon false precision, an overconfidence in methods, and a reluctance to see other dimensions of the market ecosystem. Some techniques work better in one kind of market than another, or for one type of security or another. There really are no absolutes.

You are right on the mark to bring up the difference between a stock and a company, yet evaluating a stock in absence of any fundamental knowledge leads to its own series of errors, just as does the reverse. Let’s leave theology aside and look for practicality.

In fact, “as practiced” is a phrase that ought to appear in your attack on fundamental analysis, and there I find myself in agreement with much of what you said. I have had many discussions over the years about DCF models and how they are used. If you think that you are finding an answer by using one, you’re fooling yourself. If you look at it as “an organized way to look at the world,” to use someone else’s phrase, then it can be a vehicle for insight into the economic possibilities of a firm, for aid in shaping your decision making process and your implementation plan in helpful ways.

The BP situation is just an exaggeration of one of the big problems with fundamental analysis, which it shares, by the way, with other approaches. Instead of acknowledging doubt and approaching the investment problem (OK, research puzzle) in a probabilistic fashion, we expect analysts of all stripes to be definitive in their views. I’ll spare you examples of blather from some technical types, who are just as bad as Street analysts in that regard (and probably have more followers these days). The Street analysts are in a well-defined game in which they are expected to do certain things, not among them to focus on risk management. I’ve written quite a bit about the game as practiced; you’ll get no defense of it from me.

But the worth of fundamental analysis does not deserve to be judged on that basis. It is used to good effect by many investors, just as others find success in different investment camps. But give me a mix that acknowledges how each can add value; that seems like a good starting place.

Re: The Real Greatest Trade Ever: Minuet Buys Manhattan 384 Years Ago Today The Reformed Broker

tom_brakke — Mon, 24 May 2010 12:22:13 -0000

Remarkably similar to what happens to asset managers who make great decisions in advance of a trend change, only to be fired by impatient clients before the payoff arrives.

Re: Insane Store Sales The Reformed Broker

tom_brakke — Thu, 08 Apr 2010 09:13:31 -0000

Breathless?

I trashed the office TV (figuratively, not literally), so I didn't see it, but analysts that are other than analytical always make me nervous.

Re: O-Regional Gangsters The Reformed Broker

tom_brakke — Sun, 24 Jan 2010 10:56:17 -0000

Relevant chart of KRE versus XLF (almost no overlap between): http://bit.ly/4EhH8X

Re: A stealth decade-long bull market Abnormal Returns

tom_brakke — Thu, 17 Dec 2009 11:55:33 -0000

Prime land in northwest Iowa is going for several thousand dollars an acre more than the averages cited here. In the stock market, they call it "priced to perfection." What could go wrong?

Re: Investing by the seat of their pants Abnormal Returns

tom_brakke — Wed, 11 Nov 2009 15:36:50 -0000

The hardest thing about a "winning" investment process is that it often does not last. Certain principles tend to work, but their effectiveness waxes and wanes. An approach must continually be questioned and scrutinized and sometimes changed. (One thinks of Buffett's move to higher-valuation brand companies twenty years ago, which was out of step with his previous philosophy.)

Unfortunately, a winning streak, especially a long one, tends to cause people to lock down and think that they have found the answer. The best anyone should hope for is continuing to think about the question in demanding and forward-looking ways. That requires a broad look at how investment markets are changing, not a narrow focus on a strategy.

Re: A standard forms approach to Jones v. Harris

tom_brakke — Mon, 02 Nov 2009 09:27:20 -0000

When I was contacted once by a mutual fund complex to see if I had an interest in being on its board of directors, I was contacted by the investment management company, not by the mutual funds group. In practice, more often than not the adviser effectively calls the shots, not the other way around, as envisioned by the law.

Re: Social Science vs Physical Science

tom_brakke — Fri, 23 Oct 2009 13:56:51 -0000

I think a middle ground makes sense, as I wrote in a posting about being all gaussied up.

Re: Successful Market Timing

tom_brakke — Fri, 16 Oct 2009 16:19:49 -0000

Great post. One of the best market timing signals I have ever seen was a simple 18-month moving average of a bond yield index. It was amazing how well it gave signals for the fixed income market. The guy I worked for who used it had great returns, even though being in a big shop he had to deal with lots of pressures when it was a bit out of sync.

Re: Pick 1 Stock For 5 Years: Results

tom_brakke — Fri, 16 Oct 2009 15:58:36 -0000

You are so right, but it's hard to have the rest of them just meander. A stumble by a crowd favorite or two can really hurt, since earnings and valuation can go against you at the same time.