The answer has varied over the past 150 years; it also depends upon the CPI. Are investors now underrating both asset classes’ risks? It’s one of the most basic questions that investors face. Which are riskier: stocks or bonds? The answer is crucial because, as AQR put it (“A Changing Stock-Bond Correlation: Drivers and Implications,” Q1-2023), the “relationship between … [Read more...] about Which are Riskier: stocks or bonds?
Dividends aren’t a bane – they’re a boon
Payouts aren’t merely sensible, they’re desirable: by boosting subsequent earnings, they improve companies’ and thus investors’ returns. Should dividends be “the bane of your investment life”? Does Australia’s system of dividend imputation “force companies to behave irrationally” – that is, pay overly generous dividends, retain insufficient earnings, restrict capital … [Read more...] about Dividends aren’t a bane – they’re a boon
Index funds’ key flaws – and how we overcome them
For some investors, long-established and low-cost active funds are likely a better option than many index funds and most ETFs. Without resorting to Google, try to guess who said this: “if everybody indexed, the only word you could use is chaos, catastrophe. The markets would fail.” It’s none other than John Bogle! Long known and widely lauded as “the father of indexing,” he … [Read more...] about Index funds’ key flaws – and how we overcome them
A contrarian assessment of Macquarie Group
The crowd lauds its strengths but ignores its structural weaknesses and ethical shortcomings. I assess both and consider their implications. During the long stretches outside crises, bear markets, panics, recessions, etc., Leithner & Company constantly seeks suitable candidates for investment – and when we find them, we research them thoroughly. The minority of … [Read more...] about A contrarian assessment of Macquarie Group
Why value investors should doubt “climate science”
By nature they’re sceptics, and at key junctures become contrarians. I show why they should disbelieve the orthodoxy – and why it matters. The drumbeat has long been incessant, and lately it’s become deafening. For years, “the consensus” has decreed that “the science is settled.” And on 27 July, the UN’s Secretary General, António Guterres, proclaimed: “the era of global … [Read more...] about Why value investors should doubt “climate science”
How we prepare for – and profit from – recessions
We’ve outperformed over the long term by being conservatively contrarian during booms and aggressively contrarian during busts. Investors must never forget: the economic cycle includes contraction as well as expansion. Downturns usually don’t last nearly as long as upswings, and since the Second World War they’ve become even less frequent. Perhaps that’s why, as it seems to … [Read more...] about How we prepare for – and profit from – recessions
Are Australia and the US heading for severe recessions?
Their money supply’s shrinking and yield curves have inverted. This confluence of events always precedes slumps; can this time be different? In “Dude, Where’s My Recession?” (The New York Times, 14 July) Paul Krugman noted: “almost a year has passed since the U.S. Bureau of Economic Analysis, which estimates gross domestic product, announced that real GDP had declined over … [Read more...] about Are Australia and the US heading for severe recessions?
The Myth of Small-Cap Outperformance
“Investing” in Aussie small-caps is like gambling: the longer you play and the bigger your bet, the more you’ll underperform the house. “Small-cap stocks tend to outperform big-caps,” asserts Investopedia (“Understanding Small-Cap and Big-Cap Stocks,” 4 August 2022), “ ... because they are able to grow more rapidly than larger companies.” It’s an oft-made claim. “Small-caps … [Read more...] about The Myth of Small-Cap Outperformance
How Canberra’s finances have worsened – and why it matters
Analysis of its monthly financial statements since 2005 uncovers trends that commentaries about its annual budget downplay or overlook. For more than 20 years, it’s been a basis of Leithner & Company’s operations: as a conservative-contrarian value investor, we think for ourselves – and thus always discount and often reject conventional opinion and behaviour. Warren … [Read more...] about How Canberra’s finances have worsened – and why it matters
Why America’s now in recession – and what it means for Australia
Leading indicators, weekly earnings and hours worked, GDI and productivity are all falling. That’s bad for Aussie as well as U.S. equities. In Should we be in a recession already? (2 June), Roger Montgomery wrote: “given the slumping credit demand and tightening lending standards in the U.S., which typically precede or accompany a recession, one wonders why we aren’t in a … [Read more...] about Why America’s now in recession – and what it means for Australia