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Two more good sources of bloggy investment insights

Posted by: Aaron Pressman on October 10, 2007

A couple of good finds in the investing blogosphere today. James Picerno, author of The Capital Spectator, has a great, deeper analysis post up today on the new State Street global bond ETF (Symbol: BWX) that I wrote about on Monday.

Picerno has access to some good data, too. He finds the 0.5% expense ratio isn’t the lowest among so-called world bond mutual funds but it’s in the bottom three-quarters (Furthermore, none of those funds are a pure play on the same segment of top-rated, non-dollar government bonds nor are they index funds). Even better, Picerno has some historical correlation analysis showing that an index similar to the one underlying BWX has virtually no tracking with U.S. stocks or bonds or much of anything else. That suggests that adding the fund to your portfolio will bring a diversification benefit. It would be nice to see how the lack of correlation has changed over time and how it holds up — or doesn’t — in periods of market stress, but what Picerno’s got is good.

Another goodie comes from James Montier, an economist, author and the former global equity strategist at Dresdner Kleinwort Wasserstein. His new blog, Behavioural Investing is worth following though he only writes a few times a month. Recent entries covered problems at quant funds, an examination of changes in stock market index components over time and a diss on IPO investing. I like the writing but I don’t always agree with the conclusions.

In his entry about IPOs, there appears to be a little confirmation bias at work. Montier cites a relatively small study of IPO returns in three European countries from 1995 to 2001. The study found IPOs were priced far too optimistically and returns suffered. But this is an incredibly narrow and misleading time period that is pretty much the entire run up and down of the Internet bubble. Not a very powerful citation, in my mind.

Better studies of IPO investing have shown that following a few rules, such as sticking with companies that had at least $50 million in revenue the year before they debuted, can improve your odds. And outside the hallowed halls of academia, the First Trust IPO-X 100 Index ETF (FPX), which debuted in April 2006, has wallumphed the return of the S&P 500 and the Russell 2000 over the past year. But I’m quibbling with Montier - many IPOs are overpriced, hype-driven disasters. For some better investing insights, check out Montier’s blog.

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