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…
The Good, the Bad and the Ugly
The market had a rough week and the financial media was handed a plethora of scary statistics on a silver platter. When markets evoke emotions, its really important to stay away from reading or watching things that can cause you to make bad decisions. I took the liberty of collecting some articles and to my…
The Power of Framing
Daniel Kahneman, one of the pioneers of behavioral economics, describes framing in his Thinking, Fast and Slow: “Framing effects: Different ways of presenting the same information often evoke different emotions. The statement that ‘the odds of survival one month after surgey are 90%’ is more reassuring than the equivalent statement that ‘mortality within one month…
What Makes a Great Investment Article?
Morgan Housel is one of my favorite writers in all of finance. He had this to say on what makes an investment article great. Morgan believes that the best posts are evergreen and I totally agree. One of my favorite pieces of all time comes from Jason Zweig, written in 2001. This post will be…
Obliterated
There has been a lot of talk about how just a few leaders are responsible for buoying the markets. You might be thinking about the outsized gains in Netflix and Amazon, however, we are seeing massive relative out performance of the larger stocks not just in the S&P 500, but in the Russell 2000 as…
Looking Inside The Market
Although U.S. equity indices are hovering near all-time highs, the average stock in the Russell 3000- which covers 98% of the investable market- is already in “bear market” territory. How can it be that the average stock is down 20% from its 52-week high while the index is just 2.9% from its all-time high? There…
