Cass Business School, 2013
Note: While this research (Clare, Motson & Thomas) has received ample press coverage, I don't recall seeing links to papers, video or PowerPoint before. They appear below.

Monkeys vs Fund managers - An evaluation of alternative equity indices

1. Alternative indices produced a better risk-adjusted performance than passive exposure to a market cap-weighted index
2. Fundamental indexes out-performed a comparable market cap index

Authors discuss results:

• 'Monkeys' beat market cap indices - The Video
• 'Monkeys' beat market cap indices - The PowerPoint
• 'Monkeys' beat market cap indices - The Feature
• 'Monkeys' beat market cap indices - The Mobile Page
• 'Monkeys' beat market cap indices - The Monkey

EM Blogs From Barrons
BRAZIL: Brazil slipped into recession,
The Market Vectors Russia ETF (RSX) tumbled nearly 2% Friday, ending a disappointing week for bulls who have been pouring money into the fund this month.
INDIA: India’s Pres. Narendra Modi heads to Japan to forge new bonds at the expense of China.
http://blogs.barrons.com/emergingmarketsdaily/2014/08/29/emerging-markets-week-in-review-2/?mod=yahoobarrons&ru=yahoo
South Korea:
Industrial production in July rose by 1.1%, much greater than the 0.3% consensus.
Japan had the opposite of Korea. Its industrial production disappointed, creating dilemma for its policymakers
http://blogs.barrons.com/asiastocks/2014/08/29/asia-evening-roundup-korea-ip-jumps-japan-sinks/
For the week ending August 27, of the $1.2 billion that went into emerging markets, $0.8 billion, or about two-thirds, went into China. This is the 12th consecutive week of inflows.
Bloomberg reported the largest China ETF, the iShares Large Cap China ETF (FXI), is on track to break the December 2012 record this month. This ETF has rallied 9.4% in the third quarter, although August is mostly trading sideways. The iShares MSCI China ETF (MCHI) gained 8%. Fund flows tend to lag stock market performance by a few weeks
http://blogs.barrons.com/asiastocks/2014/08/29/investors-love-china-shun-japan/
Update 08/31/2014 (this article does correctly name Mr Modi as India's Prime Minister)
Japan Aims to Double India Investment in 5 Years: Report
"India, Asia's third-largest economy after China and Japan, needs faster economic growth to create work for the one million young people who enter the workforce every month.
In early steps, PM Modi has allowed foreign investors to own 100 per cent of railway projects with an eye to drumming up interest in building India's answer to Japan's high-speed 'bullet' trains. He is also courting Japanese investment in an ambitious industrial "corridor" to run between Delhi and Mumbai.
Japan's Honda Motor Co Ltd, Suzuki Co Ltd, Sony Corp and Toyota Motor Corp are household names in India. Yet, India accounts for only 1.2 per cent of Japan's total outward foreign direct investment."
http://profit.ndtv.com/news/economy/article-japan-aims-to-double-india-investment-in-5-years-report-657101

@rjb112: i don't necessarily follow mega caps.......the argument is that.......and, technically, large caps usually lead when the rally is mature -- like it is now.

@fundalarm: I haven't personally seen the original research on megacaps, but as you mention, supposedly they lead in the back half of bull markets. They also supposedly lead in bear markets.
Have you seen any decent research on megacaps that I can read?
They apparently have not been in favor since the mid/late 1990's, when there were some years in the 1995-2000 time frame where you could have just invested in the largest [by market cap] 25-50 stocks and captured the market leadership.
Seems to me that buying the largest, safest companies at a discount is not a bad idea.
XLG, IOO, and as @expat points out, BRLIX, seems to be a good way to invest in megacaps.
You mention "WE are overweight xyz in such and such accounts".....if this is personal, please don't answer, but are you working for a company that professionally manages investment accounts? Do you feel comfortable saying the name of the company, and what your job is with them?

My ouch is OAKIX. Not quite down -5 ytd but a huge change in performance.
http://www.oakmark.com/Commentary/International/Oakmark-International-Fund-Second-Quarter-2014.htm
To swing from +20.93% for 12 months (Vanguard data) to -2.61% total return (their numbers) for the 3 months ending 6/30/14 (-0.91% YTD) ... something went sour.
Credit Suisse Group is their largest holding as of 6/30 and it has had, shall I say, challenges. This explains some of their results.
After the banking bath of 2008 I wonder about the wisdom of any fund having a substantial portion of their portfolio in banking. Their next largest holding is Allianz which doesn't concern me. 26% of OAKIX's investments are in financials.

FYI: Patience, emerging-markets stocks, and municipal bonds.
Regards,
Ted
http://news.morningstar.com/articlenet/article.aspx?id=663507

The balloon just went up over the UK.
http://video.foxnews.com/v/2553193403001/uk-pm-cameron-on-raising-countrys-terror-level-threat/#sp=watch-live

FYI: Tech stocks are often at the forefront of the stock market's advances, but as a broad group their returns in the past 15 years pale against the energy and real estate sectors.
Regards,
Ted
http://license.icopyright.net/user/viewFreeUse.act?fuid=MTg0MTYyOTY=
Enlarged Graphic; http://news.investors.com/photopopup.aspx?path=WEBMUTpent082814.gif&docId=715103&xmpSource=&width=1000&height=1197&caption=&id=715108

@rjb112: i don't necessarily follow mega caps, but i own a chunk of S&P500 index, VGHCX and a few individual names that are considered mega caps. i like GAINX (heavily subsidized ER and global market leaders). institutionally, we are overweight US large caps in multi-asset accounts. the argument is that, fundamentally, profitability of US companies is rising and, technically, large caps usually lead when the rally is mature -- like it is now.

@fundalarm: thanks. What's your opinion of megacap stocks now, both here and outside the US. Example: XLG, Guggenheim Russell Top 50 Mega Cap ETF.

The benchmark M* is using is the Russell 1000. Category: Large Blend.
I don't have a good example of a foreign megacap stock fund.
I just found IOO as an excellent example of a global megacap fund.
I think the megacaps have been underappreciated and unloved for quite some time, and represent very high quality names at reasonable prices.
You won't hurt my feelings if you totally disagree!

A nice sharp comment from the current Malkiel WSJ piece, which is weak, by a James Lear:
\\\ The CAPE analysis by Dr. Schiller is an example of sophisticated mathematics done badly. Two reasons:
1) the "cyclically adjusted" portion of his index is a 10-year moving average on *earnings* (the denominator of CAPE) but not on the price. The SMA is a common tool in electrical engineering signal processing. It removes high frequency noise but it also delays the signal by 1/2 the period of the moving average. In this case, the delay is 5-years. It turns out that it is the delay that makes CAPE seem work as a predictor, not the filtering. In other words, we can use today's price divided by earnings from five years ago, and voila we have something very similar to CAPE. The beauty of using the delayed 5-year earnings as opposed to the SMA is we can roll forward (e.g. look at 4-year earnings) and look ahead at what Schiller's CAPE will be in the future at today's prices.
2) The CAPE correlation coefficients are low.

FYI: Warren Buffett suggests most investors buy a low-cost S&P 500 index fund[1]. In the eyes of the Oracle, the S&P 500 is the perfect index. He particularly likes the Vanguard S&P 500 ETF (VOO[2]), but I suspect both the SPY and IVV would do just fine for most investors.
Regards,
Ted
http://investorplace.com/2014/08/better-index-sp-500/print

Hi crash. I don't want to come off as obnoxious or irritating with personal questions, but the comment about 'a work in progress'; this doesn't need to be a work in progress IMHO (opps, used that terrible term). You have well over 50% in one area of the world, Asia. Should Asia be weighted above average in a portfolio? That is debatable. So why would you wait years to get the balance to a more appropriate mix for a 60 year old? I guess I just don't get it. By the way, I'm 60 also and this portfolio would keep me up at night.
If you were to move your portfolio to a brokerage, say Schwab, they will give advice and answer questions for you for free. You don't have to except the advice but they would be able to lay out different risk scenarios for you. If you have a brick-and-mortar brokerage in your area where you can sit face to face with someone that's even better. I just think you could assemble a much better risk-reward portfolio now, not waiting for new contributions to get it there. That would probably take many years. Waiting could be hazardous to your wealth.

Hello. About my bonds:
DLFNX is domestic bonds, at 2.46% of portf.
MAINX is at 3.54% "World Bond" category at Morningstar.
PREMX is EM bonds, at 3.94%
Domestic funds PRWCX and MAPOX are "balanced" and hold bonds with equities, too.
:)
In the "other" category, my best guess is that it's some Treasury "shorts" in MAINX and convertible bonds in MACSX.

@MOZART325: The reference to Hussman was as plain as the nose on your face. Thanks for the link.
Regards,
Ted

"The irony is that if you are moderately wealthy, advisory fees might be your single largest annual expense -- and you're probably oblivious to them. You diligently include an $8.99 Netflix subscription in your monthly household budget, but have no idea you're paying 50 times that much to your 401(k) adviser. No other industries work like this."
If I recall correctly, many years ago John Bogle was saying that he wanted a requirement that mutual fund companies include on each statement the actual dollar amount of expenses for that specific person's account.
So if a person had a mutual fund account of $100,000 and the expense ratio of the fund was 1.26%, the account statement would say that $1,260 in expenses had been deducted from the account.
I'd like to see regulations requiring that. Not going to happen, but would be a real eye opener for everyone.

Here is the paragraph containing that link. He believes that Hussman's fund is "the worst mutual fund to own over the last 10 years"
The truth is that finance is filled with people who remain in business despite awful track records. There were 894 mutual funds in 2012 that had been in business in 1998. Of those, only 275 beat their benchmarks. That means more than 600 funds have underperformed what could be achieved in a low-cost index fund, but still remained in business for a decade and a half. The worst mutual fund to own over the last 10 years -- one that has underperformed all of its peers and trailed its benchmark by 150% -- still manages more than $1 billion.

@Crash, regarding:
M* Instant X-Ray:
Cash 4%
US 20
Foreign 56
-Europe Developed 14.63
-Europe Emerg. 0.46
-Asia Dev. 11.63
-Asia Emerg. 23.99
-Japan 7.76
-UK 7.56
-Canada 6.74
-Ausralasia 3.83
-Africa/Middle East 2.79
-Latin America 0.61
BONDS: 17
"Other:" 3
I haven't used that tool personally........I'm not getting a clear picture:
% US bonds vs. % foreign bonds?
Looks like you have fixed income: 17% "bonds", 4% cash= 21% fixed income
Can't tell what "other" is, I don't like when Morningstar uses that term.
56% foreign stocks, 20% US stocks?
Just wondering what made you want to be 56% foreign stocks and only 20% US stocks.
Looks like 74% of your stock allocation [56/76] is foreign stocks.
A "total world market weighting" would be closer to 50/50, which is close to the allocation in the Vanguard Total World Stock Index fund
Nothing wrong with being heavily in foreign stocks.
One day the performance of foreign stocks will trounce the performance of US stocks, and at that time you would be glad you were not 50/50.
Most US investors have a "home bias" and are weighted/skewed towards US stocks.

Hello, everyone. I promised an update. Here's my total run-down, after the change, tonight:
1. MAPIX 23.57% of portfolio Matthews Asia Div.
2. PRWCX 18.74 TRP Cap. Apprec.
3. PRESX 14.87 TRP Developed Europe
4. MAPOX 9.01 Mairs & Power Balanced
5. MEASX 6.2 Matthews Emerging Asia
6. MAFSX 6.19 Matthews Focused
7. PREMX 3.94 TRP Emerg. Mkt Bonds
8. MAINX 3.54 Matthews mostly Asia bonds
9. SFGIX 2.82 Seafarer EM
10. TRAMX 2.81 TRP Africa-Middle East
11. MACSX 2.63 Matthews Growth & Income
12. DLFNX 2.46 DoubleLine bonds
13. MSCFX 2.45 Mairs & Power Small-cap.
14. NAESX 0.76 (wife's 403b) Vanguard Small-cap Index Fund
*****************************
M* Instant X-Ray:
Cash 4%
US 20
Foreign 56
-Europe Developed 14.63
-Europe Emerg. 0.46
-Asia Dev. 11.63
-Asia Emerg. 23.99
-Japan 7.76
-UK 7.56
-Canada 6.74
-Ausralasia 3.83
-Africa/Middle East 2.79
-Latin America 0.61
BONDS: 17
"Other:" 3
++++++++++++++
Thanks for all the support, everyone. As I suppose it is for the rest of you, this thing is always a work in progress. I mentioned that I'll be growing MAPOX, and also my bond funds, particularly DLFNX. An intense, focused, lengthy conversation with a financial pro last year was enlightening. Wholesale changes were made. I want it to be truly worldwide. It is that. But it's still, as I say, a work in progress. Like myself.

...... down funds and whether folks were adding to their's..............whether or not it's wise to add to our laggards on the way down. Doing so runs contrary to the adage about not trying to catch a falling knife. I don't think its a clear cut choice. There are a tremendous number of other variables one must consider.

The question as to whether to add to down investments is a very difficult one.
All the precepts of value investing say to buy the unloved, buy the out of favor, be greedy when and where others are fearful......buy at a discount.
Other precepts say 'Let your winners run'.
Peter Lynch said don't 'water the weeds and don't cut your roses', or something like that.
Remember at the end of 2013 and very beginning of 2014 when almost No One wanted emerging markets. They just kept going down and down. They had a terrible 2013 performance compared to the US market, -5% vs. +32.4%. Would have been a perfect time to buy emerging markets I believe in February 2014, not sure when they bottomed....but ever since them they just can't be stopped. I've seen several down stock market days [US and developed int'l] where emerging markets were up in the past several months.
I own Sequoia, SEQUX. Underperforming the market by 9.5% year to date. Good time to buy more? I think so, but I'm already fully invested in my equity allocation.
What about small cap growth? A big underperformer this year. Good time to buy?
What about megacap stocks, as represented by XLG. On a relative basis, megacaps have underperformed for many years. A 2% underperformance relative to the S&P 500 over the past 5 years. An excellent time to buy? They are the most stable companies, at relative bargain valuations vs. the market.