A fat tail in investing doesn’t describe an animal. It’s a statistic that indicates a rare but often important outcome. In investing it may mean the odds of a really good or really bad outcome. Stock market investors are afraid of lots of things but they really should fear four things. One: The stock market has a terrible year. Two: After that terrible year, the stock market doesn’t recover for a long time. Third: The investor is out of the … Continue reading
Good investing should be even less interesting than watching paint dry. Paint dries in a matter of minutes or hours, perhaps a day or two at the most. While it’s happening, there is no perceptible change. After it’s done, if you touch the surface, you realize the paint is dry. None of that process is the least bit interesting and while it’s happening there is no sense of change. But at least it’s quick and in the end, it’s satisfying … Continue reading
As children, we crave certainty and we never truly outgrow this wish. As adults we know that there is no certainty in the world but this is impossible for people to accept. Investors fall into lots of traps because they fall under the spell of this desire for definite outcomes. In a world gripped by pandemic and economic convulsions this search for certainty is even more compelling. When so many people are in the market for certainty, the price — … Continue reading
When I began my investment career forty years ago, the price of gold was $800 an ounce and the Dow Jones Industrial Average was at $800. Today gold is a little under $2,000 an ounce and the Dow is at 28,000. Stocks, by any measure, are the clear winner. Every decade or so, gold and other commodities have a flurry of activity and a brief price run. Traders periodically jump in and we hear people spouting theories about how paper … Continue reading
Every so often, complacency sets in on Wall Street. You never know how long afterwards bad stuff will start to happen but it’s a time to be vigilant. For me, one of the warning signs is when people start to cut big blank checks. A few weeks ago billionaire investor Bill Ackman attempted to raise $3 billion dollars to buy something. Instead, investors threw money at him and he raised $4 billion. Ackman gave investors vague clues about what he’d … Continue reading
Many people think there is nothing difficult about personal finance. Listen to a few gurus on TV and maybe scan a magazine or two. That may have once been the case (I would argue not) but it’s certainly not the case after the passage of the Secure Act last December, which was followed quickly by the CARES Act and the possible Heroes Act. Couple that with other changes to RMDs, add in QCDs, QLACs, IRMAA (Income Related Monthly Adjustment Amounts), … Continue reading
As a result of the pandemic and economic downturn, there are now two kinds of Americans: those who are spending less because they have less money and those who are spending less because they don’t have anywhere to spend their money. For an economy that is two-thirds driven by consumer spending, that doesn’t bode well for a quick recovery and overall statistics. But despite the crude economic measures we employ, the true purposes of an economy are to satisfy people’s … Continue reading
The phrase “market timing” is of paramount importance to investment professionals but is difficult for most people to grasp. No matter how many times the subject is broached, most people cannot internalize the idea. The concept comes down to this: if the stock market from time to time is going to go crazy and plunge, why don’t I just sell stocks before that and buy them back when it is safe? Why suffer those losses and that pain, when it … Continue reading
March is typically an odd month, the transition from the harshness of winter to the promise of spring. This year it’s been the reverse in the worst way in modern memory. The month began in New York as a normal time with mild weather, the stock market near record levels and unemployment at a half century low. March ended in a totally unprecedented way with two-thirds of the country confined to their homes, an explosion of illness and death across … Continue reading
With the economy in free fall, for most businesses it’s a sudden shift to survival mode. Most businesses spend most of their time trying hard to grow, to innovate, to take on new markets and better serve old ones. Few people with a choice go into business just to survive. But that’s where we find ourselves today. You can’t grow if you don’t survive. Businesses that worked hard for decades to flourish, now find themselves facing excruciating choices. Capabilities and … Continue reading