Investing

Carnival Barker

Carnival Barkers

“Step right up, folks!  Hurry!  Hurry!  Hurry!  You are mere moments away from learning a secret so massive, it could undermine our very way of life!  Please move in closer so everyone can hear!  Tell your family!  Tell your neighbor!  Act now and I’ll throw in a free American flag, but supplies are limited!” We recently had a client ask us about a radio commercial he heard on the local AM station.  The commercial is deliberately vague, saying some guy predicted a bunch of stuff that came true in the past and now he’s predicting something really scary so check out his website.  The website launches a video that plays automatically and when you try to leave, you get a pop up that directs you to a transcript of the video. The transcript that I looked at was over 12,000 words long and required over 50 pages to fit in…


January Effect

By now, you’ve heard that the US stock market is off to the worst start to a calendar year ever.  This is the sort of news that is trumpeted far and wide as humans are wired to value and pass along bad news (and to elevate the status of those who sound the alarm).  This undoubtedly helped our ancestors warn each other about saber-toothed tigers, but can trip us up as investors today, leaving us easy prey for today’s investment product-selling predators.  I even heard a local economics professor talking about the ‘January Effect’ on the radio this morning.  The ‘January Effect’ is the superstition that as January goes, so goes the rest of the year.  So if the month of January is positive, then so will the rest of the year.  If the month of January is down, the rest of the year will be negative, too.  It’s so easy…


No Picture

It’s Forecasting Season

  From the Fairway Wealth Management Blog: As the leaves fall from the trees and the temperature starts to drop here in Cleveland, I am reminded that forecasting season is right around the corner. The same people who predicted $200+ oil, hyper-inflation, and multiple Federal Reserve rate hikes for 2015 will be begging for you to believe that they know what is in store for 2016. They do not. Beware predictions of what the market will do, particularly if they are precise. It may be an interesting game to play for fun, but anyone making a prediction on the S&P 500 out to two decimal places is a charlatan. Predicting the markets is like predicting the weather except that meteorologists realize that predicting the exact weather conditions twelve months in advance is lunacy. The financial entertainment industry is not as self-aware. On December 31st, 2016, what will Cleveland’s exact temperature…


1.21 Gigawatts

On October 21st, 1985, Marty McFly went back in time 30 years to escape Libyans, save Doc Brown’s life, and turn his dad from a weenie into a hero.  He also wound up with a rad 4×4, but before he could take it for a spin, Doc Brown stopped by in a flying DeLorean to whisk him 30 years into the future, to 2015.  Hijinks ensued as bully Biff Tannen got ahold of a sports almanac from the future and made a fortune betting on sports, but Marty saved the day with skateboarding, 1980s pop culture references, and a soundtrack provided by Huey Lewis and the News. Since this month marks the date that Marty and Doc Brown arrived in the future, it provides us with a convenient frame of reference for what a 30 year time period feels like.  From 1985’s perspective, 30 years into the future felt like…


No Picture

3rd Quarter Commentary

This year’s market movements are not unexpected nor are they out of the ordinary.  The S&P 500’s average return is about 10% with an average drawdown of 14% sometime during the year.  Many pundits called for a correction (stock market drop of 10% or more) this year and were lauded for this supposedly bold stance.  History tells us to expect a drawdown of 14% each year and this year we got one of 12%.  Again, this is not unexpected.  We should only be surprised if there isn’t a sizable drawdown during the year.  I admit, it would be highly entertaining if we had a panic button we could hit here in the office that set off klaxons and red strobe lights in the event of market emergencies.  Unfortunately, that button would be largely unused.  Negative returns are part of a normal market and we are a long way from hitting…


Wild Monday

So what happened to the market on Monday? I don’t know and anyone who says they do know is full of it.  Because investing involves lots of numbers and math, it is easy to assume that there are clear answers to questions like this.  Math is constant.  2+2=4.  Investing is not constant.  2+2= whatever the next guy is willing to pay for it and that person might value 2 differently than you or I.  Increasingly, the next guy isn’t even a person at all, it’s a computer.  Math serves more as a frame of reference in investing than as an absolute. Ok, that was a boring non-answer.  I’ve found that people asking about investing don’t actually want an update on the reality of the markets so much as a quick story  – the more outrageous, the better.  We want someone to blame when the market goes down and we want someone to tell us…


The Fear Trade

The fear trade is alive and well even in this incredible bull market.  Listen to AM radio for an hour and you will likely hear at least one commercial for gold or annuities. “Are you prepared to lose 20, 30, even 60% of your life’s savings in the next stock market crash?  It’s not a question of if it will happen, but WHEN it will happen!!!” “Tired of losing money in the stock market?” Humans are hardwired in such a way that pain registers more significantly than gain.  The predisposition to obey fear has been passed down through the generations in order to avoid and escape predators.  The caveman who investigated a rustling in the bushes ended up as a bear’s lunch.  The caveman who ran away lived to hunt another day.  Today’s environment is different.  The humans who give in to fear run straight into the jaws of the…