• Must Reads of the Week | 361 Capital Blog  

    Our favorite reads of the week and the quotes that make them worthy…

    “But again, wouldn’t the limiting factor be that the Earth Engine shouldn’t make, it just can’t make, any power at all, according to every rule in the physics book? Most conspicuous is the first law of thermodynamics, also known as the conservation of energy. Where is this energy coming from?”

  • How to Judge a Quantitative Model  

    Recently, FiveThirtyEight posted a review of how accurate their models have been. The blog talks about calibration, which “measures whether, over the long run, events occur about as often as you say they’re going to occur.” As you could probably guess, their models are fairly well calibrated. This is not surprising given they are in the business of making predictions; and if they were bad at making predictions they probably wouldn’t still be around or be posting about it…The same could be said about us!

  • Bias in Investing  

    The room is surrounded with people and cameras and in the middle of it all sits an oval table with bright green felt big enough to sit nine people, a dealer, and two piles of poker chips. Before the cards are even dealt you have a good feeling about this hand, so you peek and see a 7 of clubs and a 2 of hearts. Despite knowing that this is statistically the worst hand in poker, you trust your “gut” and decide to call your opponent. To your delight, 7, 7, 2 comes on the flop, with these cards you know that you’ve gone from the statistically worst hand in poker to one of the best possible outcomes. Question: Did you make a good decision?

  • Has the Value Trend Reversed?  

    A year ago, we posted this piece showing the wide gap between the returns of the Russell 2000 Growth (RUO) and Value (RUJ) indices. At the time, RUO’s relative outperformance was approaching two standard deviations above average, measured on a rolling 52-week basis. The gist of the post was that it was a large difference, but not abnormal, with the implication that the trend should reverse, but not sure when. With another year of data, we can see how things have played out.

  • Companies Are Finding It Harder to Deliver Impressive Earnings | 361 Blog  

    Fewer companies are delivering inspiring earnings results…and it’s not helping the mood on Wall Street.