Quoting from this article, “From the era of railroads and the telegraph to that the internet and smartphones, the price charged by the finance industry to turn a dollar of savings into a dollar of investment has mostly remained between 1.5 cents and 2 cents for every dollar that passes through the finance industry.” See https://goo.gl/4fo7KD for PDF version of this gated article.
I highly recommend this Freakonomics podcast (and transcript) about passive versus actively managed investment strategies. It provides historical context for the development of some of the most important ideas in finance (e.g., the efficient market hypothesis) and the implications of these ideas for investing in the long run. Along the way, you get to “virtually” meet with many of the best, brightest and most influential academic and professional finance thinkers who played important roles in shaping this history.
Prior to listening to this podcast, I was not aware of how a quip in a 1974 Journal of Portfolio Management article authored by the MIT economist Paul Samuelson inspired Vanguard founder Jack Bogle to launch the world’s first index fund in late 1975. Samuelson suggested that, “at the least, some large foundation should set up an in-house portfolio that tracks the S&P 500 Index — if only for the purpose of setting up a naive model against which their in-house gunslingers can measure their prowess.” (source: “Challenge to Judgment”, available from http://www.iijournals.com/doi/abs/10.3905/jpm.1974.408496).
It’s hard enough to save for a house, tuition, or retirement. So why are we willing to pay big fees for subpar investment returns? Enter the low-cost index fund.
From page 1 of today’s Wall Street Journal – how automation is increasingly (and in many cases, adversely) affecting the livelihoods of financial advisors.
Services that use algorithms to generate investment advice, deliver it online and charge low fees are pressuring the traditional advisory business. The shift has big implications for financial firms that count on advice as a source of stable profits, as well as for rivals trying to build new businesses at lower prices. It also could mean millions in annual savings for consumers and could expand the overall market for advice.
The “Free Inquiry on Campus: A Statement of Principles by a Collection of Middlebury College Professors” document, published in the “Aftermath at Middlebury” is well worth reading and pondering.
On March 2, 2017, roughly 100 of our 2500 students prevented a controversial visiting speaker, Dr. Charles Murray, from communicating with his audience on the campus of Middlebury College. Afterwards, a group of unidentified assailants mobbed the speaker, and one of our faculty members was seriously injured. In view of these unacceptable acts, we have produced this document stating core principles that seem to us unassailable in the context of higher education within a free society.
I am proud to be a member of the Heterodox Academy (see http://heterodoxacademy.org/). Heterodox Academy members are all professors who have endorsed the following statement:
“I believe that university life requires that people with diverse viewpoints and perspectives encounter each other in an environment where they feel free to speak up and challenge each other. I am concerned that many academic fields and universities currently lack sufficient viewpoint diversity—particularly political diversity. I will support viewpoint diversity in my academic field, my university, my department, and my classroom.”
Quoting from this CNBC article,
“The Dow Jones Industrial Average… will hit its peak on Wednesday, March 23rd, specifically “after lunch,” Robin Griffiths, the chief technical strategist at the ECU Group told CNBC.”
Such a claim (based on so-called “technical analysis” (cf. https://en.wikipedia.org/wiki/Technical_analysis)) is total and utter nonsense. It would appear that the signal-to-noise ratio for this article specifically and much of CNBC content, in general, is close to zero.
The Bank of Japan’s (somewhat counterintuitive) stated goal for implementing it’s new (negative interest rate) policy is “…to push down borrowing costs to stimulate inflation”. While I certainly do not claim or pretend to be a monetary economist, a policy that punishes savers and rewards borrowers doesn’t seem like a particularly good script for long-term economic success. I think it’s a tacit acknowledgment that the Japanese economy is struggling with deflation. See https://www.boj.or.jp/en/announcements/release_2016/k160129a.pdf for the official policy statement issued by BOJ…
I never thought that I would ever live to see the day when interest rates turned negative, creating a world where investors pay for the opportunity to lose money over time and banks pay interest to borrowers…
“As Euribor, a key benchmark used to set interest rates, seems to sliding toward zero and below, banks in some European countries are looking at previously inconceivable problem: They may soon have to pay interest to customers who borrow from them.”
According to Bill Gates, this year’s (50th annual) letter to Berkshire Hathaway shareholders from Warren Buffett is “… the best letter Warren has ever written”.
Here’s the letter: http://berkshirehathaway.com/letters/2014ltr.pdf.
Here’s Bill Gates from his video blog: