I had lunch yesterday with Rob Arnott, founder and CEO of Research Affiliates, a California-based investment management firm. The company manages more than $170 billion. Mr. Arnott is also a financial wizard, having written several award-winning academic papers for the Journal of Portfolio Management.
He is famous for inventing fundamental stock index funds and exchange-traded funds (ETFs), whereby the indexes are weighted by fundamentals (earnings, revenues, cash flow, etc.) rather than market capitalization. By being value-oriented rather than growth-oriented, he found that fundamental indexes outperform the standard market cap funds and ETFs like the S&P 500 Index (SPY). Several fundamental index ETFs have been created, such as PowerShares Fundamental Index US 1000 (symbol PRF). It also tends to pay higher dividends than SPY.
Speaking of dividends, Arnott co-authored an important paper in 2003 with Cliff Asness called “Surprise! Higher Dividends = Higher Earnings Growth.” This paper stated that against traditional theory, the more a public company paid out in dividends, the more that company’s earnings grew.
That’s good news for our high-income strategy at Forecasts & Strategies, where we recommend several rising-dividend-paying stocks and funds. We’re beating the market with less risk.
Arnott is a big supporter of Club for Growth and other libertarian causes and looks forward to coming to FreedomFest in the future.
You Blew It! Dr. Ben Carson for President?
Dr. Ben Carson, a retired neurosurgeon from Johns Hopkins University, announced this week that he had established an “exploratory committee” to run for president in 2016.
It takes incredible hubris for a man, no matter how intelligent — Dr. Carson was a world-class pediatric neurosurgeon — who has no political or government experience whatsoever to run for the most powerful position in the world.
Why? Because he had the guts to criticize President Barack Obama in person at the National Prayer Breakfast several years ago? That he became in demand as a speaker? That he has written a few “feel good” patriotic books about America?
You need a ton more experience than that resume, my friend, to run for U.S. president.
Dr. Carson would have been smarter — let’s say wiser — if he had gone on Bill O’Reilly’s Fox TV show and announced that he had first decided to run for governor of the state of Maryland. If elected, Dr. Carson could have shown that he has what it takes to lead a government.
He should at least hold some kind of political office and see how well he does before he seeks higher office.
Besides, I’m not sure Dr. Carson is charismatic enough. I heard him speak at the New Orleans Investment Conference two years ago. He addressed a sympathetic audience but he was so low-key that his talk engendered an unenthusiastic standing ovation. Even on the recent O’Reilly program when he revealed his plans to launch an exploratory committee for a presidential run, he seemed to lack sufficient enthusiasm. Dr. Carson’s announcement certainly fell short of gaining the kind of buzz that Arnold Schwarzenegger received when he announced his run to become the governor of California on the Tonight Show in 2000.
In case you missed it, I encourage you to read my e-letter column from last week on Eagle Daily Investor about how stocks are not too overvalued for investors to find profits. I also invite you to comment in the space provided below my Eagle Daily Investor commentary.
Good investing, AEIOU,
Presidential Fellow, Chapman University
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O Top Ten Debates Announced at This Year’s FreedomFest, July 8-11, Planet Hollywood, Las Vegas: We have a great lineup of debates this year, starting with the Krugman-Moore debate. We also have: Peter Thiel vs John Mackey on “Monopoly Power! Has Competition Been Oversold?”… Michael Shermer (Scientific American) vs Congressman Allen West on “Are We in Moral Progress or Decline?”… Ian Morris (Stanford University) vs Angela Keaton (Antiwar.com) on “War, What is it Good For?”… Michael Huemer (University of Colorado — Boulder) vs Mark Skousen (Chapman University) on “Is Government Really Necessary?”… Dinesh D’Souza (“What’s So Great about God”) vs the late great Christopher Hitchens (“God is not Great,” whose views we will try sharing via “séance”) on “Does the Afterlife Exist?”… Colin Campbell (“Whole: Rethinking the Science of Nutrition”) vs Wayne Gorsek (CEO, DrVita) on “Are Vitamins Good for You?”… Gregory Clark (University of California — Berkeley) vs Alexander Green (Oxford Club) on “Is the American Dream Dead?”… Richard Crepeau (University of Central Florida) vs Marc Eliot (Hollywood’s #1 biographer) on “The New National Pastime: Football or Film?”… Yaron Brook (Ayn Rand Institute) vs Ziad Abdelnour (Blackhawk Partners) on “Israeli-Arab Peace Accord in Oil, Gold and Stocks!”… plus “The Fed on Trial” with prosecuting attorney Robert Murphy (Mises Institute) vs defending attorney Jeff Madrick (“The Case for Big Government”), with Steve Forbes and John Allison (Cato Institute) as star witnesses and our Judge Kennedy (Fox Business). Only at FreedomFest — visit www.freedomfest.com, or call toll-free 1-855-850-FREE.
Investment U conference, March 11-14, 2015, St. Petersburg, Florida: “A New Golden Age” is the theme for this year’s IU conference at the Renaissance Vinoy Resort. Speakers include Alex Green, Marc Lichtenfeld, Dave Fessler, Frank Holmes, Bryon King, Karim Rahemtulla, Michael Checkan, Rich Checkan and Martin Truax. To register, go to www.investmentuconference.com, or call 1-800-926-6575.
I want to invite you on a cruise, Sept. 13-20, with Newt Gingrich, Chris Versace and me, among others. Come spend seven fabulous days aboard the six-star luxury liner, the Crystal Symphony. We will travel from New York to Montreal with a roster of noted historical scholars, political pundits and renowned market experts who will share their insights and perspectives on the current environment in Washington and Wall Street. For further information, including how to sign up, call 800-435-4534 or visit www.PoliticsAndYourPortfolio.com.