“Would we be in the same mess today if Lehman Brothers had been Lehman Sisters?” -New York Times columnist Nicholas Kristof, in an article during the financial crisis. The price of bias. This month’s edition of the Evergreen Exchange will reflect the differing viewpoints of multiple members from our investment committee. In the spirit of competition, we’ve begun to perform a survey to identify which author readers feel makes the most persuasive case. This week, we’ll tackle a topic that is largely overlooked by the investment world: behavioral finance. (Loyal readers will recall that this field of study plays an integral role in Evergreen’s approach to managing our clients’ assets.) Each author will discuss a behavioral bias that affects investors’ psyche and try to convince readers that their choice is the greatest threat to portfolio returns. Specifically, I will address the recency effect, Jeff Eulberg will cover loss aversion, and lastly, David Hay will explore overconfidence. Read More

"The US stock market has been this high only three times before since 1881." - Yale University’s Dr. Robert Shiller, referring to the price/earnings (P/E) ratio that bears his name. Mauled by a bear. One would need to be a very cursory or infrequent EVA reader—God forbid!—to be unaware that this author believes most investment assets are presently priced so high as to virtually offer return-free risk. And I’m aware that many of you think I’m a party-pooper for believing this but the fact is the math is on my side* (a more detailed analysis can be found at the end of this section). Yes, I know most of you also hate math (I can empathize with that) especially when it leads to an unpleasant conclusion. But there is some good news in this regard that I think you’ll want to hear. For years I’ve attended the National Association of Publicly Traded Partnerships (aka MLPs), missing only a couple over the last decade. The information I’ve gleaned at these has turned out to be invaluable, as have the relationships I’ve formed. In case you think MLPs are too messy to deal with (those pesky K1s), you should know that this sector has produced an annual return of 16% since Y2K (that would be 1/1/00). Fortunately, Evergreen’s MLPs have done even better, though I don’t want to incur the wrath of our compliance folks by telling you how much better.  Read More

“The US stock market has been this high only three times before since 1881.” – Yale University’s Dr. Robert Shiller, referring to the price/earnings (P/E) ratio that bears his name. Mauled by a bear. One would need to be… Read More

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To subscribe to Insights, email jliu@evergreengavekal.com; Note: all returns represent total return including dividends; YTD Market Style Returns are based on the Russell indices. Please see important disclosure below: DISCLOSURES: This material has been prepared or is distributed solely for informational purposes only and is not a solicitation or… Read More

Just between us billionaires… It’s not often you get a chance to hear one billionaire interview another. However, in January, that’s exactly what transpired at the Lost Tree Club in North Palm Beach, Florida, when Home Depot co-founder Ken Langone interviewed Stan Druckenmiller before a live audience. Although he’s not a household name to most US investors, Mr. Druckenmiller served as yet another billionaire’s investment chief during the glory years of George Soros’ legendary Quantum Fund. You may have heard of the Soros/Druckenmiller attack on Great Britain’s currency in 1992. That coup bestowed upon them the reputation of having “broken the pound” and ensured their status among the pantheon of investment demi-gods. In his interview with Ken Langone, the basis of this month’s Guest EVA, Mr. Druckenmiller describes this epic transaction, one that earned Mr. Soros even more billions and elevated Stan himself to the ten-figure net worth level. You’ll soon read that the main lesson he learned from George Soros was to make large capital commitments when convinced he had found an unusually attractive investment, such as shorting the pound. To qualify for that status, it needed to have an asymmetrical risk/reward characteristic—relatively minor downside with huge upside if you were right. Basically, Sorors taught him that when you come across such an extraordinary opportunity, you ignore the old Wall Street adage that bulls and bears both can make money, but pigs get slaughtered. Read More

Just between us billionaires… It’s not often you get a chance to hear one billionaire interview another. However, in January, that’s exactly what transpired at the Lost Tree Club in North Palm Beach, Florida, when Home Depot co-founder Ken Langone interviewed Stan Druckenmiller before a live audience. Although he’s not a household name to most US investors, Mr. Druckenmiller served as yet another billionaire’s investment chief during the glory years of George Soros’ legendary Quantum Fund. You may have heard of the Soros/Druckenmiller attack on Great Britain’s currency in 1992. That coup bestowed upon them the reputation of having “broken the pound” and ensured their status among the pantheon of investment demi-gods. In his interview with Ken Langone, the basis of this month’s Guest EVA, Mr. Druckenmiller describes this epic transaction, one that earned Mr. Soros even more billions and elevated Stan himself to the ten-figure net worth level. You’ll soon read that the main lesson he learned from George Soros was to make large capital commitments when convinced he had found an unusually attractive investment, such as shorting the pound. To qualify for that status, it needed to have an asymmetrical risk/reward characteristic—relatively minor downside with huge upside if you were right. Basically, Sorors taught him that when you come across such an extraordinary opportunity, you ignore the old Wall Street adage that bulls and bears both can make money, but pigs get slaughtered. Read More

To subscribe to Insights, email jliu@evergreengavekal.com; Note: all returns represent total return including dividends; YTD Market Style Returns are based on the Russell indices. Please see important disclosure below: DISCLOSURES: This material has been prepared or is distributed solely for informational purposes only and is not a solicitation or… Read More