ebook essays pieces of the puzzle
Saturday, February 26th, 2011
the russian bear

The return on the Russian stock market since the end of 2006 is now positive, but what a ride it’s been.  It’s up just short of three hundred percent since the low, although there was that nasty bit of unpleasantness before that.  The returns are very tied to the oil cycle, which is again going strong after the huge correction in 2008.  That move down led to a massive spike in Russia’s credit default swaps.  The Russian bear is out there somewhere and it is vicious.  (Something to watch:  The central back is raising rates to quell inflation.)  If you own a Russian ETF, you might also look at how it’s categorized in your asset allocation.  It probably shows up under “equities,” but it may belong in the “commodities” column.  (Chart:  Bloomberg terminal.)

the real role of dividends

Michael Mauboussin does his usual fine job with his latest strategy paper.  It examines the difference between the portion of market returns that are due to dividends in the abstract and in practice.  Basically, the reinvestment of dividends tends to be rare in application, so it’s easy to be fooled by numbers that assume it occurs as a matter of fact.  It’s also easy to be fooled by buybacks, especially given the tendency of managements to do the opposite of what could be best for long-term shareholders.

universities and trading

Mike Bellafiore wrote a interesting posting called, “Why Aren’t Universities Teaching Trading?”  I sent it to a professor who has taught the students in an investment fund and he was surprised by it, since he’d always been told that “traders are street smart; formal education is a waste of time for them.”  Bellafiore refers to a recent New York Times piece that I covered in an earlier pix, and is right in pointing out that articles like that often refer to the fancy set-ups at the schools as trading rooms.  They really aren’t. Should traders learn in a university setting, a vocational school, or from Bellafiore at SMB?  For that matter, how should fundamental analysts and portfolio managers be trained?  Quants?  I’ll have more to say on this in an upcoming blog entry, but I think both the industry and the academy could do much better than they currently do in training investment professionals of all kinds.

pictures with warren

The Berkshire Hathaway annual report is out, so we’ll get a full dose of the wit and wisdom of Warren Buffett in the media — mainstream, social, and whatever other kinds of it there are nowadays.  We also start the countdown to the pilgrimage to Omaha to get pictures with warren, the subject of a 2010 piece in my guru series.

especially investors

“The trouble with most people is that they think with their hopes or fears or wishes rather than with their minds.” — Will Durant.