Finance Website Web Traffic Comparison

Below is a comparison of the web traffic rank of some of the most popular finance sites on the web.  The list was formulated simply based on websites that came to mind, so it's highly probable that I missed some high traffic sites in here somewhere.  CNN money, yahoo finance and google finance are also three big finance sites that would make the list which can't be extracted from their larger parent sites.

For all the fragmentation of news that the web has caused, the big guys still get the most traffic.  Business insider is the lone new-media entrant which has competitive traffic numbers to Forbes, etc.  The only true blog that makes this list is zerohedge.  The average big name finance blog has a rank between 20,000 and 200,000.

Cities With Multiple Pro Sports Champions in the Same Year

No market analysis here, but thought it would be interesting to point out that if the 49ers win on Sunday it will be the 14th time in history that a city holds two pro sports championships at the same time.  Below are the other 13 times that it's happened.  

Since the Super Bowl only started in 1967 the years in red are the multi-championship years that hold up in the modern era.  While I'm at it, I should probably put an asterisk next to 2002 as well though.  The Angels are from Anaheim, not Los Angeles.

Source: Wikipedia

Offbeat Analysis: Optimum Class Size and Investing

An observation on the limits of cognitive capacity: the number of investments that any individual can properly monitor is not dissimilar to the number of children that an individual teacher can keep track of in a classroom.

It's logically accepted (albeit with some challenges to the conventional wisdom) that smaller class sizes are better for students because teachers can devote more time to each student.  Similarly a smaller investment portfolio means that the investor can devote more time to monitoring each investment.  There are tradeoffs though.  Smaller classrooms mean a higher cost of education per student and smaller portfolios come at the expense of diversification.

Unfortunately there's no scientific way to determine the optimal level that balances these competing forces in classrooms or investments (sorry efficient markets theorists).  However, qualitatively, the best size would be the largest size possible without sacrificing the individual attention needed to monitor the progress of each student/investment.

Looking at international data, the prevailing balance in the classroom seems to be in the 20 student range.  In the average teacher's portfolio, each student is a 5% position.

Source: OECD

Mayan Apocalypse (Cross) Averted

Circling back on a slightly ridiculous market indicator that we had been tracking here: not only was the Mayan Apocalypse averted back in December, but so was the Mayan Apocalypse Cross (which we dubbed a cross over of the 50/200 month moving average).  Thanks to the rally that we've had since November the apocalypse cross never happened.  The 50 month moving average has only crossed below the 200 month twice in the last 100 years, once at the end of the 70s bear market and once in the middle of the depression.

Speaking of moving averages, the 50 and 200 day moving averages have recently crossed for 10 year interest rates.

How Bad is This Flu Season?

Frequently this time of year the weather will become a story that people start to discuss as having possible effects on the economy.  Last year the winter was abnormally warm, leading people to hypothesize that there would be better than usual economic activity.  Meanwhile in other years there is often a blizzard or two that hit the northeast and people begin to worry about how that can affect the data (usually weather worries end up being more bark than bite).

This year the seasonal story-line isn't so much about the weather as much as it is about people being under the weather.  WAG and CVS have each had good starts to 2013 based on a bad flu season.  Just how bad is the season though? Below is some data from the CDC comparing this flu season to previous ones.  So far the season is bad but not as bad as the 2009-10 pandemic when we were hit with an attack of the swine.

Source: Centers for Disease Control

Happy Holidays! Offbeat Holiday Stats

Dear Readers,

I wanted to thank everyone who reads this blog for their interest.  I love investing and it's fun to write these posts, but it means a lot to me that there are others out there who are enjoying the content that I've been putting together.  The blog will be in hiatus until the New Year (that's the plan at least, but I'll be around next week so there is always the possibility of a post).  I look forward to starting back in 2013 with more analysis that I hope you all will enjoy.  In the meantime I put together a list of holiday stats to entertain.  Happy holidays!

Scott Krisiloff

Holiday Statistics

Thanksgiving

· Americans eat 68 million Turkeys on Thanksgiving and Christmas (that’s 31% of the annual total)

· The average Turkey weighs 16 pounds, meaning that over 1 Billion pounds of Turkey are consumed on those days—roughly 3 pounds per capita.

Hanukkah

· A menorah burns 44 candles over the course of 8 nights of Hanukkah

· An average candle generates 250 BTUs (British Thermal Units) of energy, which means that a menorah generates 11,000 BTUs in 8 nights. That’s about equal to 0.18% of a barrel of oil.

· There are 2.9 million Jewish Households in the US. If each household lit a menorah every night of Hanukkah, the total energy content of the combined candles would represent about ~5,500 barrels of oil, enough to last a population of 10,000 Maccabees for 8 days (assuming that the Maccabees drive SUVs and otherwise consume oil at US per capita rates).

Christmas 

· 95% of Americans say they celebrate Christmas. 93% exchange gifts and get together with family. 88% put up a Christmas tree.

· Only 76% of Americans describe themselves as Christian, which implies that ~80% of non-Christian Americans celebrate Christmas.

· There are roughly 50 million kids age 0-11 in the US. If Santa spends $75 per child he would spend $3.75B on presents per year. If Bill Gates decided he wanted to be Santa Claus, his fortune would last for ~16 years at that pace.

New Year’s

· ~30% of all champagne sales take place in the last 2 weeks of the year. That’s ~300 million glasses or 1.25 glasses per working age US population.

HAPPY HOLIDAYS! 

Happy Thanksgiving to the 1% (That probably means you)

I'm re-posting this post from last year--I haven't changed a word.  It's easy to forget that there was extreme bearishness then too, but after Thanksgiving 2011 we got a 5 month rally from ~1150 to ~1400.  A similar rally this year would bring us to new all time highs.

Originally posted 11/23/11:

On a day that the Dow was down 236 points, it doesn't feel like there's much to be thankful for.  Between Europe's collapse, Washington's gridlock and China's slowdown, it seems the world is a dangerous place for investors.  Despite all the scary headlines, there is of course lots to be thankful for, even from an economic standpoint.  Most notably: we are a nation of 1%-ers.

The Occupy Wall Street movement has drawn plenty of attention to the income distribution within the United States, pitting the 99% against the 1%.  But what goes overlooked by these well meaning folks is that compared to the other 6.7B people on the planet, those occupying Wall Street probably don't come close to being in the 99%.

In the US it takes an income of $250,000 per year to be considered a 1%-er, but if you take the global population into the calculation, the number drops to just $47,500.  Considering that median household income in the US is $50,000 per year, this means that at the very least half of Americans live in a household that earns at the 1% level.  Even the US poverty line, which is set at a family of four earning less than $22,000 is not too far from being in the global top 10%.

Compared to inequity of global income distribution, the intra-US distribution is no great injustice at all.  That is something to truly be thankful for.

 

Global Income Distribution

Data is from the World Bank.

Federal Debt Compared to Household Net Worth

Much of the recent discussion about the fiscal cliff has focused on the role of the wealthy and their obligation to shoulder the public debt load.  With the debt at $16T and the relative concentration of wealth in the US, the wealthy might not ultimately have much of a choice.  The top quintile of wealth is going to have to shoulder almost all of the load.

America is a wealthy country, so technically there is enough money to extinguish the whole debt if we needed to, but it would likely take extending the scope of taxation beyond income and into wealth.  The savings rate in the US ("leftover" income) is already very low, so there isn't a whole lot of room to tax income more without severely impacting consumption.  There is, however, plenty of wealth, but it happens to be highly concentrated because low income households don't save much.  The top 20% of households hold 85% of the country's net savings.

Below is a chart of what the richest Americans' wealth looks like in relation to the Federal debt.  The Forbes 400 could only cover ~10% of the total.  The top 1% could cover the whole amount, but it would require a one time tax of 71% of their net worth (which includes assets like real estate, which would be tricky to implement).

If Uncle Sam wanted to keep a hypothetical debt extinguishment tax to 30% of an individual household's net worth, it would have to extend the tax across the top 20% of households, which would include households with an average net worth of ~$700k (that works out to ~210k for that household).

Source: Federal Reserve, Avondale Estimates of Net Worth Based on 2007 Wealth Concentration Statistics.

Importantly this analysis only includes today's debt.  It does not take into account the unfunded liabilities from social security and medicare.  It's a little scary to think that the majority of American households have almost no savings and will be absolutely dependent on these programs as elderly.  These two programs combined are estimated to have an NPV liability of ~$50T, which theoretically wipes out the net worth of the whole top 20%.  Before anyone goes into crisis mode though, all that really means is that something will have to change over time.

A Weekend of Abnormal Weather

While you all on the east coast will be bracing yourselves for a snow-hurricane this weekend, we in Los Angeles will be "enjoying" 90 degree weather.  It's true that LA is often warm year round, but it's not usually this warm.  We are in the midst of a Santa Ana wind cycle, when warm winds blow through the city spiking temperatures with a dry heat in the middle of Fall and Winter.

When I was in high school, I took an English exam on a Joan Didion essay about Santa Ana winds, which has always stuck with me for some reason.  In the piece, Didion writes that the winds make people do crazy things en-mass.

As market participants, none of us should be a stranger to watching people do crazy things en-mass.  It's been my experience that sometimes the best explanation for crazy behavior is simply that there's something in the air.  I'll let Didion handle the rest:

There is something uneasy in the Los Angeles air this afternoon, some unnatural stillness, some tension. What it means is that tonight a Santa Ana will begin to blow, a hot wind from the northeast whining down through the Cajon and San Gorgonio Passes, blowing up sand storms out along Route 66, drying the hills and the nerves to flash point. For a few days now we will see smoke back in the canyons, and hear sirens in the night. I have neither heard nor read that a Santa Ana is due, but I know it, and almost everyone I have seen today knows it too. We know it because we feel it. The baby frets. The maid sulks. I rekindle a waning argument with the telephone company, then cut my losses and lie down, given over to whatever it is in the air. To live with the Santa Ana is to accept, consciously or unconsciously, a deeply mechanistic view of human behavior.

I recall being told, when I first moved to Los Angeles and was living on an isolated beach, that the Indians would throw themselves into the sea when the bad wind blew. I could see why. The Pacific turned ominously glossy during a Santa Ana period, and one woke in the night troubled not only by the peacocks screaming in the olive trees but by the eerie absence of surf. The heart was surreal. The sky had a yellow cast, the kind of light sometimes called “earthquake weather.” My only neighbor would not come out of her house for days, and there were no lights at night, and her husband roamed the place with a machete. One day he would tell me that he had heard a trespasser, the next a rattlesnake.

“On nights like that,” Raymond Chandler once wrote about the Santa Ana, “every booze party ends in a fight. Meek little wives feel the edge of the carving knife and study their husbands’ necks. Anything can happen.” That was the kind of wind it was. I did not know then that there was any basis for the effect it had on all of us, but it turns out to be another of those cases in which science bears out folk wisdom. The Santa Ana, which is named for one of the canyons it rushes through, is a foehn wind, like the foehn of Austria and Switzerland and the hamsin of Israel. There are a number of persistent malevolent winds, perhaps the best known of which are the mistral of France and the Mediterranean sirocco, but a foehn wind has distinct characteristics: it occurs on the leeward slope of a mountain range and, although the air begins as a cold mass, it is warmed as it comes down the mountain and appears finally as a hot dry wind. Whenever and wherever foehn blows, doctors hear about headaches and nausea and allergies, about “nervousness,” about “depression.” In Los Angeles some teachers do not attempt to conduct formal classes during a Santa Ana, because the children become unmanageable. In Switzerland the suicide rate goes up during the foehn, and in the courts of some Swiss cantons the wind is considered a mitigating circumstance for crime. Surgeons are said to watch the wind, because blood does not clot normally during a foehn. A few years ago an Israeli physicist discovered that not only during such winds, but for the ten or twelve hours which precede them, the air carries an unusually high ratio of positive to negative ions. No one seems to know exactly why that should be; some talk about friction and others suggest solar disturbances. In any case the positive ions are there, and what an excess of positive ions does, in the simplest terms, is make people unhappy. One cannot get much more mechanistic than that.

Federal Reserve Districts by Population

This post wasn't spurred by anything in particular, but I thought it was interesting to think about the fact that the 12 Federal Reserve districts are far from evenly distributed in terms of geography, population and deposits.  For instance, the San Fransisco district contains 20% of the population and New York contains 65% of the system's deposits.  Originally some of the existence of the regional banks was necessitated by the needs of processing physical money and checks, but with electronic currency that function is less necessary today. 

In 2006,  Tom Hoenig wrote an interesting piece defending the 12 bank system which can be found here.  The structure of the Federal Reserve as 12 banks says a lot about American political values, especially in 1913.  We are a nation that has historically fought passionately over the idea of federalism vs. centralization of government power.  The choice between Hamilton and Jefferson is what forms the backbone of American political history.  1913 marks somewhat of a crossroads of a Jeffersonian age turning slightly more Hamiltonian.  Today Hamilton firmly has the upper hand, but perhaps eventually the pendulum will swing back the other way with major implications for the current political-economic paradigm.

Is October 19th Cursed?

There are still 12 days to Halloween, but October 19th is quickly shaping up to be the spookiest day of the year for investors.  Today is the 25th anniversary of the 1987 crash and the Dow is down nearly 200 points.

Looking at historical performance on the 19th though, there's not anything extra-ordinary to worry about.  It's just a day like any other, albeit one that does average slightly negative returns.  On average, the Dow has been down 0.5% on all October 19th's since 1900.  If you exclude 1987 that figure is -0.2%.  However, of the 80 October 19th's on which the Dow has been open, the index has been positive on 39 of the days or about 50% of the time.

Abstract Painting (809-4) Gives Clapton 21% Annualized Return

There was an article in the Journal today about a painting by Gerhard Richter entitled Abstract Painting (809-4) which sold for $34m, the highest price ever for a living artist's work.  The article mentions that the painting was purchased by Eric Clapton for $3.1m in 2001, which is a 21.2% annualized return.  For comparison, AAPL has given a ~41% annualized return and Gold has returned ~16% per year since then.  The S&P has returned about 1.5% before dividends in the same time.

Passages from PT Barnum's The Art of Money Getting

I recently read "The Art of Money Getting," which was written by PT Barnum in 1880.  Although 132 years old, many of its passages still ring true today.  Below were some highlights worth re-posting.  Overall the quotes paint a picture of a man who would argue that there is no such thing as overnight success.

• "The safest plan, and the one most sure of success for the young man starting in life, is to select the vocation which is most congenial to his tastes."
• "No man has a right to expect to succeed in life unless he understands his business, an nobody can understand his business thoroughly unless he learns it by personal application and experience.  A man may be a manufacturer: he has got to learn the many details of his business personally; he will learn something every day and he will find he will make mistakes nearly every day.  And these very mistakes are helps to him in the way of experiences if he but heeds them."
• "Engage in one kind of business only and stick to it faithfully until you succeed, or until your experience shows that you should abandon it.  A constant hammering on one nail will generally drive it home at last, so that it can be clinched...Many a fortune has slipped through a man's fingers because he was engaged in too many occupations at a  time."
• "So the young man starting in business; let him understand the value of money by earning it...Men who get money with too great facility cannot usually succeed.  You must get the first dollars by hard knocks, and at some sacrifice, in order to appreciate the value of those dollars."
• "The reader of a newspaper does not see the first mention of an ordinary advertisement; the second insertion he sees, but does not read; the third insertion he reads; the fourth insertion, he looks at the price; the fifth insertion, he speaks of it to his wife; the sixth insertion, he is ready to purchase, and the seventh insertion, he purchases."
• "He must of course have a really good [product], and one which will please his customers; anything spurious will not succeed permanently because the public is wiser than many imagine."

Seasonality of Birthdays

Normally I save offbeat posts for Fridays but it's my birthday today and I was curious about what sort of seasonality there is for birthdays in the US.  The data was pretty interesting to me.  Not only is there monthly seasonality peaking in September, but there are also spikes and drops surrounding certain holidays.

Olympic Success Relative to GDP

More Olympic analysis from the London 2012 games--

Below is a chart of Olympic medal count plotted against GDP of competing countries.  Looking at the leader-board, it's fairly obvious that wealthier countries tend to do better (US #1, China #2).  By plotting the data though, you can see which countries "outperformed" their wealth level.  Generally, countries above the line did better than their wealth level would imply while countries below the line did worse, but the trend line gets a little skewed by high wealth countries and the logarithmic scale.

For more granularity, below is a list of outperformers and underperformers measured by GDP rank minus medal rank.  For example, Russia has won 58 medals in the games, and is therefore in 3rd place in medals.  In terms of GDP it is ranked 11th in the world, so it outperformed its GDP rank by 8 spots.  By contrast, Saudi Arabia has the 23rd highest GDP in the world but only won one medal, tying it for 65th place.  Therefore Saudi Arabia underperformed its GDP rank by 42 spots. There were 205 countries participating in the games and 784 medals awarded so far.  80 countries have won medals.

Eurozone Olympic Medal Count

With just three days left in the London games, the US olympic team has finally taken the lead in the medal count from China, and hopefully wont relinquish it between now and Sunday.

However, with some calling for fiscal union in Europe, would an athletic union be so far fetched?  If the Europeans banded their athletes together like they have banded their currency, they would be much better off on the medal tally.  In fact, the combined Eurozone has a commanding lead at the London olympics, having won 138 medals compared to 90 by the US and a measly 81 by the Chinese.

Just like they do economically, Germany and France lead the way athletically.  Italy, the Netherlands and Spain all are big contributors, while Greece and Portugal are just riding their larger peers' coat-tails.

Comparing Fund Managers to Golfers and Par

A perennial argument against "active" investment management is that the majority of fund managers don't outperform their benchmarks.  Last year, 84% of managers trailed their benchmarks, a pretty damning statistic. 

Since I like to do offbeat posts on Friday, I thought it might be interesting to compare that statistic to the number of golfers who shoot par.  It turns out that the relative aptitude of golfers and portfolio managers is pretty similar.  Only 25% of golfers break 90.  Less than 1% are scratch golfers.  If par is the benchmark, then most golfers are failing miserably.  Of course, this is a snapshot of all adult golfers, not professionals.  Professionals are expected to break par.  Also, you can't make a decision to "invest" in a par scorecard like you can an index portfolio like SPY.

Still, the very idea of benchmarking performance against an index is one that needs to be considered holistically.  After all, there is no such thing as completely passive management.  If not at the security selection level, there is an active decision made at the asset allocation level.  There are just fewer institutionalized benchmarks to measure the quality of those decisions.  There are likely very few investors with the stomach to hold the SPY as the only holding in their portfolio and keep it that way through retirement, so very few people really get the index return anyways.  Any deviation from the index would technically be underperformance.