Tadas Viskanta’s blog, Abnormal Returns, has gained a large and prestigious following during its seven-plus years. His new book of the same name also deserves a wide readership. Abnormal Returns (McGraw Hill, 2012) is not so much an argument for a specific strategy as a catalogue of wisdom. “This book should be read more as an exploration of a series of investment topics as opposed to some sort of doctrinaire investment philosophy,” Viskanta writes.
In his chapter on equity investing, he discusses the surprising relationship between the stock market and the economy. From listening to the news, it’s easy to infer that a weak economy produces poor market returns, but the last three years have shown it’s not that simple. The US, he writes, “continues to operate with generally tepid economic growth, headline unemployment rates well in excess of 9%, and a budget deficit well in excess of a trillion dollars,” yet the S&P 500 has more than doubled since 2009. The lesson is that weak economies are a bit like value stocks, while the burgeoning emerging markets are closer to growth stocks. For the patient investor, it is value that outperforms.