Good ratio, bad ratio
I recently added a page on the naked PE to Money Terms. A post in response to this by Richard Beddard (thanks to whom I came across the ratio in the first place) lead me to a clearer description of why it is good — and why the PEG is bad. (more…)
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Wisdom of crowds does not apply to stock picking
I have, over the last few weeks, read a few different articles about “social stock picking” which aims to apply the “wisdom of crowds” to stock picking. This is neither new, nor a good idea. (more…)
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CAPM: wrong but useful
I previously wrote a defence of CAPM in reply to this post. Even given that the empirical empirical evidence shows that high beta portfolios do not generate higher returns, the beta is still useful for investors. (more…)
Forget index tracking
I have been leaning towards passive investment for sometime, but I had not seen any evidence or argument that helped decide whether tracker funds or buy and hold mechanical strategies were better. Thanks to the Behavioural Investing blog I found this illuminating paper.
CAPM is OK
Richard Beddard not only endorses a condemnation of CAPM, but he wants to know if I am reading. I say it is the worst valuation model, apart from all the others. (more…)
New on Money Terms
The latest additions to Money Terms are:
- passive investing, which adds a more general discussion to subjects already coverd by other entries,
- the closely related trio of crash, correction, and bull run,
- an explanation of what embedded computers are.
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A better PEG ratio
While making some improvements to the Moneyterms explanation of the PEG ratio, I started thinking about ways of addressing the weaknesses of this ratio. The main problem with it is its short term nature, which makes shares that have mere enjoyed spikes in their growth, look like bargains. (more…)
Northern Rock should have been allowed to fail
Willem Buiter is quite right to criticise the Bank of England’s bailout of Northern Rock. The message to bank directors and shareholders is quite clear: “take big risks, and if they go wrong the taxpayer will pay for your mistakes, if they work, you can keep the profit”. (more…)
New Moneyterms site
I have moved Moneyterms to new hosting and to the wonderful Modx platform. The time spent developing the new site was minimal, but I also replaced all the automatically generated “related page” links with manually chosen lists, which was a lot of very tedious work. It should improve site navigation.
I also removed the “Guides” section, as it was simply not good enough. It will reappear with rewritten material.
Now that is behind me I have started adding new entries again, starting with style index, discount rate, long term PE, market neutral and synthetic security.
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Actively manage your pension
Most people are quite happy to allow a fund manager to look after their pension, even those who actively manage other investments. I suggest the opposite. There are very good reasons for concentrating on your pension. (more…)
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