January 2016

Carnival Barker

Due Diligence, Fairway, Investing January 29, 2016

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…

It's the internet so here's a cat

News January 19, 2016

Business as Usual

The S&P 500 is down almost 8%.  It’s the worst start to a new year EVER.  Is this a sign of things to come?  Is the stock market doomed in 2016?  Exactly how rare is a downwards move of such epic magnitude? The market has recovered from every downturn it’s ever experienced.  That’s a pretty good track record.  The most surprising thing about this downturn is how much publicity it is getting.  Every year since 2000 had a drawdown of at least 7% at some point except for 2013.  In 2013, the big worry was that it had been too long since the last correction.  For real. Here’s some data from Morningstar on the S&P 500 as of 1/18/2016: Max Drawdown Return YTD -7.93 -7.93 2015 -12.04 1.38 2014 -7.28 13.70 2013 -5.58 32.41 2012 -9.58 15.97 2011 -18.64 2.11 2010 -15.63 15.07 2009 -27.19 26.48 2008 -47.71 -36.94 2007…

This perma-bear is wondering what to do after trading all his salmon for gold.

News January 12, 2016

Sell Everything

So The Royal Bank of Scotland (RBS) says 2016 will be a cataclysmic year and to “sell everything except high quality bonds”.  There’s even a cute analogy, “In a crowded hall, exit doors are small.  Risks are high.”  So says RBS analyst Andrew Roberts. “Risks are high.”  Risk is the chance for permanent loss of capital.  So are stocks going to go to zero?  The article says he sees a pullback of 10 – 20 percent for stocks.  Not exactly the craziest prediction since the stock market sees a 14% pullback once a year on average.  This isn’t ‘high risk’.  This is standard operating procedure for a healthy stock market. It’s silly to say “Sell everything!” and this guy is catching some flak on the internet from people who manage real money for real people.  Timing the market has been revealed to be a sham and is in the same…

Due Diligence, Investing, News, Opinion January 8, 2016

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…