1/18/2012	The Global Financial Crisis is widely considered to have started with subprime mortgage problems in the US, but the crisis impacted countries and people around the world. The latest experts to participate in the "Global" Financial Crisis Experts Survey are Michael Lim Mah-Hui and Fred Harrison and they add perspectives from Asia and Europe. Michael Lim Mah-Hui has both academic and professional experience, having worked for several decades at banks in the US and Asia. He coauthored Nowhere to Hide: The Great Financial Crisis and Challenges for Asia and his papers include The Impact of the Global Financial Crisis: The Case of Malaysia and Financial Liberalization and the Impact of the Financial Crisis on Singapore. Harrison (UK) has been credited with predicting the crisis (by for instance, Dirk Bezemer in No One Saw This Coming), often citing his predictions from his 2005 book Boom Bust. Yet back in 1997 (in The Chaos Makers) Harrison predicted frenzied activity in the land market with prices peaking by 2007, which would be the primary cause of and "presage the global depression." While many have been recognized for predicting the crisis, Harrison and Fred Foldvary appear to have been among the first, eerily both publicly predicting in 1997 a land/housing based bubble around 2007 to be followed by a major contraction/depression (also documented by Mason Gaffney in After the Crash).
1/6/2012	4Q2011 was a good one for stocks and bonds, but US stocks were just roughly flat for 2011. US equity investors generally lagged balanced and bond investors, but still did well versus foreign stocks in general, Hedge Fund investors (which dropped an estimated 5% on average, and lagged for the third straight year), and even Buffett’s Berkshire Hathaway. USA Today discusses bonds outperforming stocks over the past 30, 20, and 10 years per the famous Ibbotson Associates SBBI data. Among the many year-end commentaries with interesting analysis and graphics are Schwab, the Economist, the WSJ's 2011 timeline, as well as Morningstar's Fund Category Returns. The latest experts (and prolific authors) to weigh in on the Global Financial Crisis Experts Survey as 2011 came to close were Robert Litan Francis Longstaff Hersh Shefrin
12/21/2011	Some outstanding commentary on the Global Financial Crisis has appeared in the Financial Analysts Journal. To supplement the Crisis Links page, I've created a page of the articles that have appeared there. Most are free to the public (including numerous crisis book reviews). They include commentary from some of the most prominent individuals in both the academic and investment communities, beginning with a 2008 article by John Bogle. See Global Financial Crisis Articles in The Financial Analysts Journal. The latest expert to weigh in on the Global Financial Crisis Experts Survey is UCLA Professor and author of over 100 published papers (including many award winners), Richard Roll.
12/17/2011	Richard Koo (author of The Holy Grail of Macroeconomics: Lessons from Japan’s Great Recession) has a new paper out titled The world in balance sheet recession: causes, cure, and politics in real-world economics review (12/12/2011), which opens with this point. "Remarkable similarities between house price movements in the U.S. this time and in Japan 15 years ago, illustrated in Exhibit 1, suggest that the two countries have indeed contracted a similar disease." Koo previously made this point in How to Avoid a Third Depression (Koo Bio on last page) in presenting to the U.S. House of Representatives on July 22, 2010. Sadly, the Japan comparison is not a new observation. John Talbott wrote the following prescient comparison between Japan and US Real Estate Prices (as US prices were peaking just prior to the collapse and onset of the Global Financial Crisis) in Chapter 1 of Sell Now! (2006) roughly six years ago. "the United States is becoming more and more like Japan every day." "Even if you optimistically (and naively) believe our government is independent of political pressure brought on it by industry and the banks, the Fed may be very slow to force banks to recognize losses and thus push the problem out for years. In an attempt to protect some of the biggest banks and possibly avert a bank run on the entire system, the Fed may choose to punish the American economy for years as it struggles slowly out of the loan morass it created during the real estate bubble. No, the story Japan has to tell is not a pretty one, but unless we are expected to repeat their troubled history we had best do something differently with our future." Recent additions to the Global Financial Crisis Experts Survey include Les Leopold, author of The Looting of America Matthew Lynn, WSJ MarketWatch columnist and author of Bust: Greece, the Euro and the Sovereign Debt Crisis Yalman Onaran, Bloomberg News reporter and author of Zombie Banks John Train, investment professional and prolific author of over 20 books and more than 400 columns and articles. Discussions about Warren Buffett (who in 2002 called derivatives "time bombs, both for the parties that deal in them and the economic system") and Joshua Rosner (who wrote in 2007 "The feared outcome is nothing less than a 21st century bank run" among other warnings) have been added to Who Predicted the Crisis?
11/28/2011	The initial results for the Global Financial Crisis Experts Survey included 22 participants and 7 individuals that predicted the housing crash and/or financial crisis in advance. Three additional experts have weighed in and the latest results bring the sample to 25 (and 8 Predictors). The new participants are Roddy Boyd, author of Fatal Risk: A Cautionary Tale of AIG's Corporate Suicide Aaron Brown, investment professional and author of Red-Blooded Risk: The Secret History of Wall Street Ann Pettifor, Crisis Predictor and author of The Coming First World Debt Crisis A new addition to Who Predicted the Crisis is Sir Andrew Large. Large is credited by multiple sources with warning about the coming crash at the London School of Economics in a 2004 speech (he was then deputy governor of the Bank of England - the UK central bank). He reportedly continued to make similar speeches and argue for another two years that the system was unsustainable (he reportedly gave up and retired in January 2006 before his term was up). See Steve Denning's Lest We Forget: Why We Had A Financial Crisis (11/22/2011) which cites Masters of Nothing: How the Crash Will Happen Again Unless We Understand Human Nature by Matthew Hancock and Nadhim Zahawi (not yet released in the US, but available in the UK)
11/15/2011	Interesting article today in P&I by Arleen Jacobius about publicly available REITs. Over the last 20 years REIT returns beat real estate funds, other alts (11/15/2011), and that's not just one study. She notes three including Morningstar's Commercial Real Estate Investment: REITs and Private Equity Real Estate Funds (September 2011), which found that REITs provided an annualized rate of return of 9.3%, compared with 4.4% for private equity core funds. Also noted is the fact that REIT fees and expenses averaged one-half to one-fourth of private equity real estate fees (which I would suggest is not unrelated).
11/11/2011	When the Global Financial Crisis began to spin out of control, a common phrase was used to imply that it was not predictable - "No one saw this coming." Many people have argued that is simply not true and a major effort to debunk that claim was published by Dirk Bezemer in 2009. It's title was "No One Saw This Coming": Understanding Financial Crisis Through Accounting Models. While many commentators have stated that only a few or a handful of people saw this coming, Bezemer documented 12 individuals that publicly warned in advance of the crisis. Since then there have been many Books discussing those that won big during the crisis and many articles, as well as a vote of thousands of economists to determine who was most accurate in predicting the crisis (the Revere Award - with Steve Keen winning along with Nouriel Roubini, and Dean Baker). I've summarized and linked to those that I've found on a new page about Who Predicted The Crisis? The number of individuals that I believe deserve some credit for sounding the warning bell is closer to 50 (including many outside the US). Given the split conclusions in the Final Report issued by the Financial Crisis Inquiry Commission, and the ongoing debate about the causes of the Global Financial Crisis, I decided to do a survey to try to clarify opinions and ask for simple prescriptions from the people that have studied and written about the crisis. I've surveyed 22 experts including crisis book authors (including several with bestsellers), published/cited researchers, and 7 that predicted the crisis (including Keen and Baker). Details of the Crisis Expert Survey are here and the initial results are here including one paragraphs summaries of Crisis Causes and Prescriptions for what needs to happen. I am finally starting to catch up to the modern internet world and you can follow updates to InvestorHome (including additional survey participants) via twitter.com.
9/30/2011	3Q 2011 was a rough quarter for equities, while long bond holders (aside from high-yield) generally had gains. US stock funds were off roughly -17% on average, while balanced (stock/bond) funds dropped about -10%. Generally small caps lagged large caps and value lagged growth. Links have been updated on the Benchmarks page including in Morningstar's Fund Category Returns and Lipper/WSJ Yardsticks.
7/6/2011	2Q 2011 had it's ups and downs, but in the end US Equity funds were generally flat (slightly positive on average per Morningstar, slightly negative per Lipper/WSJ). International stocks generally did better, although emerging markets were off roughly -1%. Large caps outperformed small and growth beat value, which is the opposite of the ten years numbers (as would be expected based on historical numbers and the three factor model). Taxable US Bond funds generally returned 1.5-2%, but high-yield returned roughly .6%, while municipals continued to recover from doomsday predictions and returned roughly 4%. Real Estate funds had strong returns, but natural resources and precious metals funds tended to have significantly negative returns for the quarter. The Benchmark page has been updated with new links.
4/15/2011	Senators Carl Levin and Tom Coburn released their extensive report titled Wall Street and The Financial Crisis: Anatomy of a Financial Collapse on 4/13/2011. Initial commentary and links have been added to the FCIC Report page. The official FCIC web site apparently has been taken down, but a back-up site is maintained by Stanford. On the topic of the Financial Crisis there is a new video of a presentation by one of the key players in the Big Short. See Michael Burry on the financial crisis courtesy of Vanderbilt University.
4/1/2011	Despite uncertainties developing from the earthquake and tsunami in Japan as well as revolts in the Middle East and northern Africa, US stocks and equity mutual funds were up roughly 6% for the quarter. International markets rose about half that and emerging market returns were generally flat in 1Q11. In the bond sector high yield bonds had a strong quarter, but munis remained dicey. Fund Category Returns and Mutual Fund Yardsticks links are updated on the Benchmark page.
1/31/2011	On January 27, 2011 the Financial Crisis Inquiry Commission issued it's Final Report on the Causes of the Financial and Economic Crisis in the United States. The report is extensive, yet some have already criticized it for what it doesn't include, and many have expressed disappointment that the commissions could not agree on the conclusions (the report includes three different views). I've created a new page with an extensive collection of articles about and reviews of the FCIC final report including those that agree with it's main points and those that have given the commission low grades, as well as one that argues the commission was doomed from the start.
1/23/2011	The SEC released it's Study on Investment Advisers and Broker-Dealers and recommended that a uniform fiduciary standard of conduct for broker-dealers and investment advisers be implemented when providing personalized investment advice about securities to retail customers. As previously documented by numerous studies (See the Stockbrokers, Registered Investment Advisors, and the Fiduciary Standard page), the study concluded that "retail customers do not understand and are confused by the roles played by investment advisers and broker-dealers, and more importantly, the standards of care applicable to investment advisers and broker-dealers when providing personalized investment advice and recommendations about securities . . . Investors have a reasonable expectation that the advice that they are receiving is in their best interest. They should not have to parse through legal distinctions to determine whether the advice they receive was provided in accordance with their expectations." While this was a major victory for supporters of the higher standard (according to this article the financial services lobby allocated $500 million a year during the run up to financial reform legislation), disagreement remains (Commissioners Kathleen Casey and Troy Paredes issued this statement) and many details remain to be determined (in this article one commentator argues "we're in the third inning of a baseball game that will likely go into extra innings.")
1/17/2011	60 minutes aired a segment on 12/19/2000 discussing problems with state and municipal budgets that included predictions by Meredith Whitney about a large number of potential defaults in the near future. That combined with rising interest rates have contributed to falling municipal bond values and outflows on a large scale. Further discussion and a collection of links on the topic are included on a new page titled Financial Doomsday Predictions & The Municipal Bond Debate.
1/5/2011	Dave Barry described 2010 as a disaster (link below), but 2010 was a good year for most investment asset classes. Coming off the Zeroes of 2000-2010, the first year of the second decade of 21st century rewarded many investors with double digit returns. The Wilshire 5000 returned 17.6%, which was modestly higher than international stocks. Small caps generally outperformed large caps, while real estate and natural resources generally had even stronger returns (equity REITs outperformed the S&P 500 over the past 1-, 3-, 5-, 10-, 15-, 20-, 25-, 30- and 35-year periods). Bonds generally lost value in 4Q10, but had decent gains for the year. Municipals are in the spotlight with this recent 60 minutes segment igniting an ongoing debate (more on that later). 4Q (and longer-term) details on returns can be found on the Benchmarks page including Morningstar's Fund Category Returns and WSJ's Mutual Fund Yardsticks. For an entertaining review of 2010 don't miss Dave Barry's Year in Review: Why 2010 Made Us Sick (1/2/2011) from the Washington Post. One of my favorites - "In other national news, Congress passes and Obama signs into law a financial-reform act designed to curb Wall Street excesses by mandating the death penalty for anybody caught wearing a watch costing more than a house. Having guaranteed that the financial community will behave in a responsible manner, Washington returns to the important work of running up the deficit."