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Research from my day at the library
Old 04-12-2005, 06:51 PM   #1
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Research from my day at the library

I was reading through the "Financial Analyst" magazine/journal and thought I would share a few tidbits of information based on the studies they performed and wrote about in the journal. Some of it may be obvious and some of it just may make more skeptical when you talk/listen to a perpetual bull. Some of it may just be interesting.

An opinion from one of the CFAs whose opinion was based around the idea that we are in an environment that does not support capitalism. He labeled it as "reverse capitalism" where 3 factors that have great influence over equity performance are now working against the equity market. Three factors are monetary policy (rising interest rates), fiscal policy (current account deficits is huge) & regulation (the rise of sarbanes oxley). Basically he suggest that investors based on the evidence against equities in general follow the strategy below:
1) Overweight tangible assets & TIPS
2) Balance stocks & bonds - maybe more bonds b/c stocks represent the "pro capitalism" environment.
3) Overweight Value vs. Growth
4) Overweight non-dollar based assets in relation to the dollar - I would imagine he is talking about metals

An additonal compilation of studies was conducted and it found there is a strong relationship between an expansive/restrictive (where we are going now) policy & the performance of stocks over time. Also small caps tend to be more sensitive to restrictive policies than large caps. Also the policy in the US tends influence markets overseas.

A study was done to evaluate the effectiveness of the measures used in an index fund. In other words, is market cap the best way to determine an S&P 500 index for example. The research formed another index based on other financial measures such as dividends, book value, market cap, etc. and found that is outperformed the S&P 500 Index by 1.97% over a 43 year period. The index had similar companies but the weighting was very different.

Anyway just food for thought...maybe you found something interesting or maybe I am an MBA student that has no life outside of the financial journals
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Re: Research from my day at the library
Old 04-12-2005, 07:28 PM   #2
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Re: Research from my day at the library

Just my two cents
1) Overweight tangible assets & TIPS
2) Balance stocks & bonds - maybe more bonds b/c stocks represent the "pro capitalism" environment.
3) Overweight Value vs. Growth
4) Overweight non-dollar based assets in relation to the dollar - I would imagine he is talking about metals
1) maybe that is really why real estate has gone up so much?
2) bonds can take a beating too. "none of the above" sounds better to me.
3)Many good advisors say Value over Growth, but they both have cycles.
4) Non dollar assets, maybe means foreign stocks. Probably is their turn based on the US market outperformain for 40 years or so and based on our own situation of high corporate, personal and govt debt.

Still have to figure out how to act on these ideas. It costs money to buy, sell and hold things. I'd rather do this through "financial instruments" as hard assets can take a lot of management even if they may also offer good returns.

yakers, who does have a few Kugerands if the s*(& does hit the fan.
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Re: Research from my day at the library
Old 04-12-2005, 07:50 PM   #3
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Re: Research from my day at the library

On the non-dollar based assets...I was thinking foreign unhedged bonds & as you mentioned foreign stocks....I would take both over gold.
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