100 Level

Occam’s Razor and Investing

Establish Basic Principles of Investing What does Occam’s Razor* principle have to do with investing? Furthermore, what is Occam’s Razor?  The principle states that “Entities should not be multiplied unnecessarily.” The principle is attributed to the 14th century Franciscan friar, William of Ockham.  Isaac Newton stated the Occam’s Razor another way with this rule. “We are to admit no more causes … [Read More...]

Stock Picking: Why It Is So Difficult To Be Successful

Shortly before the editor to the old blog collapsed, I posted this entry and I want readers to be sure to see it. Are you tracking the performance of your portfolio and measuring the Internal Rate of Return (IRR) with respect to the IRR of an appropriate benchmark? If not, why not? Investors not engaged in this level of measurement will likely find this discussion of little use. Shall we say, … [Read More...]

300 Level

X-Ray of New Normal Portfolio

From time to time I will run a QPP analysis on a current version of the "New Normal" portfolio, a defensive set of stocks and ETFs.  Below are the screen shots showing the X-Ray analysis for the NN portfolio as determined by Morningstar.  Any comments on this analysis and does this x-ray analysis show this to be a defensive portfolio?  If so, in what ways? … [Read More...]

Are Optimizers Anything But Error Maximizers?

Mean-Variance Optimization "Mean-variance optimization presents an illusion of precision that is seductive but generally fallacious and even dangerous."  So writes Richard O. Michaud in his book, Efficient Asset Management: A Practical Guide to Stock Portfolio Optimization and Asset Allocation.  Harold R. Evensky provides this MVO warning.  "In spite of my strong defense of Markowitz's … [Read More...]

200 Level

The Simple Six Swensen Portfolio

Amid all the discussion of various technical indicators resides a simple six-asset portfolio advocated by David Swensen.  The six asset classes are: U.S. Equities, Developed International Markets, Emerging Markets, REITs, Treasury Bonds, and Treasury Inflation-Protected Securities.  That's it.  Six ETFs will provide global coverage. The following slide shows the Quantext … [Read More...]

Active vs. Passive Investing: Part 9

Section Nine of the Active vs. Passive article focuses on the chance argument. "Indexers dismiss individuals' long-run record of outperformance with the argument that "It doesn't count because it was only to be expected from the random variable outcomes of cumulative 50/50 yearly probabilities of beating the index (i.e. luck not talent)". The intuitive error in that logic … [Read More...]

400 Level

Reducing Risk Model Review: Where Are The ETFs Positioned Mid-Morning Friday June 22nd?

Market action this week moved a number of ETFs into the sell zone.  REITs (VNQ and RWX) and emerging markets sovereign debt (PCY) are still priced above their 195-Day Exponential Moving Averages (EMAs). The following material is not available for publication elsewhere on the Internet. … [Read More...]

Preparing for Euclid Update

This pre-update is something I've not done before as I did not have some of these tools just a few weeks ago.  This blog entry takes a look at the Efficient Frontier of the Euclid and compares it with the S&P 500.  In addition, I look at the Rankings to see if some available cash might be used to bolster shares in ETFs that are expected to perform well over the next few months. Efficient … [Read More...]