News

Cleveland Bridge

Eventful 24 Hours

The last 24 hours have been eventful.  If you need yet another perspective on world events, keep reading.  If not, just skip to Other Stuff where it’s less serious. We launched missiles into Syria. This feels like the typical setup where the world calls on the US to act as the world’s police, our military is deployed, and the world decries our meddling in world affairs.  A dictator is butchering his own people, but no one is willing to do anything about it except us (sternly worded letters don’t count as action).  If we don’t do anything, we’re abandoning the region to nefarious powers.  If we go in guns blazing, we’re warmongers.  Ad hoc missile strikes seem to have minimal political backlash while still accomplishing a mission. If this doesn’t lay to rest the conspiracy theory that Vladimir Putin controls our executive branch, it certainly erodes its credibility. In one…


Red Herring, Red Swan

Red Herring With headlines proclaiming the worst day for the stock market in 2017, you might think the market has plummeted in a bout of panic-selling.  This is a red herring.  The S&P 500 hasn’t been down more than 1% in over 100 days.  Of course we’re going to have another 1% down day some time, but the real story is the lack of big down days rather than breaking this streak.  I’m sure some poor souls are reaching out to their brokers to ask what they should do.  CNBC is shaking the tree with the noise around this ridiculous headline and brokers are happy to collect the commissions that fall into their laps. Red Swan The concept of Black Swans has been bastardized almost beyond recognition.  Nicholas Taleb put forth the idea of a Black Swan event being something outside the realm of normal expectation making a significant impact that…


March Madness and a Special Dispensation in Cleveland

A quick update today as March Madness takes hold and Cleveland prepares for St. Patty’s Day.  How big is St. Patrick’s Day in Cleveland?  The Catholic Diocese of Cleveland issued a notice regarding corned beef and Lent.  My Catholic friends are encouraged to enjoy corned beef and perform a work of mercy rather than abstain from meat. Fed The Federal Reserve raised rates by 25bps.  The decision was nearly unanimous with the lone dissent being hometown boy Neel Kashkari.  Kashkari is a Northeast Ohio native and scary smart.  I think his dissent was more to attract attention to a political issue (economic inequality) rather than an actual desire to hold rates.  He has run for public office before (governor of California, no less!) and I think he will again.   The community that is smart enough to elect him will be very lucky.  I don’t agree with all of his…


An Anniversary and Some Words on Garbage

This week marks the anniversary of the bull market whether you measure from the intraday bottom on 3/6/2009 or the day’s closing bottom on 3/9/2009.  It’s not as simple as all that, though. After a 19% annualized gain or over 300% cumulative, it’s hard to ignore claims that the market is over-valued.  Sure, the doom and gloom folks have been saying that all the way up, but it’s getting harder to find statistics that don’t show the market at least fairly valued.  JP Morgan’s David Kelly shows P/Es slightly above historic averages, but the Shiller CAPE is really elevated. Some things to keep in mind After a long run, it feels like we are due for calamity or at least a pullback.  We’ve already had a pullback – four of them, in fact.  And we only need to look at last year to remind ourselves that the market’s rise was…


Market Top?

The Market Top and Procrastination

If it bleeds, it leads and in the investing world that means finding someone willing to call the market top.  There are plenty of statistics and charts that show the market as being over-valued pretty much since the end of the financial crisis.  While we can identify how the market looks relative to the past, the information is less useful in predicting the future. I’ve been critical of Cyclically Adjusted Price/Earnings (CAPE), but I do watch this and other valuation metrics as I think they provide information about the markets and market participants.  I don’t think any one of these fundamentals provides actionable information, however.  That is to say it would be unwise to try to time entry and exit in the market based on these statistics.  I feel the same way about charts.  It seems to me that you can overlay a chart from any time period and make it look just…


How ‘Bout That Market: 2/27/2017 Crisis

How ‘Bout That Market?  This is a question I hear at social gatherings often enough that it makes sense to make it a regular entry on this website. The Market The markets continue their march upwards in spite of unrelenting headline risk.  The stretch of positive performance is somewhat unnerving because of two streaks: an 11-day winning streak for the Dow and 48 days without a 1% move in the S&P 500.  This is really weird action, especially in the face of an emotion-driven news cycle.  Have we finally reached the point where reporting everything as a crisis means that nothing is a crisis?  Liz Ann Sonders remarked on a call that when there are so many voices calling for a bubble, it’s not a bubble.  I’m inclined to agree.  Even the perma-bears seem to be tiring of shouting bubble all day. News seems to have devolved into second-guessing President…


Market

How ‘Bout That Market: 2/13/2017

How ‘Bout That Market?  This is a question I hear at social gatherings often enough that it makes sense to make it a regular entry on this website. The Market How is the market doing?  Before we get to the market today, let’s look at how the market was doing a year ago.  On February 11th, 2016, the market was off to its worst start ever, down over 10%.  This was it.  This was the other shoe to drop.  Except that it wasn’t.  2016 ended up 12% in spite of significant headline risk (Brexit, Trump, Cleveland sports successes, etc). How is the market doing today?  Twelve months after the market bottom, the S&P 500 is up over 27%.  The market continues to climb the wall of worry.  I don’t know when the march upward will end.  The only thing I would take as a sure sign of a market top…


fiduciary

Cacti and Poison Ivy

You don’t have to be a botanist to know not to jog naked through a cactus grove.  Even an idiot can see the danger in that.  People like to think that identifying investment dangers is just as easy.  You’ll know when someone is taking advantage of you or a loved one, right?  Rather than a bramble of cacti, the investment landscape is a beautifully manicured garden.  There are so many plants in this garden that many people seek out a guide, but few make the distinction to search for a good guide.  They merely grab whoever’s most convenient and wind up with a case of poison ivy or worse.  The kind of guide investors need is called a fiduciary. When it comes to finance, the US is mis-regulated.  Small banks are at a disadvantage due to the costs of complying with rules meant to rein in mega-banks.  Well-meaning legislation (like FASB 157)…


No Picture

If I Could Give You Just One Piece of Advice

If I could give you just one piece of advice, it would be this: Don’t read the comments section. Many news organizations still have comments sections.  Comments sections provide a nourishing habitat for trolls, toxic creatures whose egos are fed with belligerent virtue signalling.  It’s basically Mos Eisley: you’ll never find a more wretched hive of scum and villainy.  The easy fix: don’t read the comments.  I don’t have comments on this website to avoid headaches with trolls and spammers. The problem: Facebook and Twitter are basically free-form comments sections.  I love news, sports, and investing, but each has their own particular breed of troll.  Are you a [political party affiliation]?  A college student would love to tell you all about how the world REALLY works (stay woke!).  Love the Indians?  There’s a 14 year old in Toronto who wants to tell you how much your favorite player sucks.  Finance…


Trump Portfolio

We’ve witnessed the peaceful exchange of power in the most powerful country on the planet.  Now, how do we create a “Trump Portfolio” of only the best, really the greatest, everybody says so securities?  Does it make sense to overweight small cap manufacturing stocks that might benefit from a strong dollar or perhaps bank stocks to take advantage of rising rates? Here’s a better question: What’s more important, the person in the White House or the person who owns the portfolio?  It doesn’t make sense to put Grandma in volatile small cap stocks if what she really needs is income.  Likewise, it wouldn’t be prudent for a 20-something to move everything to cash because they don’t agree with the President’s politics.  I hope you already knew this, but there is no optimal “Trump Portfolio”.  Rather than rebuilding their portfolio every time the winds change in Washington, D.C., investors should build around their personal needs…