Failing to Remember

It was 51 years ago, on August 28, 1963, that Rev. Dr. Martin Luther King, Jr. delivered his famous “I Have a Dream” speech on the steps of the Lincoln Memorial in our nation’s capital as part of the March on Washington for Jobs and Freedom.

Even with the easy availability of the full video of the speech, we readily misremember both the speech and its context. Continue reading

Yale Model Heat Check

Yale KeyWith a new report out from the Yale Endowment, now is a good time to do a heat check on how the so-called “Yale Model” of investing is doing. I have written about the Yale Model numerous times (see here, here, here and here, for example). It emphasizes broad and deep diversification and seeks to exploit the risk premiums offered by equity-oriented and illiquid investments to investors with an investment horizon that’s sufficiently long – in Yale’s case, essentially forever. It has worked exceptionally well for Yale. For others…not so much. Continue reading

Process and Performance

PerformanceBoth of the following statements are ubiquitous among those offering investment products – the first in writing and the second spoken, as enthusiastically as plausibility allows (and then some).

  1. Past performance is not indicative of future results; and
  2. Let me tell you about our performance history.

Despite their rank inconsistency, they are presented with respect to the same offering, and even with a straight face.

My job includes listening to sales pitches that invariably include the second of those statements, supported by details prominently displayed in the paperwork while the first statement is buried therein. But if I do my job right, I will focus on the investment process at issue ahead of performance, no matter how much it’s accentuated.  But across our industry as a whole, that’s not the way things are usually done. Continue reading

How did they do?

bestEvery year Gallup asks the following question: “What do you think is the best long-term investment?” The results of the most recent query show that Americans favor real estate (25%), gold (24%), stocks (22%), savings accounts and CDs (16%) and bonds (9%).  Bankrate undertakes a monthly survey to measure how secure Americans feel about their personal finances compared to 12 months prior. The latest such survey shows that for money not needed for more than 10 years, people making six figures annually prefer to invest in stocks (34%) and real estate (32%). People making less than that prefer cash investments (29%), real estate (23%) and precious metals (18%). Women prefer cash investments slightly more than men do (30% v. 21%), while men prefer stocks more than women do (18% v. 11%).

Even though Gallup asks about “long-term investment” and Bankrate specified a hold period of more than 10 years, we can assume that the answers reflect some recency bias.  Indeed, gold was favored by 34 percent of Gallup respondents in 2011 and 28 percent last year. That said, these survey results offer some helpful insight into what the public thinks.  Putting aside the extent to which these choices are good ones, it is important to consider how each of these asset classes have performed historically as a starting point for further discussion.  Continue reading


I was a Duke student before Coach K came on board. Duke basketball was a big deal on campus then, but its aura was very different.  We weren’t remotely a juggernaut or a national name.  In fact, within just a 25-mile radius, we were well behind both UNC and NC State in terms of basketball history and regard.  But we were very good fans, filling the seats and supporting our team.  We were aggressive too.  Our shtick was not just to be loud and intimidating but also to try to be funny and snide so as to unnerve our opponents.  Sometimes we were even offensive. Imagine that.

We invented the “Airball!” chant in 1979 for an opponent’s shot that misses everything. Thank you, Rich Yonaker. After I graduated it was chanted in German at future NBA star Detlef Schrempf who was, of course, German. We greeted the visiting USC Trojans by throwing condoms on the court in 1978. We always urged NC State’s then coach to “Have a drink, Norm Sloan, have a drink” because he had commented in the press about the alleged insobriety of Duke students in the stands.  We jangled car keys during his free throws in an otherwise silent Cameron Indoor Stadium at State guard Clyde Austin, later imprisoned for a Ponzi scheme, who was being investigated for having no job but two luxury cars, supposedly given to him by his bank teller girlfriend.  Pizzas were delivered to a State huddle because a Wolfpack player was in trouble for hassling a pizza guy.  When Maryland coach Lefty Dreisell (Duke, 1954) and his Terps visited, Lefty was greeted with a big sign and these words: “Richard Nixon [Duke Law, 1937]: Duke’s second biggest mistake. Welcome Lefty!

OverratedA regular chant in our rotation was reserved for when a very highly regarded team or player visited Cameron and didn’t perform up to reputation. “OV-ER-RAT-ED!”  Sadly, and by any reasonable measure, it is impossible to conclude that the financial services industry is anything other than wildly overrated.  Chant away. 
Continue reading