October - December 2017 articles archive home
Amor fati
I want to learn more to see as beautiful what is necessary in things; then I shall be one of those who make things beautiful. Amor fati: let that be my love henceforth! I do not want to wage war against what is ugly. I do not want to accuse
Friday, December 29, 2017 ... more
State of mind
While there is any number of legitimate reasons you could tick off for every single bull market and economic expansion in history, much of it comes down to the human element. For example, the roaring 1920s saw a huge boom in innovation
Thursday, December 28, 2017 ... more
1985 interviews
A reader at Market Folly passed along an old interview from around 1985 with Adam Smith featuring Warren Buffett, John Templeton, and Robert Wilson where each investor talked about their investment process and style.
Wednesday, December 27, 2017 ... more
Xmas spirit
For those of you who are finding it difficult to get into the “holiday spirit” this year, there’s a long list of Christmas “cheers” from the folks at the escapistmagazine.com that shows you’re not alone
Thursday, December 21, 2017 ... more
1937 again
For some time now Bridgewater Capital’s Ray Dalio has evoked the 1937 analogy to caution investors on the current market environment. There are similarities between then and now. US Interest rates were low for a long time in the 1930s
Wednesday, December 20, 2017 ... more
2018 predictions
Goldman Sachs released its 2018 stock market forecast last week. In a note to clients David Kostin and the equity strategy team at Goldman said they expected the S&P 500 to rise 11% in 2018 to hit 2,850 by year-end.
Tuesday, December 19, 2017 ... more
Next crash
During the next bear market… someone will become a hero. A pundit, portfolio manager or resident doomsayer will “call” the crash and nail the timing. It will be mostly luck but will likely lead to a number of TV appearances, speaking gigs, and
Tuesday, December 19, 2017 ... more
Summer breeze
On those weekends, the river is disquieted from morning to night by people resting from their work. This resting involves traveling at great speed, first on the road and then on the river. The people are in an emergency to relax. They long for the peace and quiet
Friday, December 15, 2017 ... more
VIX Index
There are few things more alluring in the investment world than the thought of predicting and profiting from the next black swan. Shorting, buying out of the money puts, going long volatility – betting on the next crash – is unbelievably tempting.
Thursday, December 14, 2017 ... more
Two options
If you don’t own crypto and have no plans on buying, you have two options. The first is to spend every day waiting for a crash. The second comes from Charlie Munger, who said. “Someone will always be getting richer faster than you
Wednesday, December 13, 2017 ... more
Markets will ...
Markets will ... test you. Most financial advice, especially on TV and the Internet, suggests that investing is an endless race to beat the market. If anyone else wins, it seems, you lose. But investing isn't about beating others at their game.
Tuesday, December 12, 2017 ... more
“We want to complexify our lives,” wrote Peter John Kreeft . “We don’t have to, we want to. We want to be harried and hassled and busy. Unconsciously, we want the very thing that we complain about. For if we had leisure
Tuesday, December 12, 2017 ... more
Invert, always invert
The ancient Stoic philosophers regularly conducted an exercise known as a premeditatio malorum, which translates to a “premeditation of evils.” Their goal was to envision the negative things that could happen in life – becoming homeless
Friday, December 8, 2017 ... more
[A question often asked is] “Are analysts necessary”? Well – they certainly weren’t before the early ‘70’s, when stockbrokers made their cosy equity commissions on ‘tips from the horse’s mouth’ circulating on the Stock Exchange floor
Thursday, December 7, 2017 ... more
“If the job has been correctly done when a common stock is purchased, the time to sell it is - almost never … There is still one other argument investors sometimes use to separate themselves from the profits they would otherwise make
Wednesday, December 6, 2017 ... more
Detective work
Peter Bevelin starts his book, A Few Lessons from Sherlock Holmes, by quoting mathematics and science writer Martin Gardner. “Like the scientist trying to solve a mystery of nature, Holmes first gathered all the evidence he could
Tuesday, December 5, 2017 ... more
Dan Gilbert was a big shot, the kind of guy whose name rated boldface type in gossip columns throughout most of his 80 years. His 1970 funeral was a who's who of Chicago's establishment. It was a pretty good send-off for "the world's richest cop"
Tuesday, December 5, 2017 ... more
Living longer
Should we manage to hack death and stop the aging process, the forever-young will rule the world with their immense wealth: just picture what 300 years of compound growth would do to the bank accounts of billionaire Facebook CEO Mark Zuckerberg, Google founders Sergey and Larry, and the Koch brothers.
Friday, December 1, 2017 ... more
Staying in
Unfortunately in this kind of work, where you are trying to determine relationships based upon past behaviour, the almost invariable experience is that by the time you have had a long enough period to give you sufficient confidence
Thursday, November 30, 2017 ... more
Habitual responses
Hermit crabs rely on acquiring discarded shells for their protection and are constantly on the look-out for better shells. However, faced with environmental stress they prefer to stick with their old shell, however unsuitable
Wednesday, November 29, 2017 ... more
Trying too hard
Trying to increase your confidence by gathering information that is supposedly unknown to most other investors really only makes you more comfortable with your investment decisions, not better at them, and is generally
Tuesday, November 28, 2017 ... more
Illusion of Control
The illusion of control is the tendency for people to overestimate their ability to control events; it occurs when we feel a sense of control over outcomes that we demonstrably don’t influence. Illusions of control can be
Tuesday, November 28, 2017 ... more
O, worldly pomp, how despicable you are when one considers that you are empty and fleeting! You are justly compared to watery bubbles, one moment all swollen up, then suddenly reduced to nothing. ― Orderic Vitalis
Friday, November 24, 2017 ... more
African proverbs
African proverbs with market import: # Wisdom does not come overnight. # The moon moves slowly but it crosses the town. # Knowledge without wisdom is like water in the sand. # By trying often, the monkey learns to jump from the tree
Thursday, November 23, 2017 ... more
When shorting
Three ways to short a stock: 1) Take a position based on fundamentals as though it were long term. Wall Street seems to want to believe the best in companies, and its pundits often pooh-pooh less-than-stellar stock performance as temporary ...
Wednesday, November 22, 2017 ... more
Some time ago Howard Marks sent a memo to clients of Oaktree Capital, titled It’s Not Easy, in which he listed “a collection of time-honoured bromides that range from (a) only effective part of the time to (b) just plain wrong.”
Tuesday, November 21, 2017 ... more
10 lessons learned
1. Markets tend to return to the mean over time. Meaning, trends that get overextended in one direction or another tend to return to their long-term average. 2. Excesses in one direction will lead to an opposite excess in the other direction
Tuesday, November 21, 2017 ... more
Time wasted
It is not that we have a short space of time, but that we waste much of it. Life is long enough, and it has been given in sufficiently generous measure to allow the accomplishment of the very greatest things if the whole of it is well invested.
Friday, November 17, 2017 ... more
A longer life?
Irving Kahn died at age 103, Phil Fisher at 96, John Templeton at 95 and Walter Schloss at 93. Charlie Munger is 93.Is there any reason to suggest that being a successful investor might bring with it the added benefit of living longer?
Thursday, November 16, 2017 ... more
The obvious stuff is often the first casualty of the firehose of information, noise, opinions, predictions, and analysis out there these days ... so I like to remind myself of the following obvious investment truths on a regular basis
Wednesday, November 15, 2017 ... more
Should be exciting
People who claim to know jackrabbits will tell you they are primarily motivated by Fear, Stupidity, and Craziness. But I have spent enough time in jackrabbit country to know that most of them lead pretty dull lives. No wonder then
Tuesday, November 14, 2017 ... more
Love of the game
I love the intellectual challenge of investing. I’m also intensely competitive … That’s not to say I’m particularly fond of those days when you feel like an idiot and your numbers make you look like an idiot. But as a competitive person, I wouldn’t
Tuesday, November 14, 2017 ... more
The 1% advantage
The Amazon rainforest is one of the most diverse ecosystems on Earth. Scientists have catalogued approximately 16,000 different tree species. But despite this remarkable level of diversity, just 1.4% of tree species account for 50% of the trees
Friday, November 10, 2017 ... more
Lesson learnt
From Jim O'Shaughnessy, Chairman and CEO OSAM: When I was 27 I paid great attention to the news and what people were saying about the future direction of the market. I watched as the markets roiled on Friday, October 16th, [1987]
Thursday, November 9, 2017 ... more
Jody Chudley at Daily Reckoning warns that what Warren Buffett calls “the best single measure of where valuations stand at any given moment” is calling a market top. At present the metric sits at around 140%, close to the record high of 145%
Wednesday, November 8, 2017 ... more
Not what they do
Plenty of high profile people are more than happy to share their views on the state of the market and give advice on the best course of action. But, much of the time what they say in public has little-to-no bearing on how they manage their own portfolio.
Tuesday, November 7, 2017 ... more
In The General Theory of Employment, Interest, and Money John Maynard Keynes defined speculation as "the activity of forecasting the psychology of the market", and speculative motive as "the object of securing profit from knowing better than
Tuesday, November 7, 2017 ... more
Negative knowledge
Many people are overwhelmed by the sheer amount of information, opinions, analysis, and news we have available at our fingertips from our pocket supercomputers. Many place the blame on ‘fake news’ or social media outlets when people don’t know
Friday, November 3, 2017 ... more
Housel's lessons
Morgan Housel started writing about investing 10 years ago. These are some of the things he says he’s learned along the way … that most investors have a hard time distinguishing between what happened and what they think should have happened
Thursday, November 2, 2017 ... more
JZ: Do you think the investing public has gotten smarter? PB: I think my answer would be no … I don’t think that many individual investors have learned that the more you press, the more problems you’re going to get into. They have not learned
Wednesday, November 1, 2017 ... more
How useful's value?
"Given the performance of certain stocks, we wonder if the market has adopted an alternative paradigm for calculating equity value," writes David Einhorn in the latest Greenlight Capital letter to clients. Einhorn, who cemented his reputation by successfully
Tuesday, October 31, 2017 ... more
The most difficult subjects can be explained to the most slow-witted man if he has not formed any idea of them already; but the simplest thing cannot be made clear to the most intelligent man if he is firmly persuaded that he knows already
Tuesday, October 31, 2017 ... more
Information dodge
We live in an unprecedented age of information, but we use ittle of it. Dieters prefer not to look at the calories in their dessert, people at high risk avoid screenings and people choose the news source that aligns with their political ideology
Friday, October 27, 2017 ... more
Losing it all
Here's what Paul Tudor Jones had to say about losing everything in the stock market: “I think it’s no coincidence that our greatest champions, our greatest everything all seem to have experienced some kind of gut-wrenching loss
Thursday, October 26, 2017 ... more
Cost of liquidity
Most individual investors can turn their stock portfolio into cash at reasonable prices in seconds. It is a massive benefit to investing in public stocks. But it doesn’t come free. You pay a lot for the service. And it’s a service many public investors overpay for
Wednesday, October 25, 2017 ... more
What it takes
The stock market is nothing if not a place of pure deception. Just when you think you have it figured out it changes course leaving you scratching your head in frustration. Just when it seems to make sense it makes no sense at all
Tuesday, October 24, 2017 ... more
Wanna think
My general rule of thumb is to ignore making decisions based on investing sound bites from legendary investors. There are a few reasons for this. First of all, there’s a good chance they have way more money than you, so circumstances are different.
Tuesday, October 24, 2017 ... more
Where psychologists Daniel Kahneman and Amos Tversky went beyond the social science of the time, was in demonstrating that people’s errors are not random but predictable.
Friday, October 20, 2017 ... more
Dull & slow is best
Contrary to what a lot of the financial press has stated … the best environment for stocks is a very dull, slow economy that the Federal Reserve is trying to get going… But once an economy reaches a certain level of acceleration
Thursday, October 19, 2017 ... more
Tech mania
Tech mania is resurgent. Investors are again glancing at a clock with no hands — and dismissing the risk. The profitless start-ups that were wiped out in the dot-com crash have consolidated into an oligopoly composed of leading survivors such as Google
Wednesday, October 18, 2017 ... more
Richard Thaler
Last week Richard Thaler of the University Of Chicago Booth School Of Business was awarded the Nobel economics prize for documenting the way people's behaviour does not conform to economic models that portray them as perfectly rational
Tuesday, October 17, 2017 ... more
Foster on Thaler
"Awarding the Nobel Prize for Economics to Richard Thaler should have been more controversial," says Peter Foster in the National Post. “If you had told Adam Smith that 200 years after his death the most prestigious prize
Tuesday, October 17, 2017 ... more
Friday 13th
To say that Friday 13th is thought by some to be an unlucky day is no exaggeration. According to the Stress Management Centre and Phobia Institute in the US an estimated 17 to 21 million Americans are affected by a fear of this day
Friday, October 13, 2017 ... more
Sticking with what’s working happens to square with some of the most important wisdom on how to grow and remain wealthy: Take a long-run view. Don’t overreact to noise. Be patient. Most of the time, do nothing. Though profound
Thursday, October 12, 2017 ... more
To reduce risk
If your big theory on the market is about how stocks are overvalued relative to some historic relationship that may or may not be relevant anymore, then you invalidate it by being equally bearish at Dow 8,000 as you are at Dow 24,000.
Wednesday, October 11, 2017 ... more
When to run
One of the more pertinent market analogies for today’s markets is George Goodman’s comparison of high-flying markets with “A wonderful ball where the champagne sparkles in every glass and soft laughter falls upon the summer air.”
Tuesday, October 10, 2017 ... more
From The Motley Fool, 3 analogies to simplify what the stock market and investing is all about: 1)“[There’s] an excitable dog on a very long leash in New York City, darting randomly in every direction. 2) Think of yourself standing on the corner
Tuesday, October 10, 2017 ... more
Quick origin story – High school student Peter Parker is bitten by a radioactive spider on a field trip and develops super strength and the amazing ability to crawl up walls. At first, he uses these powers to make a little cash on the amateur wrestling circuit ...
Friday, October 6, 2017 ... more
Under the Adaptive Markets Hypothesis, individuals never know for sure whether their current heuristic is good enough. They come to this conclusion through trial and error. Individuals make choices based on their past experience
Thursday, October 5, 2017 ... more
What, bad news?
If you’re not sure whether or not we’re still in a bull phase, or if you don’t believe that bull markets simply shrug off bad news … You might expect news of a mass shooting or a terror attack to have a negative impact on markets
Wednesday, October 4, 2017 ... more
In a crisis
The old trading adage to, “buy on the sound of cannons, sell on the sound of trumpets” is often attributed to London financier Nathan Rothschild who supposedly made ‘millions’ after the battle of Waterloo by using his early knowledge
Tuesday, October 3, 2017 ... more
Trump Trade
Trump's tax plan is finally here and though it's short on details some key points are clear. The corporate tax rate is set at 20% down from the current 35% … and a reduced 35% percent top income tax rate for individuals. These measures should
Tuesday, October 3, 2017 ... more
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