News

ONE TRILLION DOLLARS *pinky*

The Trade War™ wiped over ONE TRILLION DOLLARS from the stock market on Monday.  Will the market ever recover from this disaster?  It turns out that a trillion bucks ain’t what it used to be.  Financial reporters showed Monday’s market movement as -2.41%.  Financial entertainers breathlessly echoed the ONE TRILLION DOLLARS talking point.  Being down over 2% in one day isn’t good, but it was a useful tool to separate news sources that are serious about their reporting from the click-bait farms.  Oh and will we ever recover?  The S&P 500 was down 0.11% on the week, as of Thursday’s close, but oddly we haven’t heard any stories of the market gaining ONE TRILLION DOLLARS over the last couple of days.  Weird. Trade War™ There is a lot of hand-wringing over the consequences of the very public negotiation with China.  Bad financial news of all sorts is inevitably traced back…


Dry Powder

I’ve got some dry powder set aside for a situation just like December.  During a bear market (when the market drops 20%), the plan is to deploy half of it into equities.  The S&P 500 fell 19.4% from September through Christmas Eve.  It was chaos on CNBC.  This was the big one…  And I turned up my nose because it was half a percent short of a formal bear market.  I was not ready to buy until that last 0.6% bled away.  It didn’t hit the magical 20% number.  Since this bear kiss, the S&P 500 is up 9.6%.  Oops. Eddy Elfenbein of Crossing Wall Street (great follow on Twitter) has a quick hit this morning “What if the Bear Market is Already Over?” that is a great reminder that the market doesn’t care about our arbitrary mindsets.  Usually, I think about this in relation to the calendar.  The market…


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…


Left of the Decimal

Dow Jones has removed General Electric from the Dow Jones Industrial Average (DJIA) and replaced it with Walgreens Boots Alliance.  GE was an original Dow stock and was part of the index for over 100 years.  The Dow is how your parents consume the stock market which is why newscasts tend to report that information in Dow points.  This is a huge deal, right?  Not from an investing standpoint. The DJIA is price-weighted, meaning that stocks with higher prices make up a larger portion of the index than stocks with a lower price.  This is different than an index like the S&P 500 which is market cap-weighted (the size of the actual company).  It’s interesting to note that GE is getting replaced by a company about half its size by market cap so it’s not like GE is getting the boot (pun intended) because of its size, it’s because the…


I’m Back, Baby!

It’s been a while since I’ve posted, but that’s because I’ve been busy with a new baby!  Baby and Mom are happy and healthy.  This is a pretty big difference from our first child who spent a ton of time in the hospital during his first two years. There’s a pretty big gap between our two kids (almost 8 years!) so a lot of people are asking us if we are ready to go through all the newborn stuff again.  Are we ready?  We’ve been playing the child-raising game on hard mode for the past 8 years.  We are reveling in changing diapers, feeding, and just holding the newest member of our family. Our child-raising experience is anchored in years of NICU units, dialysis treatments, and navigating various hardware that came with having a baby with ARPKD.  While it’s not exactly a vacation to wake up at 2 in the…


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…


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…


Are You More Likely to Cheat with Bitcoin?

I recently spoke with a client who wanted to know what could go wrong with bitcoin.  We talked about bitcoin and the monetary system (not a risk now, but who knows in the future) as well as black market applications (greenbacks work just as well or better here).  The question stuck with me, though.  What could go wrong?  I remembered attending a session at an IMCA (now the Investments & Wealth Institute) conference with Dan Ariely and something clicked.  Ariely’s research suggests that the further we get from money, the higher the likelihood that we will cheat. Check out his TED talk here.  He performed an experiment where subjects were given a limited amount of time to complete a number of math problems and would get paid based on the number of problems they completed.  Subjects who handed in their papers got an average of 4 problems correct. Lots of…


Bears, Beats, Bitcoin

In honor of my favorite vignette from The Office… Question:  What kind of bear is best? ‘Tis the season for market predictions (and forgetting last year’s predictions).  The optimists predict low single digit returns for equities.  The bears predict bear things.  Which means no one expects even decent stock market returns.  Now more than ever it makes sense to hold a portfolio that doesn’t require you to predict the future to be successful. Bears Eat Beets Schwab’s Jeffrey Kleintop points out that while stocks have gone up every month this year, so have earnings. Battlestar Galactica Bitcoin is going bananas yet again.  Charlie Bilello has tracked bitcoin sentiment via Twitter polls at major milestones which is fascinating.  He also occasionally marks bitcoin’s “market cap” (or whatever you want to call it) which has hit $214 billion.  OMG!  That’s more than Home Depot!!! Calm down, Apple’s cash hoard is around $270…


My Favorite Posts This Week

I try to share good posts via Twitter.  A bunch of people were writing solid stuff this week:   A Little Knowledge is Dangerous – Nick Maggiulli – Surprising stat about survival rates for people lost in the wild.  Kids six and under have a surprisingly high survival rate while one of the lowest is for kids seven to twelve.  Younger kids follow their instincts.  Older kids overthink and panic.  This maps over to investing in that knowing a little bit can lead to devastating over-confidence. Is Robert Shiller Right that Passive Investing is Dangerous? – Cullen Roche, Chicken Farmer – This is a sensible layout of one argument in the active/passive debate, pointing out that the sides often aren’t even debating the same points. How to Deal with Market Moving News – Ben Carlson – Binary thinking and single variable analysis are killers to long-term portfolio success. Backtested Strategies:…