Spanning the divide between academia and practice...

SMART INVESTING, FOCUSED ON AN EVER-CHANGING ECONOMIC LANDSCAPE.

Recent Insights


June 3, 2024

A common refrain is that to get more return you have to bear more risk. But what exactly is risk? We revisit this important issue. As part of the work leading to his Noble Prize, William Sharpe noted that in equilibrium all investors should hold some combination of the risk-free asset and the market portfolio.

Click for More
May 14, 2024

Download PDF   With stock prices at near record highs relative to measures like earnings or cash flow, many leading analysts have predicted meager returns over the next decade. Some have even suggested the return on the S&P 500 could be negative over the upcoming decade. Others have raised the possibility of a short-term collapse of

Click for More
April 2, 2024

The S&P 500 ended the year 2023 at 4,769. During December, several leading financial firms were asked for their forecasts for the year-end 2024. The results are shown below. The most optimistic forecasts were by Fundstrat (a well-known bullish firm), Oppenheimer, and Yardeni. Considering the strong returns during 2023, four major firms, including Morgan Stanley

Click for More
March 6, 2024

Professor and Nobel Prize winner Eugene Fama put forth the efficient market hypothesis and based on that concept Warren Buffet suggested that holding a passive investment in the S&P 500 was the best advice for most investors. If the market were efficient and if passive investing was best for everyone, how can that be reconciled

Click for More
February 20, 2024

When attempting to explain movements in stock prices the media often overlook the key facts that for every buyer there is a seller and every outstanding share must be held continuously.  As we record this, the S&P 500 has surpassed 5,000, and it leads a lot of people to ask, ‘How could the market be

Click for More

Featured Publication


With stock prices at near record highs relative to measures like earnings or cash flow, many leading analysts have predicted meager returns over the next decade. Some have even suggested the return on the S&P 500 could be negative over the upcoming decade. Others have raised the possibility of a short-term collapse of 20% or more. For instance, famed investor Jeremy Grantham said, “As for the U.S. market in general, there has never been a sustained rally starting from a 34 Shiller P/E. The only bull markets that continued up from levels like this were the last 18 months in Japan until 1989, and the U.S. tech bubble of 1998 and 1999, and we know how those ended.” But still others have taken the contrary view that the high prices represent a new normal and do not portend meager returns ahead. To shed light on the dispute, we take a deep dive into the underlying data.A good place to start is with data from Prof. Robert Shiller’s website. His work on the CAPE (Cyclically Adjusted Price-to-Earnings Ratio) is fundamental. Exhibit 1 presents a scatter plot of the level of the CAPE against the S&P 500 real total return (annualized) in

Read More