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: click here to view my video on this post. “What are the historical returns?” That’s the first and often only question many investors ask before allocating capital. Why? Because we’re wired to believe that those returns are indicative of what we’ll receive in the future. If something has gone up 20%, we expect another […]
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 whom had never lost a job during the pandemic) received two more tax-free stimulus checks, setting the stage for one of the greatest […]
If you’re going to bet against Warren Buffett, you better have the odds tilted in your favor. Back in January 2008, Buffett wagered $318,250 that an S&P 500 index fund would beat a hedge fund portfolio (five fund-of-funds chosen by Protégé Partners which invested in over 200 hedge funds) over the next ten years. The […]
“As Ben Graham said: ‘In the short-run, the market is a voting machine – reflecting a voter-registration test that requires only money, not intelligence or emotional stability – but in the long-run, the market is a weighing machine.’” – Warren Buffett (1993 Berkshire Hathaway Letter) Over the last year we’ve seen a rolling series of […]
US equity valuations are high. How high? The CAPE Ratio on the S&P 500 just crossed above 40. When was last time we saw a CAPE ratio above 40? September 2000. What happened after that? The “lost decade” for investors. The S&P 500 declined 15% over the next 10 years, with two significant drawdowns in […]
Rivian ($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? […]
It’s that time of year again. Endless predictions and price targets about where the markets are headed in 2022: -The S&P 500 is going to ___. -The 10-year treasury yield is going to ___. -Crude Oil is going to ___. -Bitcoin is going to ___. There’s a huge audience for this type of content, but […]
“The Market is always right.” One of the most popular sayings which can also be one of the most dangerous. Why? Because “the market” can be very wrong at the worst possible time. A few examples… 1) Silver in 1980 The price of Silver went up over 10x in the year leading up to its […]
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 […]
“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 […]
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 $851 million over the last […]
By changing the start and end date, you can win just about any argument over what’s the best investment. Even the age-old battle between Gold bugs and stock market bulls? Yes, even that one. Here’s a guide to winning the argument, first in favor of Gold and then in favor of Stocks… If you’re a […]
Investing is never easy, but there’s no denying that the last 10 years in U.S. equities have been a far smoother ride than most of history. How do we define “smoother”? In layman’s terms: higher returns with lower risk. In technical terms, we can look at things like the Sharpe Ratio, which measures risk-adjusted performance. […]
Put these charts on your wall for reference the next time you think… All-time highs are a reason to sell… It’s “oversold” or “at support” and has to go back up… It’s “overbought” or “at resistance” and can‘t possibly go higher… Investors are rational and would never buy stock in the wrong company because of a tweet… A meme can’t lead […]
There are two types of investors: Pundits and Professionals… <> The Pundit thinks they know everything. The Professional knows that learning is infinite. <> The Pundit makes subjective predictions. The Professional makes objective assessments. <> The Pundit seeks self-promotion. The Professional seeks self-improvement. <> The Pundit exudes hubris. The Professional exudes humility. <> The Pundit […]
A 17,320% gain in 11.5 years. That’s what happens when you combine 3 turns of leverage with the greatest uptrend in history, the incredible move higher in the Nasdaq 100. The 3x Long Nasdaq 100 ETF ($TQQQ) was launched in February 2010. Since then it has advanced 17,320% (56% annualized) versus a gain of 890% […]
Investors today are experiencing one of the calmest markets in history: The S&P 500 has posted a positive return in each of the last 7 months (February – August), and has done so with bond-like volatility (5.2% vs. 5.2% historical average for the Bloomberg Barclays Aggregate). This is lower than over 98% of historical periods […]