Equities

Question 1

What is regarded as the 3 core problems with Equities?

Answer 1

1) You have to live with them during big drawdowns. Great Depression drawdown was 80% and 2008 was 50%
2) Can underperform bonds for more than 20 years. [1803-1857, 1929-1949]
3) Equities are 2x more volatile than bonds - large stocks 20% SD while Govt bonds 10%, small stocks 30%

Question 2

If you have an 80% decline what level of return do you need to get back to breakeven?

Answer 2

400%

Question 3

What would a good estimate of US Equity market correlation to the USD?

Answer 3

historically rolling 30day correlations on a 12m basis shows -0.62

Question 4

What is the nominal and real return of US equities since 1900 according to Dimson and Elroy?

Answer 4

9.6 nominal and 6.5% real

Question 5

Finish this sentence: With no yield in bonds, money has two places to go to seek yield/return?

Answer 5

Equities and Hard assets (includes commodities, real estate)

Question 6

What did the BCG and Morgan Stanley study (1990-2009) tell us about the key drivers of a stocks long term performance (10 years)?

Answer 6

Sales growth was the key driver (75% source) with margin (15%), then 5% for multiple and 5% for FCF.