Dear friends,

Spring is a time when we celebrate the small and uncertain signs of hope. Weighed down by the exhaustion of war and politics, pandemic and winter, we look happily at the first crocus to spring which shoulders its way through the autumnal leaf mold. We’re reluctant to invest too much in it, knowing that winter has not yet suffered its final defeat. (Here, anyway. Last Wednesday’s upper 60s was followed by Thursday’s measurable snow.) Continue reading →

Step One: Find the right recipe.

Indexes are recipes. By that, I mean they’re really precise sets of instructions that direct you in what ingredients, in what amounts, need to be treated, in what way to achieve a particular, predictable outcome. In investing, as in cooking, recipes are relatively recent inventions. Once upon a time, both activities were dominated by the notion that “experienced old guys do their thing, the rest of us watch in awe.”

Take luce or tench or fresh haddock, & boil them & fry them in olive oil. And then take vinegar and the third part sugar & onions minced small, & boil all together, & mace & cloves & cubeb. And lay the fish in dishes & pour the sauce above & serve it forth. Continue reading →

When I came across a quote by Peter Lynch on how passive fund investors were making a mistake, I had two choices: to sweep his comments under the rug or evaluate the validity of them. In the article below, we will look at:

• • Lynch’s argument
  • My researched reasons for preferring passive investing.
  • The role of confirmation bias and how it can hurt or help investors.
  • The results of a careful analysis of the performance of Mr. Lynch’s preferred funds
  • Finally, a few conclusions.

The takeaway: Outperforming MFs do exist but their taxable distributions are a larger drag than expected.

We’re inviting you to Continue reading →

Devesh and I have an ongoing conversation about the value of active managers. He thoughtfully runs through the arguments – from consistency to tax efficiency – that led him to conclude, “not much value there.” Cool and sensible.

If you want to join the conversation but start with somewhat greater sympathy for the role of active managers, you might consider five arguments. Continue reading →

I have expressed my intention to retire in the next few months with the specter of stagflation looming. I have studied the 1960s to 1970s stagflation period since I lived through these times and know that they are secular. Federal Reserve Chairman Jerome Powell recently described the potential for inflation to last for an extended period of time:

…the risk is rising that an extended period of high inflation could push longer-term expectations uncomfortably higher, which underscores the need for the Committee to move expeditiously as I have described. (Powell Says ‘Inflation Is Much Too High’ And The Fed Will Take ‘Necessary Steps’ To Address,” CNBC, 3/21/2022) Continue reading →