Michael Batnick

Preparing For Lower Returns

John Bogle, Cliff Asness, and Ray Dalio are just a few of the juggernauts that have recently been vocal about expecting lower returns. What is an advisor supposed to do when people like this are all on the same side of a very important issue? Here are a few ideas: Lower your expectations, literally. In the…

The Upward Drift

Cliff Asness is out with a new interesting paper, “Market Timing Is Back In The Hunt For Investors.” In it, he discusses the efficacy of using valuations, specifically the CAPE ratio, to help time the market. One thing Asness addresses is the valuation drift upward which U.S. stocks have experienced over the last century. Here’s Cliff:…

Do People Want to be Fooled?

“Magicians are the most honest people in the world. They tell you they’re gonna fool you, and then they do it.” -James Randi I recently watched “An Honest Liar” on Netflix, which is the story of The Amazing Randi, a magician and escape artist who dedicated his life to unveiling the charlatans. He went on…

Right Place, Right Time

Amazing things can come to people that work hard, persevere, and are lucky enough to be born in the right place at the right time. Malcolm Gladwell talks a lot about this in his book Outliers: The Story of Success, in which he explains why two-thirds of Canada’s pro hockey players were born in January…

Necessity’s Mother

Guns, Germs and Steel is one of the most fascinating books I have read in a while. Jared Diamond masterfully tells the story of how and why civilizations have developed differently across the globe. I wanted to share a passage which questions the common thinking that “necessity is the mother of invention.” The starting point…

When Is the Right Time to Sell Big Winners?

The largest gains are enjoyed by investors with the longest time horizons. Let’s take Amazon, obviously an extreme example. From the time of its IPO through the end of 2014, Amazon gained 12,600%. Even after such a remarkable run, Amazon is up over 100% through the first ten months of this year! However, the reality…

This is the Small Cap Secret No One Ever Told You

This is the small cap secret no one ever told you; You’ve probably heard about the small stock premium, the idea that over long periods of time, small stocks outperform large stocks. There are a bunch of different theories as to why this is the case. Some believe the additional returns are compensation for decreased…

Then, As Now

The Great Crash 1929 by John Kenneth Galbraith was poetically published in 1954, the first year that stocks would eclipse their 1929 highs. One of the most enjoyable aspects of reading about events that shaped history is getting a better sense of what actually happened. Ninety years later, the stories tend to morph into something…

Historic Underperformance

If Donald Trump were to weigh in on value stocks this year, he’d call them ugly losers. Growth stocks on the other, in particular the “FANG” names, have been been extremely rewarding to investors.  Netflix is up 110% this year, Amazon is up 95%, Google is up 35% and Facebook is up 32%. What’s so impressive…

A Ninety Percent Decline

From 1929 through 1932, the Dow Jones Industrial Average would lose nearly ninety percent of its value. In this four year period, there were several nasty bear market rallies, lifting the hopes of the hopeful, only to be met with tidal waves of selling. Corporations were collapsing and individuals didn’t fare much better. Unemployment in…