New title

  • Mesa Financial Group on Facebook
  • Mesa Financial Group on YouTube
  • Mesa Financial Group on LinkedIn

Insights



Markets (and some premiums) Bounce Back

What a difference a few months can make! A few months at the end of 2018 turned U.S. stock returns negative and made international stocks to decline further for the year. Now, just a few months after that recent low, stocks in the U.S. and abroad have staged a significant recovery. U.S. stocks (represented by the S&P 500 Index) declined -13.5% in the fourth quarter of 2018. After the first two months in 2019, they were up 11.5%. This pattern
Read more

The Index Bogeyman

Over the last several years, index funds have received increased attention from investors and the financial media. Some have even made claims that the increased usage of index funds may be distorting market prices. For many, this argument hinges on the premise that indexing reduces the efficacy of price discovery. If index funds are becoming increasingly popular and investors are “blindly” buying an index’s underlying holdings, sufficient price discovery may not be happening in the market. But should the rise
Read more

Perspective on Premiums

Investors may be tempted to extrapolate recent returns into the future, which can lead them to abandon their investment philosophy at potentially inopportune times. While negative outcomes are disappointing, investors should view them with the proper perspective and stay the course. When you leave your server a tip, do you round it to a whole-dollar amount and often in multiples of $5? Does a 60th birthday seem more significant than a 59th? If you answer yes to these questions, you’re
Read more

Your Personal Property Memorandum: 4 Tips for Success

What is a personal property memorandum? It is a frequently-used estate planning document that provides an opportunity to expand upon your will or trust. Many wills or trusts simply divide the whole of an estate equally between surviving family members. But, what if you’d prefer a more detailed plan for particular items you want to leave to specific individuals? If you’d like to ensure that specific property or items in your estate are left to certain relatives or friends, a
Read more

2018 Report Card For Hedge Funds

Hedge funds entered 2019 coming off their ninth­ straight year of trailing U.S. stocks (as measured by the S&P 500 Index) by significant margins. And for the 10­ year period ending 2017 — one that included the worst bear market in the post­ Depression era — the HFRX Global Hedge Fund Index produced a negative return (­0.4%), underperforming every single major equity and bond asset class. So how did hedge funds fare in 2018? The following table shows the returns
Read more

Common Factor Investing Myth

William Sharpe, Jack Treynor, John Lintner and Jan Mossin are typically given most of the credit for introducing the first formal asset pricing model — the capital asset pricing model (CAPM). It was important because it provided the first precise definition of risk and how it drives expected returns. Fama & French Take It Further The CAPM looks at returns through a “one actor” lens, meaning the risk and return of a portfolio is determined only by its exposure to
Read more

Do Surprises Really Move Markets?

French economist Louis Bachelier long ago remarked: “Clearly the price considered most likely by the market is the true current price: if the market judged otherwise, it would not quote this price, but another price higher or lower.” Prices will not change if the expected happens. It is the unexpected that causes prices to move. In an efficient market, any new information the market receives will be random, not in the sense of being good or bad, but in the
Read more

Getting to the Point of a Point

                    A quick online search for “Dow rallies 500 points” yields a cascade of news stories with similar titles, as does a similar search for “Dow drops 500 points.” These types of headlines may make little sense to some investors, given that a “point” for the Dow and what it means to an individual’s portfolio may be unclear. The potential for misunderstanding also exists among even experienced market participants, given that
Read more

Discipline: A Necessary Condition for Successful Investing Part 3 of 3

(Continued from Discipline: A Necessary Condition for Successful Investing Part 2 of 3) There’s another way to reduce the risk of investment depression. Myopic Loss Aversion and the Pain Ratio Nobel Prize winner in economics Richard Thaler, author of the book Misbehaving, has found that we tend to feel the pain of a loss twice as much as we feel joy from an equal­-sized gain. This tendency leads to the behavior known as “myopic loss aversion,” creating a problem for
Read more

Discipline: A Necessary Condition for Successful Investing Part 2 of 3

(Continued from Discipline: A Necessary Condition for Successful Investing Part 1 of 3) Perhaps the greatest anomaly in finance is that while investors idolize Warren Buffett, they not only fail to follow his advice but often do exactly the opposite of what he recommends. Buffett’s Advice Warren Buffett, probably the most highly regarded investor of our era, has offered the following advice over the years. Listen carefully to his statements regarding efforts to time the market. “Inactivity strikes us as intelligent
Read more