July - September 2018 articles archive home
The best thing that money gives you is better choices. People who do not have any money have terrible choices. A lot of people who own a lot of expensive things are in debt and don’t have the ability to make good choices in their life
Friday, September 28, 2018 ... more
All value
Imagine two scenarios. Company A has strong management team who are focused on increasing returns on invested capital. Current cash flows are €3 billion per year, and top-line growth of 4% and EPS growth of 14% suggests even stronger cash
Thursday, September 27, 2018 ... more
Look at a typical day in the stock market. The volume and volatility of trading are staggering. The reasons for that are complex and the subject of much research and debate, but it seems clear that at least some of it is due to traders overreacting
Wednesday, September 26, 2018 ... more
Role of luck
“When you look at anything — say the stock market — you see the survivors, the winners; you don't see the losers and you will be likely to misattribute the things that led to winning,” says Nassim Taleb, author of The Black Swan, in a piece at Edge.org
Tuesday, September 25, 2018 ... more
A few things investors might want to remember about luck. Luck enters into every contingency. You are a fool if you forget it - and a greater fool if you count upon it. Life is full of luck, like getting dealt a good hand, or simply by being
Tuesday, September 25, 2018 ... more
An opportunity
From Lester Davids at Unum Capital: The South African economy has continued to show signs of weakness, with conditions continuing to deteriorate as the emerging market contagion spreads and sentiment toward
Thursday, September 20, 2018 ... more
Psychology of Market
The effort to reduce the science of speculation and investment to an impossible definitiveness or an ideal simplicity is, I believe, responsible for many failures … the market student of a mathematical turn of mind is always seeking a rule
Wednesday, September 19, 2018 ... more
Small caps
Who should consider investing in small caps? The quick answer is everyone (bar the institutions) because while small caps might encompass more risk they also provide the greatest opportunity for spectacular returns. And while it would be foolish to overweight in penny-stocks it doesn’t make sense either not to take a punt on a stock for the sole reason that it trades below a certain price.
Tuesday, September 18, 2018 ... more
Penny stocks
The world of pennies is inhabited by hardworking average Joes hoping to strike it rich, pumpers and dumpers, hypesters and scammers. In pennies, the logic and reason that applies in the rest of daily life is replaced by zeal and prayer
Tuesday, September 18, 2018 ... more
No way of knowing
We’re living through a transformation of our information environment. My feeling is that although we don’t know really where it is heading, we’ve had one stroke of luck: We’ve conducted this experiment before. And we know quite a lot
Friday, September 14, 2018 ... more
Do's & don'ts
From the Evening Standard, some dos and don’ts from Daniel Kahneman: Do keep natural impulse in check. Kahneman says we have two systems of thought — fast, based on intuition and impulse; and slow, based on calculation
Thursday, September 13, 2018 ... more
Buffet's mistake
Back in 2010, Warren Buffett said the biggest mistake he ever made cost him $ 200 billion. He was referring to the initial purchase of Berkshire Hathaway more than 50 years earlier. "Berkshire Hathaway,” he said,” was carrying this anchor
Wednesday, September 12, 2018 ... more
2 things
There are two things that kill most investors: a lack of discipline and over-confidence. A prerequisite for success in most fields is control. The successful artist controls his or her medium to create a work of art. The successful business person
Tuesday, September 11, 2018 ... more
The next time you’re tempted to buy or sell stock because you believe it’s mispriced, think about the assumptions you are making. First, you are assuming the price set by millions traders all over the world - traders who are looking at the same information about the stock as you have - are wrong.
Tuesday, September 11, 2018 ... more
Perception requires imagination because the data people encounter in their lives are never complete and always equivocal. For example, most people consider that the greatest evidence of an event one can obtain is to see it with their own eyes, and in a court of law little is held in more esteem than eyewitness testimony.
Friday, September 7, 2018 ... more
Doing the opposite
It is axiomatic that inexperienced traders and investors, and indeed a majority of the more experienced as well, are continually trying to speculate on past events. Suppose, for example, railroad earnings as published are showing
Thursday, September 6, 2018 ... more
A few reminders
No one, absolutely no one, knows everything Prof.essional investors and fund managers work full time on their portfolios, have access to management teams and subscribe to great data and financial services, but the market is still bigger than them
Wednesday, September 5, 2018 ... more
Hard to believe
Given that the market reflects expected performance, it’s easy enough to accept that if you want to predict market behaviour this year or next, the economy is essentially irrelevant as the stock market leads the economy, not the other way around. What is more difficult to accept is that even the long term performance of the economy has little impact on the market.
Tuesday, September 4, 2018 ... more
Hard to accept
The hardest thing for active investors to accept is that attempting to beat the market is futile. “It’s kind of crazy when you think about it,” say Wesley Gray and Tobias Carlisle in their book, Quantitative Value, “we had hoped that having tested
Tuesday, September 4, 2018 ... more
Holy Terror
Wall Street is a morbid excrescence. Plainly it's a thing that has grown out upon the social body rather like -- what do you call it? -- an embolism, thrombosis, something of that sort. A sort of heart in the wrong place, isn't it? Anyhow -- there it is. Everything seems obliged to go through it now; it can hold up things, stimulate things, give the world fever or pain ...
Friday, August 31, 2018 ... more
Critical time
The majority of your lifetime investment returns will be determined by decisions that take place during a small minority of the time. Most of those periods come when everything you thought you knew about investing is thrown out the window.
Thursday, August 30, 2018 ... more
Price : Book
Book value is a measure of a company’s assets, less its liabilities. In theory, if you can buy a company for less than the value of its net assets (a p/b ratio of less than one), you’re potentially snapping up a bargain. If a company is trading
Wednesday, August 29, 2018 ... more
"Investing without considering your values is like having the fastest boat in the middle of the Pacific Ocean with no set destination,” says Nick Maggiulli at Cornerstone Research, “no matter how fast you go, you will always feel lost.” Find what you value in life, then tailor it to your portfolio ...
Tuesday, August 28, 2018 ... more
2 questions
I'm going to make investing really easy for you. Smash your calculator. Rip-up your valuation tables. Laugh-off your know-it-all accounting buddy. Successful investing boils down to nailing the answers to the only two questions that matter.
Tuesday, August 28, 2018 ... more
Dr Rabbit
Doctor Rabbit said, “I don’t think I should care much if Ki-yi Coyote did come after us. I could run away from him and be in the Big Green Woods in no time!” But Jack Rabbit had run away from Ki-yi Coyote a good many times, and he knew. So he said
Friday, August 24, 2018 ... more
If you are a junior analyst at a big fund management firm, it is extremely difficult to pitch an idea that the “smartest” (or at least loudest) folks out there have already concluded is a dog with fleas. The idea will not only sound stupid, but
Thursday, August 23, 2018 ... more
Preconceived perspectives
One of the big issues investors face is preconceived perspectives. When we look at a stock, what goes on in our brains when we encounter a company for the first time? For the first 30, 60 seconds, or first couple of minutes? That has a huge impact
Wednesday, August 22, 2018 ... more
Charlie Munger, the vice chairman of Berkshire Hathaway, advices students to cultivate multidisciplinary thinking. “I went through life practicing the multi-disciplinary approach,” he tells them, “and that made it more fun, more constructive
Tuesday, August 21, 2018 ... more
The Simpsons
Homer: “How is education supposed to make me feel smarter? Besides, every time I learn something new, it pushes some of the old stuff out of my brain. Remember when I took that home wine making course, and I forgot how to drive?”
Tuesday, August 21, 2018 ... more
The human mind is a lot like the human egg, and the human egg has a shut-off device. When one sperm gets in, it shuts down so the next one can’t get in. The human mind has a big tendency of the same sort. And here again, it doesn’t just catch
Friday, August 17, 2018 ... more
Why John's wrong
“John Hussman has spent last decade betting against the stock market, with a mutual fund down more than 50% to show for it,” writes Morgan Housel at Collaborative Fund. “What’s struck me about Hussman is that he is not an end-of-the-world
Thursday, August 16, 2018 ... more
Linda's rules
Linda Bradford-Raschke is a world renowned trader. Her trading rules: The key to success is in knowing yourself. Have a plan, follow the plan. Keep records. Don’t be afraid to buy high and sell low. Buy into bad news, sell into good news
Wednesday, August 15, 2018 ... more
Is the Market a con?
A con is an intentional deception to cause a person to give up property or some lawful right. Con games are crimes of persuasion and deception. The victim always trusts the swindler in some way. Does this definition of a con fit the stock market?
Tuesday, August 14, 2018 ... more
Apple spent $20.8 billion buying back its own stock in the last three month and so far in 2018 has tripled its share repurchases over the first half of last year. S&P 500 companies are on track to return a record $1 trillion via buybacks and dividends
Tuesday, August 14, 2018 ... more
Fear & greed
The human animal will never be free of the two constants, fear and greed. This is regardless of whether they’re investing in investing in closed-end funds, high-cost products, rules-based products, faith-based products, socially responsible products
Friday, August 10, 2018 ... more
Own game
The problem is that there’s one field in investment markets. Think about the day trader in 1999 whose marginal trade helped push Yahoo! stock to $430 a share. This trade made sense, because he thought shares would probably go to $431
Wednesday, August 8, 2018 ... more
Bear Markets
Bear markets often start with a sharp, swift decline. Resulting in an oversold bounce that retraces a portion of that decline. After which the decline continues, but at a slower pace, as the fundamentals deteriorate.
Tuesday, August 7, 2018 ... more
Never can tell
British stock market historian, David Schwartz, believes that a professional that is asked to comment on poor market conditions is more likely to argue that it’s a temporary situation than foretell the start of a serious bear market
Tuesday, August 7, 2018 ... more
Dreaming of electric sheep
His hands, his face - it clung to every part of him, except his eyes. Round with awe his shone, like those of a little boy; he looks, she thought, as if he has been playing and now it's time to give up and come home.
Friday, August 3, 2018 ... more
You've been warned
Prepare for the biggest stock-market selloff in months, warns Morgan Stanley. The U.S. stock market has been partying all throughout July, and a hangover is coming. Wall Street’s rally is showing signs of “exhaustion,” and with
Thursday, August 2, 2018 ... more
The 200 dma
The 200-day moving average works better as an indicator of the type of market environment we are in than as a timing signal. Over the past 90 years [US] stocks have spent about two-thirds of the time above the 200-day mark and one-third of
Wednesday, August 1, 2018 ... more
Small caps
We recognise that most small businesses are destined to stay small given their limited scope for both structural growth and meaningful differentiation. Such businesses constitute the bulk of the ‘smaller companies’ universe’ but are of no appeal
Tuesday, July 31, 2018 ... more
The willingness to do things differently may be an essential ingredient for success in the stock market. So that while most investors are invariably looking for something to do an alternate approach may to look for sufficient reason
Tuesday, July 31, 2018 ... more
Truth be told
Headlines for those who clamour for “more of the truth” from the medi ... JPMorgan Chase Acquires Bear Stearns in Tedious-To-Read News Article ... No one, absolutely no one knows where a stock is going ... Only two things are important
Friday, July 27, 2018 ... more
Blind spots
“You can consider yourself a person of high standards and still have debilitating blind spots. There can be whole arenas of endeavour where you may not even know that your standards are low or non-existent, and certainly not world class
Thursday, July 26, 2018 ... more
Success & failure
The late Jim Paul went from a poor Kentucky boy to serving on the board of governors of the Chicago Mercantile Exchange through a series of lucky breaks and smart investments. But his hubris grew alongside his success, and a series
Wednesday, July 25, 2018 ... more
Who to trust
Assessing the quality of management, in particular the extent to which they can be trusted to put the shareholders’ interests above their own, is more an art than a science, and each investor has to find his or her own way of doing so.
Tuesday, July 24, 2018 ... more
Fake news
One of the more common ways that management will try to bamboozle you is by misusing charts. Always check the axes as scale can easily distort a trend. It’s easy enough to make small changes look large by reducing the scale of
Tuesday, July 24, 2018 ... more
Would change
History is riddled with investor after investor who couldn’t quit while they were ahead and eventually ended in ruin. Jacob Little, Jesse Livermore, Isaac Newton, Mark Twain, shall I continue? But the bigger question remains: Why does
Friday, July 20, 2018 ... more
Not so passive
In today’s diverse world of index funds you are no longer tracking passive indices since you can now track almost anything in the world - ranging from hedge funds, leveraged ETFs, to plain vanilla market cap weighted index fund
Thursday, July 19, 2018 ... more
From the June 1962 issue of Life magazine (following the market plunge in May): There is an adage perhaps based on the common sense of the first cave man who threw a stone into the air, that what goes up must come down. By many of the 15 million
Wednesday, July 18, 2018 ... more
Wizard's advice
From Jack Schwager’s Stock Market Wizards, advice for novice traders: Have a plan. Know why you are buying or selling and what to look for in a trade. If you take a step back and think about what you are doing, you can avoid a lot of mistakes.
Tuesday, July 17, 2018 ... more
Let’s face it, when it comes to investing everyone’s in it for themselves. If those who make a living selling, mentoring, coaching, writing and such tell you your stock is going up (or down) in price, you have absolutely no reason to believe
Tuesday, July 17, 2018 ... more
In short, the more helpless the patient felt, the more likely he was to be traumatized … One unit I was with north of Fallujah had lost a guy who was killed while using a Port-a-John in the middle of the night. He’d gone out to take
Friday, July 13, 2018 ... more
Consensus & alpha
We have sometimes observed that decision-making biases are often driven by a natural tendency of herding among investors and analysts covering the stock. There are many reasons why people will “herd” around each other, and in fact we believe
Thursday, July 12, 2018 ... more
Don't know
Don’t catch a falling knife is a well-known maxim in the stock market. It’s good advice too. Many an investor that’s rushed in to buy into a company whose share price is tumbling has regretted the decision. In 1996 Murray & Roberts was trading
Tuesday, July 10, 2018 ... more
Can't or can?
Watch a pro football game, and it’s obvious the guys on the field are far faster, stronger and more willing to bear and inflict pain than you are. Surely you would say, ‘I don’t want to play against those guys!’ Well, 90% of stock market volume
Tuesday, July 10, 2018 ... more
Bullshit jobs
David Graeber defines a bullshit job as a form of employment that is so completely pointless, unnecessary, or pernicious that it cannot be justified. Not to be confused with shit jobs, which tend to be blue collar and pay by the hour, whereas
Friday, July 6, 2018 ... more
Conjunction fallacy
We could call it the ‘work ethic’ fallacy, says Mark Rzepczynski an Economist at Lakewood Partners in his review of a recent paper by JB Heaton and Ginger Pennington that looks at whether the persistence of active management relative to passive
Thursday, July 5, 2018 ... more
Investment advice from Med Faber at Cambria Investment Management: Don’t do dumb things; diversify globally across stocks, bonds, and real assets; tilt away from market cap weights, and; implement with low-cost funds and brokerage
Wednesday, July 4, 2018 ... more
Beta, etc.
For investors, that means a careful focus on broad diversification (to limit the impact of errors), significant reliance on beta (because we will be wrong a lot), fees and costs (because they compound relentlessly whether we’re right or wrong)
Tuesday, July 3, 2018 ... more
Don’t overstress diversification … Buying a company without having sufficient knowledge of it may be even more dangerous than having inadequate diversification … Investors have been so oversold on diversification that fear of having too many
Tuesday, July 3, 2018 ... more
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