Welcome to the end of the week and another edition of Happy Hour! Just sit back, relax, and enjoy your end of the week roundup of all things interesting in the land of money.
Bubbles are all the rage these days. So much so, that everyone is looking for one. It reminds me of Bigfoot. It’s out there somewhere (maybe), we just haven’t found it, yet.
NPR recently covered the opposing views of Fama and Shiller on bubbles and the ability to predict them. Fama believes bubbles are not predictable. And if someone can predict bubbles, that person somehow has information not available to the market. That, according to Fama, is impossible because an efficient market has all the information and is priced accordingly.
Of course, Shiller actually predicted two bubbles. Funny enough, Shiller describes bubbles as a mental illness. Like you’re crazy to pay such a high price for something not worth it, but you do anyways.
Maybe they’re both right. All the information is available and represented in the market prices. Only, too many investors view that information incorrectly or just ignore it.
Stock Guru Index
The popularity of index funds allows for strange creations. Welcome to indexing gone wild. The propaganda against actively managed mutual funds has brought about a slew of new indexes with a hope that a fund will be created to follow it. It boils down to licensing. Companies like Standard & Poor’s charge fund companies for the use of its market indexes.
Now there is a new index that tracks active stock pickers called the iBillionaire Index. It tracks the investments of 10 billionaire stock pickers.
People have been doing this for years. There are mutual funds that follow along with Buffett. There’s even a study showing that investing alongside Buffett would have outperformed the S&P 500 over a 30 year period. So this index isn’t really a stretch. In fact, it just makes it easier to follow the leaders. Or, you can spend hours digging through quarterly 13-F filings yourself.