The Transparent Advisor

by Danno   Interest rates are basically at all-time low levels right now. Interest rates are a really simple concept to most people because all they ever do is borrow...  "Oooh, I can afford that monthly payment!"  But in the economy and in investing interest rates are much more than that. On the economics side first: Back around 1980 my mom and dad bought their first house, and they paid about 15% interest on their fixed mortgage.  So if they purchased a $50,000 house, for example, putting 20% down and borrowing $40,000 their interest expense would have been about $6,000 per year.   For the sake of simple math, let's say that inflation cuts your money in half (or doubles your property value in dollar terms) every 20 years. Today the prime rate is only about 3%. That same house in a similar condition is worth about $200,000.  If I put 20% down I'd need to borrow about $160,000 costing me about $4,800 per year in interest expenses. The "real" interest cost of

by Danno We are through 9 months of 2020... Good riddance!   I look forward to the end of each quarter so I can take another quick look under the hood year-to-date. Again, I like to zoom out and look at it by Style, by Asset Class, and by Sector so I can look past the news (i.e. noise) of the day and understand the larger themes that are going on. The US 2020 year-to-date style box including dividends looks like this... Large is still doing better than Mids, Mids are still doing better than Smalls.  (LargeCaps are companies valued at about $15B+, MidCaps are companies valued at roughly $4.5B to $15B, SmallCaps right now range from about $100MM to $4.5B) Growth is still just crushing Value again this year across all company sizes and geographies. Next let's look at some of the different basic Asset Classes.    US stocks are only up modestly on the year, but they're whooping up on Internationals.  Commodities are down broadly, but that's mostly due to Oil getting crushed.  Me

  by Danno   In Q3 stocks reached earnings multiples not seen since the "dot com" bubble of the late-90's and early-2000's.   Stocks then broadly backed off 10% or so in September, generally going down most severely in the areas that had gone up the most in the prior 6 months.  Largely, the things that were up the most in the prior months are still up the most year-to-date.  Folks can speculate all they want about such moves, and hindsight is always 20/20, but the truth is that no one knows when the winds will change in the markets.   See Exhibit number 7 million: On December 5, 1996 Alan Greenspan, the Chairman of the Federal Reserve from August 11, 1987 until January 31, 2006, famously made his often cited "irrational exuberance" comment in a prepared speech given at the American Enterprise Institute. Alan Greenspan was not a loose-lipped man.  He chose his words very carefully and this was a prepared speech.  People paid attention when he spoke and he kne