“Higher risk, higher reward.” This is one of the most repeated maxims in investing, and the basis of Modern Portfolio Theory. It’s also intuitive: riskier investments should be compensated with a higher return. But what should happen and what actually happens is not always one in the same… It’s May 2006 and Gold is all […]
Note: view the video of this post here. The charts and themes from the past week that tell an interesting story in markets and investing… 1) A Good Start What a difference a year makes. In the first 21 trading days of 2022, the S&P 500 was down 5%, the worst start for the index since […]
Note: view the video of this post here. The charts and themes from the past week that tell an interesting story in markets and investing… 1) Inflation is Slowing Fast The overall US inflation rate (YoY % Change) moved down in December for the 6th consecutive month. At 6.5%, this is the lowest inflation rate […]
Note: view the video of this post here. Here are the charts and themes that tell the story of 2022… I. Starting Off With a Bang The first day of trading in 2022 felt very much like 2021. The S&P 500 closed at an all-time high and Apple hit yet another market cap milestone, becoming […]
We’re only a few weeks away from New Year’s Eve, and you know what that means: it’s resolution time. Exercising more, eating healthier, losing weight, and spending more time with family. These are among the most popular resolutions, each and every year. In the investing world, instead of resolutions at year end we often hear […]
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 […]
“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 […]
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, […]
Notes: Every week I send a letter to tens of thousands of investors covering the most important charts and themes in markets (Subscribe here). Click here for a video on this post. Put these charts on your wall for reference the next time you think… It’s “oversold” or “at support” and can’t possibly go any lower… […]
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 […]
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 […]
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 […]
“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 […]
The market has gone up over time. But not all the time; far from it. And therein lies the challenge, for you can’t have one (long-term gain) without the other (short-term pain). Since 1990, the S&P 500 has returned an impressive 10% per year. And it’s done so despite two 50+% bear markets and being […]
I Don’t Know Three words that are rarely heard in the investment business and at the same time the most important to long-term success. Why? Because the future is unknown and having the humility to admit that is very hard for us to do. We’re wired instead with overconfidence – we tend to overestimate our […]
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 […]
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 […]
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 […]
Note: watch a view a video of this post here. These are the top 30 stocks in the S&P 500 over the past 30 years… What stands out? The unfathomable cumulative returns, a product of time and the magic of compounding. What’s missing? The many periods of excruciating pain that anyone invested in these companies would have […]
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, […]
“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 […]
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 […]
If you’re going to bet against Warren Buffett, you better have the odds tilted in your favor. Back in January 2008, Buffett wagered $318,250 that an S&P 500 index fund would beat a hedge fund portfolio (five fund-of-funds chosen by Protégé Partners which invested in over 200 hedge funds) over the next ten years. The […]
“As Ben Graham said: ‘In the short-run, the market is a voting machine – reflecting a voter-registration test that requires only money, not intelligence or emotional stability – but in the long-run, the market is a weighing machine.’” – Warren Buffett (1993 Berkshire Hathaway Letter) Over the last year we’ve seen a rolling series of […]
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 […]