Michael Batnick

Munger On The Circle Of Competence

I always enjoy taking a few minutes to flip through Poor Charlie’s Almanack. I found the following passage particularly interesting and wanted to share it (Emphasis mine). Munger discusses the importance of “The Circle of Competence,” which helps explain what has fueled Berkshire’s unrivaled performance over the last several decades. The cash register was one…

Have Bonds Failed?

The S&P 500 just experienced its worst month since September 2011, falling 6.3% in August. With such a steep decline, the investor in a classic sixty/forty portfolio might have expected bonds to provide protection to their portfolio. The negative 0.08% total return for the Barclays Aggregate Bond Index might lead them to think there’s something…

Volatility Brings Out The Worst In Us

The following exchange is what often occurs on Twitter, especially when markets are volatile and account balances are going in the wrong direction. “Why are you yelling at me?” “Because we have different views on how to make money in the market!!” Social media has changed the game for the better. Unfortunately there will always…

Beware (the Stories) of the Death Cross

On Friday the S&P 500 experienced what is known as a “death cross.” This is when the 50-day moving average crosses below the 200-day moving average and as you can guess by the name, is allegedly a negative signal for stocks moving forward. A lot of work has been done to debunk the myth of…

Actual Buyers

A lot of the movement in stocks over the past few trading sessions has happened overnight. During the past 5 days, the overnight gaps have totaled 13.14% which is something SPY hasn’t done since October 2008. What’s interesting is that over the last two days we’re finally seeing some buying taking place between 9:30 and the…

What Do People Hear?

When markets enter “correction territory” and volatility picks up, people are much more likely to tune into the TV or read a few articles. The financial media lives for these sorts of markets the same way The Weather Channel yearns for super storms. ” Their job is to sell advertisements, not make their audience better…

A 0.5% Day

Today we saw what is typical of an unhealthy stock market. This morning, when it looked as if stocks might have a monster day, I tweeted that 22 of the 25 single best days since 1970 occurred under the 200-day moving average. The point is that outlier days, both to the upside and to the…

Using The Rear View Mirror

After spending the last twenty years with the strongest stock market in the world, why would we bother diversifying? This is likely what Japanese investors were saying in the late 1980s. Following a 1,500% return over the 20 years prior, the Nikkei swelled to 48% of the global investable stock universe.

Morning Reading, Correction Edition

“U.S. stocks were up nearly 400% in the 1980s. All anyone remembers is the 1987 crash.” (Ben Carlson) “Corrections come a lot slower than anyone expects, but once they happen they escalate faster than most could imagine” (Ivanhoff) “Indices have a tendency to come back, stocks are a different story, most don’t make it.” (Frank…

Should Investors Stay the Course?

“Risk control is invisible in good times but still essential, since good times can so easily turn into bad times.” Howard Marks As U.S. equity markets enter a correction you’ll hear a lot of people scoff at the phrase “stay the course.” For whatever reason, people seem to think that the portfolio of those on…