Felix Salmon

Beware those S&P 500 benchmarks

Next time a fund manager brags of outperforming the S&P 500, remember this:

A favorite index for advisers has been the S&P 500, because its performance has been below every other major asset class over the past decade. Virtually any portfolio diversification away from large-cap U.S. stocks would have outperformed the predominantly large-cap S&P 500. All an investor needed was a small allocation to international stocks, small-cap stocks, REITs or bonds–or even cash–and his portfolio would have “beaten the market.”

The negative bag-check fee

Back in September, Joe Brancatelli made a compelling case that bag-check fees at major airlines were actually losing them money, rather than making money. And that was before Southwest airlines embarked on a major marketing campaign touting the fact that they check bags for free — a campaign that Eric Joiner calls “pure marketing genius”.

Shia LeBoeuf vs the short-sellers

May I present to you Shia LeBoeuf, momentum trader:

After preparing for his turn as a hedge-fund trader by visiting trading floors of small brokerage houses, LaBeouf in the April issue of GQ talked up the stock of an oil and natural gas exploration company that has yet to produce any of either.

Student loans and fiscal policy

I don’t even pretend to understand the parliamentary mechanism by which the long-overdue overhaul of the student loan system was pushed through inside a health-care reconciliation fix. Certainly that says a lot about how dysfunctional Congress is.

Why mortgage principal reduction isn’t happening

BofA’s “earned principal forgiveness” program looks very similar to the Responsible Homeowner Reward plan of Loan Value Group that I wrote about yesterday. In both cases, homeowners staying current on their mortgage payments get a reward after a certain number of years — a principal write-down on their mortgage in the first case, and an old-fashioned cash payment in the second.

Goldman’s outperforming mortgage CDOs

I’m a bit late to this, but Stephen Gandel had an interesting post this weekend about the now-famous Harvard thesis upon which Michael Lewis based a lot of his latest book, and whether it partially exonerates Goldman Sachs from the charge of deliberately building CDOs which were designed to go bad, to the profit of Goldman Sachs.

Counterparties

How climate change is affecting Latin America’s coffee crop — NPR

Tonchi moving from T to W: obviously V was passed over — NYT

Advice for PBS: “Instead of showing Andrea Bocelli, I’d telecast David Robertson and the St. Louis Symphony performing Samuel Barber’s ‘Prayers of Kierkegaard.’” — WSJ

E&Y tries to defend itself

Contrarian Pundit has a letter being sent out by Ernst & Young “to address certain media coverage and commentary on the Examiner’s Report that has at times been inaccurate, if not misleading”.

Blodget fires Carney

Why did Henry Blodget fire John Carney? I suspect that Carney himself will tell us soon enough. But the broad narrative of Foster Kamer’s post today rings true: it’s the age-old tension between the popular and the high-quality.