Opinion

How Much Does Money Cost?

The Federal Reserve Bank of St. Louis caught my eye with a tweet the other day: “If you would know the value of money, go and try to borrow some.”  This quote from Benjamin Franklin got me thinking about the cost of money and how it impacts a few different aspects of financial life.  The St. Louis Fed was looking at what it costs the unbanked to borrow their next paycheck, but it is instructive to look at interest rates as they relate to things like the pensions and housing, too. Pensions Despite ten years of stock market gains, many pensions are underfunded.  Much of the blame has gone to retirement systems overpromising unrealistic payouts.  Their assets haven’t returned as much as expected, providing a double whammy.  The investment research guy in me wants to dig into the underlying investments and asset allocation.  Many pensions got hurt by stocks during…


Where Are We in the Current Cycle?

Glad you asked!  This is such a great question.  It makes you look smart for asking it.  You recognize that the market is cyclical and your question implies that you’re so savvy that you can sync your investing to take advantage of the market’s ebbs and flows.  You’re a force of nature and I commend you for it, especially since you preceded the question with several minutes critiquing the Federal Reserve and expressing concern about today’s geopolitical situation. I love that you asked me because now it’s a chance for me to cite a bunch of bullshit statistics that prop up my world-view and make us all feel better about ourselves.  Best of all, no answer I give is going to suggest taking any real action on your part.  It’s a win-win. So Where Are We in the Current Cycle? Definitely the late innings, but it may only be the…


Golden Paw of Fairness

My older son’s school celebrates a positive trait each month (respect, courtesy, etc) and recognizes students that embody the month’s trait at an assembly.  For February, William earned a golden paw award for fairness.  I keep thinking about this because while William may display fairness to his fellow students, life has not been fair to him.  The kid was dealt a tough hand of cards from the beginning.  He has ARPKD.  He deals with it and tries his best to show fairness and compassion to others, though, which is mind-blowing because he could use his diagnosis as a crutch instead.  Will could whine about all the things he can’t do like play contact sports or ride roller coasters.  Instead, he plays the hand he was dealt.  To see him do this day after day is inspiring and humbling. Kidney Month March is National Kidney Month.  The Wall Street Journal has…


The Classic Bear Bottom

As I toasted a bagel in the kitchen at Fairway this morning, I heard a talking head on TV describe the Christmas Eve market drop as a “classic bear bottom”.  A couple of the show’s co-hosts nodded sagely in agreement, but one pressed him.  You recognized this as the bottom?  Seriously?  And of course he did.  Market breadth, IPOs, and the Federal Reserve all pointed to a “typical” bear bottom. Don’t Believe It The idea that you (or anyone else) can recognize turning points in the market is poison.  The conversation’s casual tone is noxious.  If this guy has figured out how to time the market, why is everyone yawning?  Financial professionals recognize this guy is just bullshitting for the cameras, but civilians might think he’s serious.  They might be tempted to ask their “money guy” why he doesn’t invest based on market breadth, IPOs, and Federal Reserve pauses.  The truth…


An Entire Sleeve of Oreos

As the first waves of taxes get prepared, many are finding that they are not getting as large a refund as they expected.  This is often due to reworked withholding tables as the IRS tried to make it so fewer taxpayers gave Uncle Sam an interest-free loan this year.  This is rational, logical, and surprisingly proactive.  People are losing their minds about it.  There are two main critiques: 1) an assumption that taxes went up 2) this messed up a savings vehicle.  My initial response was that the people complaining about this are unreasonable since most people’s taxes didn’t go up.  Then I remembered something very important. I Cannot Trust Myself I simply cannot trust myself to eat a responsible amount of Oreos in one sitting.  The serving size for Oreos is three cookies.  Three!!!  Double Stuf Oreos have a serving size of two freaking cookies.  This is completely insane. …


Tidbits and the Hardest Thing About Investing

2019 has been great for investors as the S&P 500 gained 8.86% so far (through 2/4/2019) in reaction to the release of my investment philosophy.  Ok, maybe there were other factors at play.  If you missed the posts, portfolios should be Risk-Aware, Focused, Elegant, and Realistic.  There were also some investing concepts that just didn’t fit in this framework, but deserve mention.  Each of these could be a post of their own, especially the hardest thing about investing. Time as a Factor Factor investing tries to identify characteristics of stocks that move up to gain an edge over market-cap based indexes.  Factor investing has gained traction over the past few years, beginning with dividend and low volatility funds.  Now most investment firms have agreed on four factors – value, size, dividends, volatility, quality, momentum, revenues, profitability, and liquidity.  Yes, that’s nine factors, but most product sellers use a maximum of…


Realistic

This is the fourth in a series of posts about my investing philosophy – Realistic.  Investors should be realistic about their expectations and the nature of the markets. No one can predict the future. After hearing 10 years of “The easy money has already been made”, it’s clear that most can’t even predict the present. It sure didn’t feel easy at the time. While no one knows the returns or risks in advance, investors with a reality-based approach to investing can craft a long-lived investment process. Realistic Market Expectations Expect markets to go up over the long term. This is not optimism or a leap of faith. It’s realism. Humans will continue to innovate and seek to put their capital to work. Not every asset class will go up at the same time forever, but that’s what diversification is for – to eliminate the need to predict what asset classes will go…


Elegant

This is the third in a series of posts about my investing philosophy – Elegant.  The investment process should be elegant, efficient, and low-friction. Before diving into what that means, Tadas at Abnormal Returns has collected posts that remember investing legend Jack Bogle, founder of Vanguard, who recently passed away.  If you’ve invested money in the last 40 years, you have more money in your pocket than past investors because of Jack Bogle.  Skim the headlines and pick a couple to read.  It will be worth the time. Elegant If you were to build your portfolio from scratch today, would it look like what you own right now? Are the investments in your portfolio pieces of a larger financial plan or accumulated trinkets of an investment collection? When tempted to overthink a portfolio, I remember an urban legend from the space race. While NASA spent $1 million developing zero-g pen. the Soviets…


Focused

This is the second in a series of posts about my investing philosophy – Focused.  It can be difficult to keep an eye to the big picture without getting distracted by all the different ways to invest.  Focus is about maintaining perspective, understanding why we invest and measuring the success of those investments. Think Left of the Decimal Spend more time/energy on the things that have a true impact and less time/energy on low-impact items. It’s worthwhile to examine whether your portfolio should have a 60% or 70% allocation to Equities, but if you’re torn over adding a 0.5% exposure to a single country ETF, you’re overthinking things. This goes for all things investing. Get the big things right. Avoid errors caused by forgetting what you are really trying to do. You don’t have to be a great investor, just don’t be a bad one. Marginal Utility Understand when you’ve won the…


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…