Equity Risk Premiums: The 2012 Edition

As many of you who have been reading this blog for a while know, one of my obsessions is the equity risk premium. To me, it is the "number" that drives everything we do, while investing, and two events precipitated this post. The first was an article in the Economist on the topic, arguing that investors are expecting misreading the past and expecting higher returns from equities than they should. The second was the culmination of what has now become an annual ritual for me, which is updating my paper on equity risk premiums for the fifth year (I started in September 2008). You can download...

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Greg Smith on Goldman: An indictment of investment banking?

Greg Smith, the Goldman VP who resigned with a searing indictment of Goldman Sachs in the New York Times, has created quite a commotion. Predictably, the responses, which are understandably heated, have fallen into two extremes. On the one side are those who are predisposed to believe the worst about investment bankers and view this as vindication for their view that investment bankers are shallow, self serving and greedy. On the other are defenders of investment banking, who argue that this article states the obvious (that investment bankers are focused on making money) and that Greg Smith is...

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Apple: Thoughts on bias, value, excess cash and dividends

Apple is hitting or is close to hitting two significant landmarks. Its market cap exceeded $ 500 billion yesterday (2/29) and its cash balance is at $ 100 billion. The twin news stories seem to have set investors, analysts and journalists on a feeding frenzy.  I think it is ironic that a company doing as well as Apple is right now, in terms of operations and stock price performance, is receiving this much unsolicited advice (split the stock, pay a dividend, buy back stock, do an acquisition, borrow money) on how it should fix itself. As we look at these prescriptions being offered to one...

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