Category Archives: Uncategorized

Markets and economies are agglomerations of interconnected human behaviors.  It’s a surprise, then, that in the fields of finance and economics, the work of history’s most famous behavioral psychologist, B.F. Skinner, is rarely mentioned. In this piece, I’m going to present … Continue reading →

From January of 1933 through July of this year, beer companies produced a real, inflation-adjusted total return of 10% per year. Steel companies, in contrast, produced a return of 5%.  This difference in performance, spread out over 82 years, is enormous–the … Continue reading →

The big surprise from Thursday’s Fed announcement was not the decision to hold interest rates at zero, which most Fed observers expected, but the revelation that an unidentified FOMC member–probably Narayana Kocherlakota, but possibly another dove–is now advocating the use … Continue reading →

Suppose that you’ve been given $1,000,000 of cash in an IRA to manage.  Your task is to invest it so as to generate the best possible risk-adjusted return over the next 12 months. You don’t have to invest it immediately–you can … Continue reading →

“You know, Paul, Reagan proved that deficits don’t matter.  We won the mid-term elections, this is our due.” — Vice President Dick Cheney defending a second round of tax cuts against the objection of Treasury Secretary Paul O’Neill, shortly after … Continue reading →

It’s amazing to think that just last Monday, August 17th, the S&P 500 closed at 2102.  Today, it closed at 1868, falling 11.1% in 6 trading days.  The shocking speed of the decline has injected a level of fear into … Continue reading →

The following chart shows the aggregate net profit margin of the S&P 500 using earnings data updated through the 1st quarter of 2015 (75% complete): With yet another quarter now on the books in which profit margins have remained steady … Continue reading →

Those who expect U.S. equities to deliver poor returns going forward can cite two compelling reasons in defense of their expectation: (1) Equity prices are significantly elevated relative to underlying earnings fundamentals.  The S&P 500’s trailing price-to-earnings ratio, for example, … Continue reading →

A common criticism of Professor Robert Shiller’s famous CAPE measure of stock market valuation is that it fails to correct for the effects of secular changes in the dividend payout ratio.  Dividend payout ratios for U.S. companies are lower now … Continue reading →

In this piece, I’m going to do five things: First, I’m going to clarify the purpose of Total Return EPS, what it’s trying to accomplish.  In a single sentence, the purpose of Total Return EPS is to convert dividends into … Continue reading →