Tiny changes are hard to spot, which makes it difficult to see the potential broader impact down the road.

That’s the message from Professor Bakshi, who wrote a great piece, as it relates to a company’s competitive advantage. Gradual tiny changes can work to strengthen or destroy any advantage a company might have.

But the effect of small changes is not the easiest thing to recognize because management often fails to see the bigger picture. Continue Reading…

On Tuesday, I read a short book that dramatically changed investor thinking and fueled the 1920s market boom.

The running belief at the time was that bonds were better, safer investments than stocks. It was considered common knowledge until Edgar Lawerance Smith ran the numbers and published his results: Continue Reading…

I ran across one of Howard Marks’ earliest Memos from before his Oaktree days. The topic was the value of forecasts, which he thoroughly explains where the value lies.

Accurate forecasts aren’t enough. You have to be accurate and your forecast must translate into above average returns. You have to be better off than doing nothing.

Just being right is hard enough. You also have to predict how the market will react, you have to act on it and get the timing right, and the result of all that needs to be worth it.

That’s a lot to ask for when predicting the future. Here’s Marks: Continue Reading…

The latest from James Montier of GMO is a rundown on the current U.S. market valuation. Feel free to read that part, if you want (links are below).

I want to focus on his explanation of the factors that drive market returns and valuation. Because when you understand the factors, you can reach your own conclusions on where the market stands on valuation.

There are a lot of factors you can consider when doing this, but most are secondary. Besides, this isn’t rocket science, so let’s over complicate it. It’s best to keep it simple, which Montier’s does: Continue Reading…