Here’s something I’d never seen done before – an analysis of Warren Buffett’s risk adjusted returns. Insider Monkey has run an interesting analysis on the Buffett portfolio calculating his alpha since 1977. The conclusion – as Buffett has aged and grown in size his returns have become substantially worse on a risk adjusted basis:
“Warren Buffett had a phenomenal annual alpha of 19% between 1956 and 1968. Our current analysis shows that his alpha was more than 30% between 1977 and 1981. During the 80′s and 90′s, his annual alpha declined but was still better than 12%. For the ten years leading to mid-2003, his annual alpha stayed around 12% per year. Since then, it started a steep decline; by the end of 2004 it was (still a respectable) 6% per year. Between 2005 and 2008 Buffett’s alpha averaged only 3% per year. Finally, in the ten years ending in 2009, it went virtually to zero. (For regression results and Buffett’s style drift, visit Insider Monkey)”
Is Warren Buffett another casualty of the tough investment environment? Looks like we can chalk this up under the “many myths of Warren Buffett” file.
Fundamental analysis is no longer relevant as Alpha has just done one more revolution in its grave: today 1 Year Implied Correlation hit a new all time record, at 79.84 (out of 100 maximum possible), meaning the inverse of the metric, stock dispersion, or the measurement of the variation in individual stock prices, or broadly speaking alpha, is now completely irrelevant. As we have been saying for a year, "investing" is now all about a levered beta bet, using the maximum possible leverage, and sacrifices to Moloch, that the market does not turn before price targets are hit. At this rate we anticipate the next broad or acute selloff will take us to 100 in implied correlation, at which point there will be no benefit whatsoever to trading individual stocks: the entire market will be one big ETF.
As a clarification: the data comes from the CBOE S&P 500 Implied Correlation Index is a widely disseminated, market-based estimate of the average correlation of the stocks that comprise the S&P 500 Index. Using SPX options prices, together with the prices of options on the 50 largest stocks in the SPX. Tied to January 2011 Option Maturities.
Japan’s Prime Minister Shinzo Abe has had an extremely busy past few weeks. After increasing the sales tax rate earlier this year which caused the GDP to contract by more than 7%, the Bank of Japan announced earlier this month it would step up its game and print money like never before. In a previous column we explained that Japan would print new money at twice the rate the USA was printing cash at the height of its quantitative easing program.
Even though Abe’s economic policy (called Abenomics) seemed to be working in the first phase of the implementation, the progress has stalled and Japan is now ...
The Final University of Michigan Consumer Sentiment for November came in at 88.8, a bit off the 89.4 preliminary reading but up from from the October Final of 86.9. As finaly readings go, this is a post-recession high and the highest level since July 2007, over seven years ago. Today's number came in below the Investing.com forecast of 90.2.
See the chart below for a long-term perspective on this widely watched indicator. I've highlighted recessions and included real GDP to help evaluate the correlation between the Michigan Consumer Sentiment Index and the broader economy.
Nimble Storage Inc (NYSE: NMBL) reported its third quarter results on Tuesday after market close. The company reported a loss of $0.15 per share, slightly better than the $0.16 per share loss analysts were expecting, while revenue of $59.10 million was higher than the $57.75 million analysts were expecting.
In a note to clients on Wednesday, Katy Huberty of Morgan Stanley noted that the company “continues to disrupt the storage market” as new customer adoption doubled year-over-year, increasing its installed base to more than 4,300 customers.
The analyst also notes that international investments are “beginning to pay off” as revenue grew 135 percent from a year ago, contributing 20 percent of total revenue in the quarter.
However, Huberty singles out the addition of the Fibre Channel (FC) protocol. The analyst states that the company has now ex...
With warmer weather arriving to melt the early snowfall across much of the country, investors seem to be catching a severe case of holiday fever and positioning themselves for the seasonally bullish time of the year. And to give an added boost, both Europe and Asia provided more fuel for the bull’s fire last week with stimulus announcements, particularly China’s interest rate cut. Yes, all systems are go for U.S. equities as there really is no other game in town. But nothing goes up in a straight line, not even during the holidays, so a near-term market pullback would be a healthy way to prevent a steeper correction in January.
In this weekly update, I give my view of the current market environment, offer a technical analysis of the S&P 500 chart, review our weekly fundamentals-based Sector...
By Rod Garratt and Rosa Hayes - Liberty Street Economics, Federal Reserve Bank of New York
In June 2014, the mining pool Ghash.IO briefly controlled more than half of all mining power in the Bitcoin network, awakening fears that it might attempt to manipulate the blockchain, the public record of all Bitcoin transactions. Alarming headlines splattered the blogosphere. But should members of the Bitcoin community be worried?
Miners are members of the Bitcoin community who engage in a proce...
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This post is for all our live virtual trade ideas and daily comments. Please click on "comments" below to follow our live discussion. All of our current trades are listed in the spreadsheet below, with entry price (1/2 in and All in), and exit prices (1/3 out, 2/3 out, and All out).
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I officially bought 250 shares of EZCH at $18.76 and sold 300 shares of IGT at $17.09 in Market Shadows' Virtual Portfolio yesterday (Fri. 11-21).
Click here for Thursday's post where I was thinking about buying EZCH. After further reading, I decided to add it to the virtual portfolio and to sell IGT and several other stocks, which we'll be saying goodbye to next week.
A four-year low for the spot price of gold has had a devastating impact on Yamana Gold (Ticker: AUY), with shares in the name down at the lowest price in six years. Some option traders were especially keen to sell premium and appear to see few signs of a lasting rebound within the next five months. The price of gold suffered again Wednesday as the dollar strengthened and stock prices advanced. The post price of gold fell to $1145 adding further pain to share prices of gold miners. Shares in Yamana Gold tumbled to $3.62 and the lowest price since 2008 as call option sellers used the April expiration contract to write premium at the $5.00 strike. That strike is now 38% above the price of the stock. Premium writers took in around 16-cents per contract o...
Reminder: Pharmboy is available to chat with Members, comments are found below each post.
Well PSW Subscribers....I am still here, barely. From my last post a few months ago to now, nothing has changed much, but there are a few bargins out there that as investors, should be put on the watch list (again) and if so desired....buy a small amount.
First, the media is on a tear against biotechs/pharma, ripping companies for their drug prices. Gilead's HepC drug, Sovaldi, is priced at $84K for the 12-week treatment. Pundits were screaming bloody murder that it was a total rip off, but when one investigates the other drugs out there, and the consequences of not taking Sovaldi vs. another drug combinations, then things become clearer. For instance, Olysio (JNJ) is about $66,000 for a 12-week treatment, but is approved for fewer types of patients AND...
This is a non-trading topic, but I wanted to post it during trading hours so as many eyes can see it as possible. Feel free to contact me directly at email@example.com with any questions.
Last fall there was some discussion on the PSW board regarding setting up a YouCaring donation page for a PSW member, Shadowfax. Since then, we have been looking into ways to help get him additional medical services and to pay down his medical debts. After following those leads, we are ready to move ahead with the YouCaring site. (Link is posted below.) Any help you can give will be greatly appreciated; not only to help aid in his medical bill debt, but to also show what a great community this group is.
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