Albert Bridge Capital

Stock Market History, Illuminated, 2022 Style

I’ve been keeping a graphic of the long-term performance of the US stock market for many years now, and I’ve been sharing this information in the histogram below. I think it does a reasonable job of revealing how long-term returns are manufactured and the tilts over time. I’ve color-chunked the data by decade to highlight decades of historical weakness as well as periods of strength. I’ve also added additional tables and charts which I think are interesting, and in some cases, stunning.

Interest Rates and Growth Stocks

It's very possible, if not likely, that the move in growth stocks from 2017 through 2020 probably wasn’t caused or justified by a move in interest rates, but that people believed, and acted like, it was.

For Investors, a "Never-Sell" Mantra is a Song for Fools

On the misleading claims of Hendrik Bessembinder about diversification; and the convenient, post-hoc, and the spurious conclusion to always buy and hold.

A Conversation between Drew Dickson and Morgan Housel

A discussion between Drew Dickson of Albert Bridge Capital, Morgan Housel of The Collaborative Fund; moderated by Jamie Catherwood of O'Shaughnessy Asset Management

Conversation with Dr. Daniel Crosby on his Standard Deviations Podcast

Drew joins Dr. Daniel Crosby on the Standard Deviations podcast.

Finding Alpha in Europe

Drew and Toby chat about narrative-driven investing, Ben Graham's voting machine, behavioral explanations for stock mispricing, and managing a concentrated portfolio of investment ideas.

Sell in May and Go Away?

Turns out there may actually be something to the old Sell in May and Go Away adage - at least over the last 80+ years.

The Politics of Passive Investing

Most of us in the finance world are well aware of the evolution of “passive” equity investing over the years, and have witnessed its tremendous growth. Some of us have asked questions about it. We’ve asked is it all good? Is it mostly good? Are some aspects perhaps bad? Are some really bad?

Stock Market History, Illuminated

Some year-end charts and tables asking some big questions about what comes next.

Do Short Term Flows Permanently Affect Share Prices?

I’d like to think that prices can get out of whack for some period of time, and in that window, the nimble, unbiased, fundamental stock picker can take advantage of overreactions and underreactions. If they don't, then the M&M propositions truly hold, and I don’t have a meaningful job. However, if this paper is right, and it is only flows that matter, then while the M&M theorems are overturned, I don't have a meaningful job either. If it is all about flows, then I shouldn't play the game.

Archegos, Disclosure, and Price Discovery

This had a lot to do with bad banking, but most to do with an overzealous client. Meanwhile, it had very little to do with holdings disclosure. Sure, our kneejerk reaction is (always) for more regulation, because we want to believe that some regulatory response will immediately solve all our future problems. But we should question this intuition.

On Unlimited Upside

He implies that a biased sample of self-selected winners suggest that it is a mistake to ever sell any shares in any companies that you think are “winners” either historically or prospectively. That sure would be nice, wouldn't it?

A Memo to Investors

I know, these are weird and trying times. It all makes you wonder what the point of stock-picking is. What is the purpose of kicking the tires, looking under the hood, and doing our jobs?

Was “Value” Just a Hot Hand Thing?

In 1861, at the outset of the Civil War in the United States, Union Pacific issued 20 shares in its IPO.

Bubblicious?

COVID-19 and related counteractive policies have had an extremely negative impact on domestic and global economies. Whether or not you believe that the policies weren’t strong enough, or if they were overzealous, we are where we are.

Finance

Behavioural Finance is Finance

Last week, Barry Ritholtz had a fun interview with Eugene Fama.

Finance

America’s Decade

When it comes to predicting the economy, we believe that speculating when things will turn is an exercise in futility and a horrible waste of time; one which meanwhile distracts us all from the task at hand.

Everybody Was Kung Fu Fighting?

Last week, Finance Twitter erupted over a Bloomberg article about Michael Burry [i] and how he likened passive investment in equity markets to the bubble in the synthetic CDO market back in 2007, which he famously – thanks to Michael Lewis and Christian Bale – identified.

Voting Machines and Weighing Machines

Ben Graham is famously attributed for stating that the market was a voting machine in the short term, but a weighing machine in the long term.

Groundhog Day and Overnight Returns

Over the past few years, some of the finance literature has started addressing the phenomenon, if not the apparent puzzle, of overnight returns (close-to-open) vs. intraday returns (open-to-close).

Visualizing the Arithmetic of Active Management

It’s been said that a picture can be worth a thousand words.

Risk and Portfolio Theory

As we’ve discussed, efficient market academia suggests that Mr. Market actually only cares about systematic risk.

On Sexual Chocolate and Semi-Annual Reporting

The presupposition that quarterly earnings and guidance somehow breeds short-termism and suboptimal business strategy,

Island Economies and Risk

In this economy there are two companies, a resort hotel, and an umbrella manufacturer.

Hunting for Alpha

But Can a Stock-Picker Really Generate Alpha, and is it Luck or Skill When it Happens?

Career Risk, Alpha, and Contrarian Investing

At our firm, one of our main goals is, very simply, to generate excess returns from equity investing without taking commensurate risks.

God Bless the Shorts

Elon Musk made a lot of news last week, refusing to answer “boneheaded” questions from “boring” sell-side analysts.

Equilibrium Happens

There is a great deal of discussion these days regarding the impact of passive investing

Half Hearted Is Half Minded

After discovering the next great investment idea, why is it so easy to start with a half-sized position, watch it a bit, and then go full-sized later?

Still Superman, but without the cape

I have immense respect for Bob Shiller.

Pegs, P/E'S and the Value Premium

The notion that the PEG is a linear tool for valuation is a myth, and a deeper analysis of its function reveals that the difference in outperformance of growth stocks over value stocks accelerates as interest rates drop toward zero.

On Passive Flows, Smart Money, and Alpha

The trend from active to passive (or systematic) investing is now well-entrenched.

Drew's Views

Asset Pricing

Stock Market History, Illuminated, 2022 Style

Interest Rates and Growth Stocks

For Investors, a "Never-Sell" Mantra is a Song for Fools

A Conversation between Drew Dickson and Morgan Housel

Conversation with Dr. Daniel Crosby on his Standard Deviations Podcast

Finding Alpha in Europe

Sell in May and Go Away?

The Politics of Passive Investing

Stock Market History, Illuminated

Do Short Term Flows Permanently Affect Share Prices?

Archegos, Disclosure, and Price Discovery

On Unlimited Upside

A Memo to Investors

Was “Value” Just a Hot Hand Thing?

Bubblicious?

Finance

Behavioural Finance is Finance

Finance

America’s Decade

Everybody Was Kung Fu Fighting?

Voting Machines and Weighing Machines

Groundhog Day and Overnight Returns

Visualizing the Arithmetic of Active Management

Risk and Portfolio Theory

On Sexual Chocolate and Semi-Annual Reporting

Island Economies and Risk

Hunting for Alpha

Career Risk, Alpha, and Contrarian Investing

God Bless the Shorts

Equilibrium Happens

Half Hearted Is Half Minded

Still Superman, but without the cape

Pegs, P/E'S and the Value Premium

On Passive Flows, Smart Money, and Alpha

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