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How Bout That Market: 1-16-2017

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   My quarterly commentary for Fairway Wealth Management is posted here.  As we approach inauguration day, it’s prudent to maintain perspective in the face of media noise.  It may be a good time to audit your news streams and trim the dead weight.  I love Twitter and Feedly as they make managing the noise easy.  The key is to cut bad sources without regret.  If the rest of your follows are solid, they will help you fill in the gaps that you may miss by posting things they think are relevant. I cannot stress enough that investing never requires minute by minute updates.  The same goes for the news.  It is human nature to want access to news before other…


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Don’t Invest Like an ASS

ProTip:  Don’t invest like an ASS.  That is, don’t give in to the temptations of investments that are Aspirational, Signalling, or Sexy.  I didn’t plan it this way, but like all great concepts, the acronym is there.  It sounds silly, but these can be serious portfolio killers. Aspirational Investments Aspirational marketing has been around for as long as there has been stuff to sell.  The product is promoted as something used by the person you want to be in the setting you wish you were at.  A great way to sell bad beer is to show bros with washboard abs drinking on a beach with girls in bikinis.  This is an obvious aspirational marketing gimmick.  You’re entirely too smart to fall for that, right? There is a sneakier technique almost imperceptible to adults.  Watch commercials aimed at children.  You’ll notice that the children in the ads are usually slightly older…


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HBTM: 12-27-2016 Dow 20,000 Edition

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 last week of the year is usually pretty sleepy.  This year’s final week is book-ended by holidays which means a terrific drive in to work for me as everyone takes advantage of long weekends.  I don’t usually expect financial news this week, but this year the Dow Jones Industrial Average is bumping up against 20,000 which is a MAJOR MILESTONE/PSYCHOLOGICAL BARRIER.  Will we hit 20k?  It wouldn’t take much, but it really wouldn’t mean much either. 20,000 is just a number.  Don’t forget that the DJIA is just 30 stocks and the index is price-weighted rather than market cap weighted.  This means that even though Apple is the largest public company on the planet, eight other stocks have a…


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HBTM: 12-19-2016

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 Federal Reserve raised rates last week, but everyone expected that so the announcement was received with an initial shrug of the shoulders.  As more people read into the Fed’s statement, they noticed the Fed expects to raise rates three times in 2017.  This caused the market to drop by less than a percent?  Maybe?  Speculating about the market’s daily moves just isn’t my thing and if it’s your thing, then I think you should get a different thing. Focusing on the daily noise makes it easy to neglect the long-term and that’s dangerous for any investor.  Also, millions of actions influence the markets every day.  It’s silly to point at one thing and say, yep, that’s why the market…


Donald Trump

Donald Trump is President-elect of the United States of America.  This election reminded me of the Brexit vote across the pond earlier this year.  An entrenched power bloc assumed it had already won, but woke up the day after the election to a powerful reminder of the world outside of their ivory towers.  I voted and I hope you did, too. So What Does Donald Trump Mean For The Markets? It means the uncertainty over who will be President is over.  No kidding, right?  It is cliche by now, but the market does hate uncertainty and knowing who will be in the White House allows companies to eliminate a variable from their business calculus.  You don’t need to be a genius to navigate your portfolio through an election cycle; you need patience and informed optimism.  Even smart people screw up and overreact to short-term blips.  Nobel laureate Paul Krugman of the New…


Right Said Fred Forecasting

Right Said Fred Forecasting

You couldn’t do a little turn on the catwalk in the 1990s without hearing Right Said Fred’s song about the tail wagging the dog.  “I’m Too Sexy” lampooned fashion’s focus on the model rather than the clothes.  More and more it seems that financial pundits are performing Right Said Fred Forecasting rather than providing any realistic or actionable information.  “Smart Beta” firm Research Affiliates recently put out a study that is summarized by Bloomberg in the article “The Next 10 Years Will Be Ugly for Your 401(k)“.  Their prediction tells us more about the forecasters than it does about the future. The Research Affiliates study gives investors a 0% chance of earning 5% annually for the next ten years with a portfolio of 60% stocks / 40% bonds.  This is a great way to catch investors’ attention.  We know that negative outlooks carry more weight with people than positive outlooks.  A…


Eight Years Ago

Eight years ago, we were in the midst of financial crisis.  Warren Buffett penned an op-ed in the New York Times encouraging investors to “Buy American, I Am”.  So did you buy American?  Too many investors were scrambling to do the opposite. On the front page of the New York Times from that day is a big picture of Joe the Plumber and a chart of oil prices shooting up to $140/barrel and then down to $70.  Inside, economist Paul Krugman lambasted the Federal Reserve and predicted a nasty, brutish, and long economic slump.  Who in their right mind would buy stocks in that environment? The S&P 500 fell another 30%, hitting bottom on March 9th, 2009.  Had Warren Buffett lost his touch?  No.  Since October 17, 2008, the S&P 500 has gained over 150% (over 13%, annualized).  The S&P 500 is up over 250% (over 18%, annualized) since the…


Harvard’s Endowment

Fairway’s third quarter commentary has been published.  Keeping up with the Joneses has distracted Harvard’s endowment from its true mission.  Here is some background on what happened: First, the actual endowment report.  Harvard lost 2% over the last year, driven into the ground by what I call conspicuous sophistication. The Harvard Crimson leads the charge on reporting the results here. There is a pile-on by the WSJ (some good reporting here), NYT, and CNBC among others. Then the students weigh in via the school newspaper.  If there’s one constant Harvard’s endowment can count on, it’s that the students will be vocal critics no matter what.  The horror of their $36 billion endowment lagging peers “is unacceptable”.  When the endowment was blowing the doors off of its peers, students felt that management was getting paid too much.  Now that performance is lagging, students are re-thinking this – maybe it makes sense…


Weekend Reading

Some articles for your down time this weekend.  Don’t forget the Northeast Ohio PKD walk is this weekend! Man clocked doing 88mph in DeLorean Liz Ann Sonders – “The media, more than most, persistently look for a narrative to explain every daily move in the market. It’s rarely that simple.” Why flush your money down your toilet when you can flush your money down the neighbors’ toilet? Update on the Buffet-Hedge fund bet.  Crazy thing is that the collateral outperformed both parties. A good takedown on end-of-the-world ads that run on AM radio by Larry Swedroe. Morgan Housel with some perspective – “Being born in America in 1900 gave you a 79% chance of living for five years. Today, the five-year survival rate for non-Hodgkin’s lymphoma is 82%. So just being a kid 1900 was riskier than having lymphoma is today.”   Photo by Lummi Photography


He Called It

He called 5 market crashes and now has three more dates for you to worry about.  Technical analyst Sandy Jadeja is predicting financial devastation on three dates.  Well, now that I read the article, he doesn’t really say that at all, only that there will be sharp market movements in the future.  He names three dates, but doesn’t really attach any importance to them, only saying to “watch” them.  I hope this sounds fishy to you because this sounds shady as hell to me.  So I did some digging. Who is this guy?  Google Sandy Jadeja and you don’t really find much other than the recent Business Insider articles written about him.  I couldn’t find any education credentials, but I found a video of him speaking with a British accent so he’s probably really smart.  They don’t hand out those accents to just anyone. How does he make these predictions?…