More by the Same Author
2012-10-09 High-Dividend Yield Strategy under the Microscope by Michael Nairne (Article)
High-dividend yield stocks have become the favorite recommendation of a host of advisors, but an undue focus on income alone obscures the irreducible fact that long-term investment success is based on the total return of a portfolio including both income and capital growth. This raises two questions. How has the total return of a high-dividend yield strategy fared relative to the market? How does its total-return performance compare to the returns of other possible stock-selection strategies?
2012-07-10 The Plight of the Conservative Retiree by Michael Nairne (Article)
Today's extraordinarily low rates on top of a lower equity premium leave conservative retirees with the risk of heightened capital depletion as poorer portfolio returns may be inadequate to offset the combined impact of withdrawals and inflation.
2012-07-03 Don't Get Emotional by Michael Nairne (Article)
With the developed world mired in slow growth and the eurozone teetering on the brink of disintegration, to many investors the future seems bleak. Some are so disheartened they are abandoning the stock market as a hopeless endeavor. Yet, one of the abiding tenets of investing is that investor sentiment is rarely predictive of the future.
2012-04-17 The Rebalancing Problem by Michael Nairne (Article)
Selling winning asset classes to buy losers runs counter to human nature. But doing so with discipline can increase the potential return of a portfolio while critically maintaining its risk profile. The rebalancing premium is an important and often overlooked addition to returns of properly managed portfolios.
2012-02-14 The Dividend Yield Love Affair by Michael Nairne (Article)
Employee share-based compensation is now a significant expense deduction for public companies and hence, is already accounted for on the financial statements. Concerns that options-related stock issuance nullifies the impact of stock buybacks are accordingly overstated. This bolsters the view that you need to look at stock buybacks as an additional form of cash remittance to shareholders and not simply at dividends.
2011-12-13 Harnessing the Power of Momentum by Michael Nairne (Article)
A market phenomena that we can harness on behalf of our clients is momentum - the propensity for price trends to persist in the short-term. I examine the origins of momentum, illustrate its return premium and consider how managers can leverage momentum on behalf of investors.
2011-10-11 The Global ‘Old Normal’ by Michael Nairne (Article)
Amidst a torrent of dismal economic news and plunging stock prices, investment horizons have become increasingly short-sighted. The new normal of faltering growth and painful deleveraging appears to be only too true. However, investors capable of taking a long-term, global view will find forces at work that will likely drive resurgent world growth akin to that which occurred in the decades right after World War II.
2011-08-16 A Commentary on the Correction by Michael Nairne (Article)
Market corrections are always painful and this one particularly so because of the lingering anxiety from memories of the 2008-2009 market crash. I explore the history of stock market corrections and examines the dynamics of the recent downturn as well as actions that may be warranted, depending on individual circumstances.
2011-07-12 The Real Story behind Bond Yields by Michael Nairne (Article)
One of the most important questions that individuals should ask before making any investment is 'Am I being paid enough for the risk of this investment?' I analyze the returns available today from government bonds and answer this important question for this asset class.
2011-05-10 Lessons from the Farm by Michael Nairne (Article)
Farmers know all about droughts. Droughts occur in nearly all climates and impair all types of crops. They are unpredictable, yet are recurring and can last for years. Likewise, performance droughts abound in the world of investing.
2011-03-08 The Sweet Spot by Michael Nairne (Article)
Today’s low interest rates and lackluster stock valuations suggest portfolio returns going forward will be modest. Investors in search of higher return opportunities need to consider small-company value stocks. We explore how this asset class can improve portfolio performance for long-term, patient investors and deal with its risks and limitations.
2011-01-11 What's Past is Prologue by Michael Nairne (Article)
With nearly two centuries of stock market performance history now available, investors should be well-armed intellectually to deal with the vicissitudes of equity investing. Many, however, are not. I explore this history and what it means for future performance.
2010-12-06 Real Return Expectations by Michael Nairne (Article)
There is nothing more important to long-term investors than the real rate-of-return that they can reasonably expect to earn on their investments. We forecast the expected real annual return for US stocks over the next 10 years and then set out ways to potentially improve on what many will find to be a discouragingly low expected return.
2010-11-09 Bogus Numbers by Michael Nairne (Article)
The crux of the difference between the 'cheap' and 'overvalued' market valuation views lies in the selection of earnings numbers, of which there are two basic sets. The broadest traditional measure is 'as reported' earnings which includes all charges except the cumulative impact of accounting changes, discontinued operations and extraordinary items. Is the market cheap by the appropriate measure?
2010-10-05 The Myopic Bond Market by Michael Nairne (Article)
Many investors seem to believe that today's low bond yields are proof positive that inflation rates will stay low for many years. Michael Nairne assesses how successful the bond market has been in anticipating future inflation and how well bonds have performed historically in low yield environments. Bond strategies today need to reflect our findings.
2010-09-07 The Free Lunch Illustrated by Michael Nairne (Article)
One of the most remarkable discoveries in modern finance is the ability to improve the expected return of a portfolio while simultaneously reducing its risk. In this guest contribution, which advisors can share with clients, Michael Nairne explains that the proverbial "free lunch" does exist, its exploitation requires a focus not only on the returns and volatility of the assets in the portfolio but on the degree of covariance between those assets.
2010-07-06 And the Winner Is... by Michael Nairne (Article)
As investors rush into U.S. Treasury bonds in response to a weakening economy that may portend the onset of deflation, this begs the question whether there is a superior deflationary hedge. History can be instructive in this regard, as Michael Nairne explains in this guest contribution.
2010-05-28 The Real Deal by Michael Nairne of Tacita Capital
Investors will face turbulent markets over the next several years as the world's credit implosion, now mutated into a sovereign debt crisis, plays out. Broad global asset class diversification is essential to riding out this storm. However, in the long run, it is the real economy that matters to equity returns. In today's climate of uncertainty, long-term investors should take heart that the drivers of world GDP growth - labor force growth and productivity increases - remain intact.
2010-05-01 The Bond Roller Coaster by Michael Nairne of Tacita Capital
The bond market has been characterized by long-term secular cycles. From 1946-1981 yields steadily rose; since 1981 they have steadily declined. The good times for bonds couldn’t last forever. Although some longer-term bond exposure is needed today as a hedge against a deflationary scenario, investors should recognize that in the next year or so the bond roller coaster is about to get underway.
2010-03-31 The Price of Emotion by Michael Nairne of Tacita Capital
Emotionally driven investment decisions often lead investors to buy high and sell low, and can exact a huge price on a portfolio over time. The antidote to emotional investing is threefold. First, investors must clarify their ability to tolerate risk in financial and psychological terms, and use this profile as the primary determinant of portfolio design. Second, investors should back-test the asset class performance of recommended portfolios. Finally, investors must document their investment strategies in writing.
2010-03-02 The Elusiveness of Persistence by Michael Nairne (Article)
In this guest contribution, Michael Nairne examines a manager's track record, and highlights the critical question of persistence in performance - whether a manager's past performance is predictive of future performance. Certainly, he says, considering the avalanche of media articles on top winning funds and the endless sales pitches to investors trumpeting "best in class" managers, one would assume that there is some reasonable level of persistence in performance...
2010-01-22 Give Bernanke a Break by Michael Nairne of Tacita Capital
In a recent speech, Bernanke pointed out that it was low real long-term rates (i.e. nominal rates less inflation) determined in the bond market that were a major contributor to the housing bubble, not
2009-12-17 Good Things Come in Small Packages by Michael Nairne of Tacita Capital
2009-11-30 Routinely 'Under Water' by Michael Nairne of Tacita Capital
2009-10-23 The Retirement Lottery by Michael Nairne of Tacita Capital
2009-09-22 Lower Than You Think by Michael Nairne of Tacita Capital
2009-08-24 The Discomfort of Diversification by Michael Nairne of Tacita Capital
2009-07-23 Beating the Market by Michael Nairne of Tacita Capital
2009-06-25 The Bond Hedge by Michael Nairne of Tacita Capital
