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David Merkel

The Permanent Portfolio

==========================================I will admit, when I first read about the Permanent Portfolio in the late-80s, I was somewhat skeptical, but not totally dismissive.  Here is the classic Permanent Portfolio, equal proportions of:S&P 500 stocksThe longest Treasury BondsSpot GoldMoney market fundsThink about Inflation, how do these assets do?S&P 500 stocks – mediocre to pretty goodThe longest Treasury Bonds – cratersSpot Gold – soarsMoney market funds – keeps value, earns incomeThink about Deflation, how do these assets do?S&...

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Redacted Version of the March 2017 FOMC Statement

Photo Credit: Norman Maddeaux====================================February 2017March 2017CommentsInformation received since the Federal Open Market Committee met in December indicates that the labor market has continued to strengthen and that economic activity has continued to expand at a moderate pace.Information received since the Federal Open Market Committee met in February indicates that the labor market has continued to strengthen and that economic activity has continued to expand at a moderate pace.No ...

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Estimating Future Stock Returns, December 2016 Update

What a difference a quarter makes!  As I said one quarter ago:Are you ready to earn 6%/year until 9/30/2026?  The data from the Federal Reserve comes out with some delay.  If I had it instantly at the close of the third quarter, I would have said 6.37% — but with the run-up in prices since then, the returns decline to 6.01%/year.So now I say:Are you ready to earn 5%/year until 12/31/2026?  The data from the ...

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On the Pursuit of Economic Growth

Picture Credit: Asian Development Bank========================I wrote this to summarize my thoughts from a chat session that I was able to participate in at Thompson Reuters Global Markets Forum yesterday.  It was wider ranging than this, but was a very enjoyable time.  Thanks to Manoj Rawal for inviting me.On the Pursuit of Economic GrowthI think one of the conceits of the modern era is ...

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We Get New Highs More Frequently After New Highs

This post may fall into the “Dog bites Man” bucket, but I will see if I can’t shed a little more light on the phenomenon.  Here’s the question: “When do we see new highs in the stock market most often?”  The punchline: “After a recent new high.”The red squares above show the probability of hitting a ...

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The Rules, Part LXIII

Photo Credit: Pete Edgeler==========================Onto the next rule:“We pay disclosed compensation.  We pay undisclosed compensation.  We don’t pay both disclosed compensation and undisclosed compensation.”I didn’t originate this rule, and I am not sure who did.  I learned it at Provident Mutual from the Senior Executives of Pension Division when I worked there in the mid-’90s.  There is a broader rule behind it...

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Good, Not Average, Not Great

I was reading through The Wall Street Journal’s Daily Shot column, done by the estimable @SoberLook, and saw the following graph and text:The S&P 500 move this year is completely outside the historical seasonal trends. Graph Credit: Deutsche Bank via @SoberLook at The Wall Street JournalAverages reveal, but they also conceal.  When I look at a graph like this, I know that any given year is highly likely to...

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Everyone Needs Good Advice

Picture Credit: jen collins===================================================I am a fiduciary in my work that I do for my clients. I am also the largest investor in my own strategies, promising to keep a minimum of 80% of my liquid net worth in my strategies, and 50% of my total net worth in them (including my house, etc.).I believe in eating my own...

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Book Review: The Difference

In general, I don’t like books on personnel management.  That’s mostly because good management techniques are mostly obvious, and there are typically a lot of good strategies that are somewhat different, and most of them will work, if applied with a little common sense.  Pick one.  Apply it.  Be consistent.  Get feedback.  Adjust.  Repeat.No one has the &#...

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Problems with Constant Compound Interest (6)

Doctored Photo Credit: Marvin Isidore Macatol || And I say this is heresy!=================================My last post produced the following question:What if your time horizon was 60 years? Would a 5% real return be achievable?I am answering this as part of an irregular “think deeper” series on the problems of modeling investment over the very long term… the last entry was roughly six years ago.  It’s a good series ...

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