For years now, there has been a war in the investment industry, driving down fees as fund companies compete for business. At first glance, lower fees may seem like the answer to investors’ prayers. After all, keeping costs as low as possible is an important pillar to maximizing one’s invested wealth, as it is one of the few things you can control in an uncertain market. While our firm’s investment thesis agrees with this idea, we constantly remind ourselves and our clients that there’s no such thing as a free lunch.

When Andy was ten years old and in fifth grade, he discovered that if you strode confidently toward the bike rack at lunch time, the Hall Monsters (sorry, Monitors) would assume you had permission to go home to eat lunch with a parent. A few times that year, he used this method to hop on his bike, take his bag lunch to his empty home, and (sometimes with an accomplice) watch as much of The Price is Right as could fit into an elementary school lunch hour. Andy learned a few important lessons that year:

1. Confidence and initiative are a powerful combination
2. If you are unsure of the exact price of a thing, do your best to build a range of decent guesses before you bid
3. When push comes to shove, bidding at the low end of your range leads to better outcomes over time
4. We all have a responsibility to help control the pet population

Collectively, the West Wing at Exchange Capital Management has spent years studying architecture, engineering, finance, and mathematics, and we are all CFA charterholders or candidates. Sometimes, though, some educated guessing and intuitive logic can answer a complex question better (and faster) than quantitative analysis; just ask the contestants on The Price is Right. Given the recent revival of criticism toward corporate stock buybacks, we decided to walk through a thought experiment considering a simple question that is often ignored in the conversation.

If you follow financial news, you have probably noticed pundits warning of the flattening yield curve recently. In fact, they say, someday soon it will invert and part of it has already! Furthermore, when the yield curve inverts, these pundits claim, it predicts a recession almost perfectly!!! If you are like many people watching these shows, your anxiety spiked on the word "recession" and you forgot to ask what the yield curve even was. Our team is fairly level headed and analytical, and as a firm we reject market timing, so we think this kind of hyperbolic commentary should be analyzed rather than taken as simple fact.