Category: Equities


There Will Be Drawdowns

For the first time in over a decade, the S&P 500 is down more than 20% from its prior high on a monthly closing basis (total returns including dividends). The current drawdown, at nine months and counting, is now the longest we’ve seen since the 2007-09 bear market. Volatility has been rising all year and […]

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Why Fear Is Good

“Investors should remember that excitement and expenses are their enemies. And if they insist on trying to time their participation in equities, they should try to be fearful when others are greedy and greedy when others are fearful.” – Warren Buffett “Greed, for lack of a better word, is good” – Gordon Gekko, Wall Street […]

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How to Think About Investing During a Recession

Is the US economy in a recession? Everyone seems to be asking that question. Why? Likely because we just learned that real GDP contracted for the second straight quarter. And the last 10 times we’ve seen consecutive quarters of negative economic growth, the US was indeed in a recession. With data going back to 1947, […]

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The Upside of Downside

Note: for my video on this post, click here. The first half of 2022 was one of the most painful periods in history for investors… The S&P 500 fell 20%, on pace for its largest annual decline since 2008 and 3rd largest ever (after 1931 and 2008). The 10-Year Treasury bond fell 11.5%, on pace […]

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The Greatest Paradox in Markets

Stocks go up and stocks go down. Most of the time there’s nothing interesting or exceptional to say about it. But from time to time, notable extremes occur, both on the downside and the upside. The driving force? The most powerful human emotions: fear and greed. In the past few years we’ve seen both sides… […]

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Facing the Single Biggest Fear in Retirement

After years of hard work, you’re ready to retire. You’ve been a disciplined saver and investor, building up a sizable nest egg that should allow you to maintain your current lifestyle throughout your golden years. Your biggest fear? A devastating bear market that would significantly reduce the value of your portfolio and put you at […]

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Every Bear Market is Different

It’s official: the Bear Market of 2022. The S&P 500 has now fallen 20.9% from its high in early January, the largest decline for the index since March 2020. The question everyone’s asking: what happens next? To answer that, we often look back at history, attempting to find parallels with the past. But even a […]

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The Stock Market is a Voting Machine

“Hence the prices of common stocks are not carefully thought out computations, but the resultants of a welter of human reactions. The stock market is a voting machine rather than a weighing machine. It responds to factual data not directly, but only as they affect the decisions of buyers and sellers.” – Graham and Dodd, Security Analysis […]

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When Cash Is King

Cash is king. At least for the moment. In the first quarter of 2022, short-term Treasury bills finished marginally higher (+0.03%) while both the 10-Year Treasury bond (-6.64%) and the S&P 500 (-4.95%) declined. The greatest fear among many investors is that this trend will continue. Is this a rational fear? How often has cash […]

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Is a Low Unemployment Rate Bullish for Stocks?

The US Unemployment Rate moved down to 3.6% in March, its lowest level since the start of the pandemic and well below the historical average of 5.75%. If you asked most people, they would probably say this is a bullish sign, where a strong economy is good news for the stock market. But is this […]

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The Inverted Yield Curve Omen

There are few things investors fear more than an inverted yield curve (the relatively uncommon situation where short-term yields are higher than longer-term yields). Why? Because it tends to be a pretty good indicator of future economic weakness. Case in point: the last 6 recessions in the US were all preceded by an inverted curve. […]

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A Checklist for Corrections

The markets are volatile, the news is bad, and the value of your portfolio is going down. You’re afraid things may get worse and you want to do something about it. This is a perfectly normal reaction. When faced with something painful, we look for ways to ease the pain. While such a response serves […]

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Will a Single Rate Hike Kill the Bull Market?

Note: view my video on this topic here. Stocks are down and the Fed is expected to hike rates for the first time in years. Many are worried that we are heading straight for a bear market. Which begs the following question: has there ever been a 20% stock market decline in advance of or […]

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The Price of Admission in Stocks

Note: watch a video of this post here. When investors think about risk, it’s the extremes that immediately come to mind… 1929 (Great Depression) 1987 (Black Monday Crash) 2000 (Dot-Com Bubble) 2008 (Financial Crisis) 2020 (Pandemic Crash) The commonality: fear, panic, and catastrophic losses. While these periods are all front and center in our minds, […]

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Are You Investing or Merely Speculating?

“Whether you’re excited or nervous when your favorite asset falls in price marks whether you’re investing or merely speculating.” – Naval Ravikant (Founder of AngelList) Are you investing or merely speculating? Naval Ravikant had an interesting take on this most important of questions. The deciding factor: whether you’re “excited” or “nervous” to see your investment going […]

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2021: The Year in Charts

Here are the charts and themes that tell the story of 2021… I. The Free Money Effect In the first few months of 2021, hundreds of millions of Americans (the vast majority of whom had never lost a job during the pandemic) received two more tax-free stimulus checks, setting the stage for one of the […]

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How to Avoid Another Lost Decade

US equity valuations are high. How high? The CAPE Ratio on the S&P 500 just crossed above 40. When was last time we saw a CAPE ratio above 40? September 2000. What happened after that? The “lost decade” for investors. The S&P 500 declined 15% over the next 10 years, with two significant drawdowns in […]

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Investors Are Behaving as if the Future Has Already Happened

Rivian ($RIVN) went public last week in one of the largest IPOs ever, raising $12 billion and ending its first day of trading at a market cap of $87 billion. Only a week later, its market cap has surged to $149 billion, higher than both General Motors ($GM) and Ford ($F). Why is that surprising? […]

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The Stock Market Is Not the Economy

US economic growth contracted 2.3% in 2020, the worst year for the economy since 2008. Did that hurt the stock market? Not at all. The S&P 500 gained 18%, well above its historical average return of 10%. 2020 wasn’t the first time we’ve seen a higher stock market in spite of an economic downturn. The […]

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Reaching for Returns

7.5%. That’s been the annual return assumption of pension funds for decades. What mix of assets is required to generate such a return? The answer to that question has changed dramatically over the past 40 years. Let’s take a closer look… January 1981 In 1981, short-term Treasury bills were yielding over 15%, near their highest […]

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How the “Buy the Dip” Generation Came to Be

“Buy the dip.” This has been the mantra for an entire generation of investors. Why? Because we are creatures of habit, and during the last 12 years the best habit you could possibly have had as an investor was to stop worrying and simply “buy the dip.” The fact that dips were often followed in […]

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Expectations Are Everything

This is a story about expectations. But first, I want you to read about Company A and Company B… Company A had revenues of $66.81 billion over the last year and net income of $7.14 billion. It was founded in 1912 and has 114,000 employees. Company B had revenues of $851 million over the last […]

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When Valuation Matters

“But valuation doesn’t matter anymore.” You’ve probably heard that statement in some form or fashion over the last year as we’ve witnessed a rolling series of manias in markets like never before. And indeed it is true – at least in the moment. During a parabolic advance, sentiment and herd behavior easily trump valuation and […]

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Home Bias and the Best Time to Diversify

“Invest in what you know.” A common piece of advice that’s often taken to heart. Familiarity breeds comfort, and the more comfortable you with an investment, the more likely you are to own it. Which is another way of saying that our feelings and emotions are the primary drivers of our investment decisions, not data […]

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