Market valuation is always a hot topic at the start of every year. Predictions are another. And there’s always someone who combines the two, citing current valuation for what the market will do over the next year.

Let’s stick to what we know. The current U.S. valuation hovers around a CAPE of 28. You can read more about the CAPE ratio here. For the short version, 28 falls on the expensive side of things, meaning on average expensive markets tend to perform poorly over the next decade.

But expensive does not mean that a market correction or crash is imminent or guaranteed. The funny thing about averages is that it turns a large basket of numbers – added up and divided by the total number of numbers – into one number. Some people choose to focus only on the one number and ignore all the rest but we can’t. Continue Reading…

Howard Marks released his latest memo this week about focusing on what’s knowable and doing your best to ignore what’s not. Put simpler, stick with the things you can control and stop trying to predict future events. Everyone has an opinion on what happens next, but having an opinion and knowing are not the same thing.

Here’s Marks: Continue Reading…

So thousands of published blog posts debating active versus passive and it turns out nobody was right (okay, maybe someone was right). That’s the latest from Michael Mauboussin’s “Looking for Easy Games”, on how the balance between active and passive impact each other. It’s your must read this week.

Mauboussin digs through the giant shift from active funds to passive funds over the past decade, its effect on markets, and, most important, how an investor subscribing to one (or the other) may benefit from an imbalance between the two. Continue Reading…