George Morgan's Blog, page 11

The Yellen Fed

With the exception of the swearing in ceremony, Janet Yellen is now in charge of the Fed. What is the potential impact of a Yellen Fed on the market and investors? There can be no doubt that she will be at least as, if not more so aggressive, on the use monetary policy to guide the economy than her predecessor. The Feds announced pullback in their bond buying policy, unless accelerated, is of minor importance. What is more important is the Fed’s role as a regulator of our financial markets an...

Humans On Stock Exchanges

Prior to the mid-1970s, all the trading activity on the U.S. stock exchanges involved humans, called specialists, who took and completed all the trading orders. But, over the decades, human participation has dwindled as larger and faster computers have come to dominate the markets.  However, in 2013, for the first time in 19 years, the New York Stock Exchange landed more initial public offerings of technology companies than did the Nasdaq Stock Market. Officials of the exchange attribute...

Bernanke's Last Words

On Friday, Ben Bernanke gave his last major address as Chairman of the Federal Reserve. He will officially leave office on January 31, at which time Janet Yellen will take over the reins. His remarks presented a cautiously optimistic outlook for economic growth in both U.S. and globally. In support of the Feds December’s decision to pull block on their bond buying program, Mr. Bernanke stated that the estimated growth of the US economy for 2013 is 2.01% and that he expected to that figure to...

More On Malkiel

One of the most interesting discussions in “A Random Walk Down Wall Street” concerns the ability of investors and investment professionals to predict the future earnings of a company and by discounting those earnings to the present, place a current value on its stock. To help put this in context, Malkiel writes about how stock analysts project a company’s earnings for the current quarter using real sales and cost figures. What is interesting about their projections is that all the investors h...

Random Walking Again

Over the holidays I had some time to thumb through the Burton Malkeil’s classic, “A Random Walk Down Wall Street.” Every time I do, I come up with dozens of aha moment’s. While I was reading the 2011 version, what is striking is that, while it is wordier than the original 1973 edition, the basic argument is little changed. Wouldn’t it be great to be able to go back to the early seventies and see how the media and the public responded to Malkiel’s book and Jack Bogle’s introduction of the inde...

Dumb Is Better

This morning, the Wall Street Journal reported that the smartest way to play the markets in 2013 was by being dumb. Passive strategies that involved buying and holding plane Jane stocks or index funds definitively outperformed all other investment groups. When dividends are included, the S&P 500 gained 32% for the year. Hotshot hedge funds and many actively managed pension funds were left in the dust. A quote from David Rolf, chief investment officer of St. Louis’s Wedgewood Partners was...

The Year Ahead

Now’s the time of year when we reflect on the year just past and speculate on what the new year will bring. 2013 turn out to be a much better year than anybody expected, but being a long term observer of the market, I have learned to expect the unexpected. Anytime you can get a 25% gain without significant volatility, you should be happy. The regulators warn us that past performance should not be used to predict future performance. (They have to say that because that’s what their lawyers tell...

Happy Holidays

We are rapidly coming into the busiest time of the holidays. Our focus is on our friends and family as we reflect on the year just past. The market will operate with diminished trading hours and lower trading volumes. In recognition of this, I will not be posting next week if. I will return the following week with renewed energy and focus as I begin the New Year with a project called “Efficient markets, Passive investing and Smart Beta.”

Have a wonderful Holiday.

George L. Morgan

Cleaver Timing

Facebook just announced an impending secondary offering of their stock. A secondary offering has many of the characteristics of an initial public offering. The shares for sale come from insiders who own it and it requires the use of an investment banker to complete the deal. The fact that the stock is available in the secondary market, where the forces of supply and demand establish a market price, is the major difference between an initial public offering an a secondary offering. One little...

Beating The Pros

Hedge funds are the most sophisticated investment vehicles available today. They have the most resources, the most expertise and deal only with the most sophisticated investors. One of the most prestigious of this elite group is Blue Crest Capital Management, LLC. They have over $40 billion in assets under management and operate out of offices in London, Geneva and New York. This year the firm’s Blue Trend fund is down over 10% and its Blue Crest Capital International fund is flat for the yea...