Featured

Low Returns Are Fundamentally Unstable

10 Year Treasury Rate - 54 Year Historical Chart In my previous post, I discussed how investors seeking relative value tend to drive prices up and returns down over time. When returns are low, small changes in expected returns (or small differences in returns between investments) result in large price changes. Everything I know about …

Continue reading Low Returns Are Fundamentally Unstable

Opportunity Costs, Relative Value, and Absolute Value

  "If you take the best text in economics by Mankiw, he says intelligent people make decisions based on opportunity costs—in other words, it’s your alternatives that matter. That’s how we make all of our decisions." -Charlie Munger Most people make investment decisions by comparing a potential investment to other investments that are available today. …

Continue reading Opportunity Costs, Relative Value, and Absolute Value

Dividends, Reinvestment, Options, and Total Returns (FIG)

I bought Fortress Investment Group (FIG) late in 2014 at $7.40 a share. Softbank announced in February it is buying FIG for $8.08 per share. That's only a 3.9% compound annual growth rate (CAGR) over that time period. But wait. FIG paid out $1.16 worth of dividends during that time. This increases the total CAGR …

Continue reading Dividends, Reinvestment, Options, and Total Returns (FIG)