Investing

shir-kay

Investing, News, Opinion October 11, 2018

I Blame SportsCenter

The market was down 3% yesterday although you’re more likely to see this as DOW PLUMMETS OVER 800 POINTS.  I don’t know why it’s down, but neither does anyone else.  No one knows what it will do from here, either.  However, I do know how things will play out on CNBC as every perma-bear in New York City is wetting their pants waiting for their booking agent to tell them what time to arrive on set.  I expect doom n’ gloomers making victory laps and appealing to our baser instincts. It’s All SportsCenter’s Fault The golden age of ESPN was wall to wall SportsCenter and actual sporting events.  Today it’s talk shows and even SportsCenter is less focused on actual sport and more story-driven.  Why?  Drama sells.  The WWE is basically soap operas for rednecks and you’re smarter than a redneck, right?  ESPN is the WWE of sports.  What’s really…

No Picture

Investing, Opinion September 20, 2018

Your Bad Taste in Music Isn’t Helping You Invest

Spotify’s algorithm recently uncovered a gem (to me, anyway) from my youth, adding Gilby Clarke’s “Cure Me Or Kill Me” to one of my playlists.  I admit that this is not a great song, but seeing as how our musical tastes are developed in our teenage years, this track scratches an itch for me.  It brings me back to laying in bed, headphones cranked too high, listening to 106.9’s Top Ten at Ten.  Tremor Christ, Volcano Girls, Counting Blue Cars, Loser, Andres – all on ROCK ONE OH SEVEN WRQK, CANTON’S ROCK STATION!!! Like our taste in music, our perspective on risk can be overly influenced by our early investing experiences.  Vanguard found that Millennials who started investing with them after the global financial crisis were more than twice as likely to hold zero-equity portfolios as those who started investing before.  They also found that older investors held more equities…

No Picture

Due Diligence, Investing September 18, 2018

Can’t Trust’em

It pays to be skeptical of financial product pitches.  Investments that are sold rather than bought are often inferior and loaded with fees.  Marketing (even for good funds) is filled with cherry-picked data, but that’s the job of the marketing folks – make the product look good.  However, sometimes a pitch comes across my desk that goes beyond marketing and makes me wonder whether the money manager is dishonest or just incompetent.  Either way, they get filed under ‘Can’t Trust’em’. The latest entry into my ‘Can’t Trust’em’ file is a manager that absolutely crushed the S&P 500 over the last 10 years.  They lost a ton less than the index during the crisis and were up over 60% in 2009.  Returns for other years were pretty middling, but they shined when it counted the most, right?  I looked around on their website a bit and found a document called ‘BACKTEST’. …

No Picture

Due Diligence, Investing July 24, 2018

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

Investing June 23, 2018

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…

No Picture

Investing June 13, 2018

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

Investing, Opinion May 10, 2018

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. …

No Picture

Investing, Opinion April 13, 2018

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…

alright

Investing, News, Opinion February 5, 2018

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…

ESG

Investing, News, Opinion January 17, 2018

Doing Good While (Hopefully) Doing Well

Each year, BlackRock’s Chairman and CEO, Larry Fink, writes a letter to CEOs of “leading companies” in which BlackRock’s clients are shareholders.  Last year’s letter encouraged long-term thinking in the context of a world that is increasingly focused on short-term volatility.  This year’s letter strikes a similar tone, but goes a step further in mentioning environmental, social, and governance (ESG) matters as factors CEOs should be considering in their long-term strategies.  Socially responsible investing (SRI) is gaining traction among investors.  Is this just kumbaya investing or is it for serious investors, too?  Why would anyone do this?  On the other hand, why would anyone NOT do this? The Basics ESG and SRI are sometimes used interchangeably, but they are different.  SRI is the broad overarching investment thesis of the movement.  ESG filters this mandate through three lenses, environmental, social, and governance.  SRI is open to personal interpretation just like the…