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Joel Greenblatt on passive investing
"The shift to passive management is a powerful trend dominating the investment industry. The liquidity, lack of tracking error, and low costs associated with passive investing are clearly attractive. However, active management is the only way to truly outperform the market as a whole over time. Gotham Asset Management founder and co-CIO Joel Greenblatt shares his thoughts on the debate and provide insights on ways to navigate the changing landscape".
What's an unusual year for the stock market? (Link)
"Very roughly, the stock market gains, on average, about 1/40th of a percent each trading day. In other words, a $40 stock gains about one penny each day. Yet the standard deviation, meaning the average daily swing, is about 1% each day. That means the daily “noise” is about 40 times the true value each day, again, on average. On average, the stock market gains about 6% to 7% each year, and the standard deviation is around 15%. So right now, we’re tracking about one standard deviation below the mean. That’s perfectly normal."
"Big banks calculated that giant rewards would make consumers spend more, earning the banks more interest and boosting their returns. They calculated wrong. Consumers have figured out how to game the system, spending just enough to earn generous sign-up bonuses—then abandoning the cards in a drawer. Others pay their bills in full and avoid interest charges and late fees. This has pressured credit card profitability for banks. Once the crown jewel of their lending portfolios, credit cards are estimated to only deliver a return on assets of 3% in 2019, down from nearly 5% in 2014."