2018

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Rising Rate Pitch

Rising interest rates have been a market bogeyman for almost a decade.  During that time we’ve gotten pitched all sorts of products that claimed to protect against this.  They never seemed to do well, mostly because rates never went up!  A couple of years ago that changed.  The Federal Reserve has finally moved toward rate normalization and we’re getting the rising rate pitch all over again. Rates are still very low Interest rates here in the United States are still very low.  Raising interest rates can be a bad thing, but I’m in favor of a modest campaign of slow rate hikes to get back to more normal levels.  That is what the Federal Reserve has been doing recently.  I like that the movements have been telegraphed well in advance and that the Fed is reducing its balance sheet.  When the next recession hits, the United States will be better…


Random Task

The Thing to Keep in Mind About Knife Fights

Years ago, I had the opportunity to attend some self-defense workshops put on by military and law enforcement.  One class that changed my outlook on life was a knife course.  We were going to learn how law enforcement treats knives and how to work with a knife ourselves.  “The thing to keep in mind about knife fights is that YOU ARE GOING TO GET CUT.”  Wait, what?  This guy was supposed to show us how not to get hurt!  It turns out that it is just incredibly difficult to wrestle around with someone that has a knife and avoid the blade.  You can train all the disarming techniques you want, but in real life blood is drawn almost 100% of the time.  I’ve found that this is a useful way to view conflict in general.  In any conflict, expect pushback whether it’s in sports, telling your 8 year old to…


Matt jr

Left of the Decimal

Dow Jones has removed General Electric from the Dow Jones Industrial Average (DJIA) and replaced it with Walgreens Boots Alliance.  GE was an original Dow stock and was part of the index for over 100 years.  The Dow is how your parents consume the stock market which is why newscasts tend to report that information in Dow points.  This is a huge deal, right?  Not from an investing standpoint. The DJIA is price-weighted, meaning that stocks with higher prices make up a larger portion of the index than stocks with a lower price.  This is different than an index like the S&P 500 which is market cap-weighted (the size of the actual company).  It’s interesting to note that GE is getting replaced by a company about half its size by market cap so it’s not like GE is getting the boot (pun intended) because of its size, it’s because the…


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Spot the Pattern and Let Me Lie to You

This is actually a post about two different lies.  The first is the lie your brain tells you because it can’t help itself.  The second is a lie investors need to keep an eye out for when presented with market data. Spot the Pattern We all know about the market cycle.  The market goes up.  The market goes down.  There’s a chart that’s basically a sine wave that starts with an upward trend, peaks, reverses, then goes down until it troughs and rebounds to begin the cycle anew.  The market is never that neat, though, right?   Okay, sometimes it is that neat.  This is a beautiful example of the S&P 500 starting in 1997 moving through the cycle.  The first euphoric peak is the tech boom in 2000 followed by the tech crash into despair.  The rebound peaked just before the global financial crisis sent the market back into…


Run Rich Run

Pros Versus Casuals

One of my favorite events at the NFL Combine is when NFL Network’s Rich Eisen runs the 40 yard dash.  He uses the Run Rich Run event to raise money for St. Jude’s.  It also helps give perspective to just how talented the athletes at the combine are.  Viewed on the field of play, athletes usually don’t look all that different from one another so when someone sees that Denzel Ward is 5’11” and 180 pounds, they may be tempted to think, “I could compete with that guy!”  No, you could not.  Eisen runs a 6-second 40.  Ward is at 4.3 seconds.  Rich provides the average fan a service that should be available in every sport.  I want to see an average guy swim against Michael Phelps or a group of randoms take on an Olympic curling team. Seeing the difference between a professional and an amateur on screen is helpful. …


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How Yale Beat the Market

The Yale Endowment released their 2017 report, taking a victory lap over their 20-year returns.  In their hubris, the endowment’s management team let slip the secret to beating the markets.  “[A]ctive management can be a powerful tool for institutions that commit the resources to achieve superior, risk-adjusted investment results.”  If only Harvard had thought to commit the resources to achieve superior, risk-adjusted investment results! What’s happening here is two of the planet’s greatest active managers disagree about passive investing.  Warren Buffett says most individual and institutional investors would be better off indexing.  Yale’s David Swenson argues that institutional investors with the resources to do so should just pick good funds. Check out this gem of a footnote in the report: “Yale’s 106.3% venture capital return over the past twenty years is heavily influenced by large distributions during the Internet boom. Since such a calculation assumes reinvestment of proceeds from the…


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My “Bad” Personal Finance

“Dad, can we go speed?” I always wondered if my kids would be like me.  So when William asked that question on the way to swimming lessons, I knew I could check that box.  Yep, this kid inherited the car gene.  My dad is a car guy.  By today’s standards (I enjoy driving stick), I am a car guy.  And now it seems the next generation has the bug.  What’s this got to do with personal finance?  Cars are one of the biggest targets for personal finance bloggers.  If you’re trying to live the FIRE (financially independent, retire early) lifestyle and do the whole retire in your 30s/40s thing, a car can be a huge burden on this journey. Car FIRE The FIRE crowd isn’t necessarily against cars so much as car payments.  Their arguments are air-tight and their logic is flawless.  Yes, it makes sense to buy a used…


Garrott Boys

I’m Back, Baby!

It’s been a while since I’ve posted, but that’s because I’ve been busy with a new baby!  Baby and Mom are happy and healthy.  This is a pretty big difference from our first child who spent a ton of time in the hospital during his first two years. There’s a pretty big gap between our two kids (almost 8 years!) so a lot of people are asking us if we are ready to go through all the newborn stuff again.  Are we ready?  We’ve been playing the child-raising game on hard mode for the past 8 years.  We are reveling in changing diapers, feeding, and just holding the newest member of our family. Our child-raising experience is anchored in years of NICU units, dialysis treatments, and navigating various hardware that came with having a baby with ARPKD.  While it’s not exactly a vacation to wake up at 2 in the…


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Has the Dow Left You Dazed and Confused?

Let’s set aside the fact that the Dow Jones Industrial Average is a flawed measure of the overall stock market.  The media, your parents, and their parents have all accepted the Dow as the standard.  Besides, over time the Dow does move in line with the overall market.  So instead of arguing semantics, let’s talk about the headline: a 4-digit drop in the Dow today along with a 600+ point drop on Friday. While the average person associates the Dow with the overall market, we should also recognize that the media loves the Dow because of the potential for attention grabbing headlines.  To paraphrase Wooderson in Dazed and Confused: That’s what I like about the Dow, the points get bigger, but the size of the returns stays the same. On average, the S&P 500 experiences a drawdown of 14% every year.  If we apply that average to the Dow, it would…


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2018 Outlook

I’ve been meaning to post an outlook for 2018, but I kept putting it off.  Between the holidays, a sick kid, and my belief that calendar year outlooks are dumb, procrastination has been beating my will to write.  No more!  Here are my predictions for 2018: If you have been investing for 10+ years, your 10 year return number is going to look a ton better at the end of 2018 Donald Trump is going to collaborate with Democrats going into the mid-term elections Bitcoin and crypto-assets will rally hard, then have a huge correction at year-end To be honest, those second two predictions are garbage.  The first one, however, is the stealth story of the year. Ten Year Returns If you’ve been investing for over ten years, your ten year return number is going to burst higher.  Why?  The S&P 500 lost 37% in 2008 and that year is…