Markets Aren’t Efficient
Relative Performance is a Dangerous Game
This Time is Never Different
Valuation Matters (in the Long Run)
Wait for the “Fat” Pitch
Sentiment Matters
Leverage Can’t Turn a Bad Investment Good
Beware of Over Quantification
There is No Substitute for Skepticism
The Benefits of Cheap Insurance
Some of these are probably more useful to you than some others.
Markets Aren't Efficient is a good one. I would tweak it to say that markets are efficient except for when they aren't. I recently read something that said people rely on markets to be rational (perhaps a synonym for efficient) when they themselves are irrational. Markets do tend to be rational most of the time but occasionally they go off the rails which can lead to great upside like 1998 and 1999 and sometimes it can go the other way like in 2008 when some stocks went to single digits when there was no justification to go that low (some stocks were justified in going that low).
This Time Is Never Different is useful too. Many people really thought the financial world was ending, there was genuine fear that the Great Depression was back and so on. Amusingly I was "too bearish" and then I wasn't "bearish enough." A point I tried to make repeatedly is that while the details were unique the human failings behind the details were not. People are (collectively) greedy, they misuse leverage, don't appreciate the risk they take and often react by selling low. You saw this ten years ago and you will see it again, guaranteed.
What sticks out for you?
8 comments:
Markets are much much more efficient than bureaucrats. People want nirvana. People are dillusional.
The bull looks like it will continue. But, eventually we will see very attractive stock prices. Stocks go up and stocks go down - get used to it as it is not going to change.
SEG
The benefits of (cheap) insurance are too plentiful to overlook. The gnashing of teeth and sleepless nights can certainly be minimized with proper management. There is simply no excuse to watch a carefully constructed portfolio dismantle before your eyes.
Paul. What do you consider cheap insurance? Thank you.
where is the best website to design for asset allocation an IRA with a transfer from 401k for a 59 year old?
It sounds irrational now, but back in March I was starting to panic.... if the DOW hit 6500, why wouldn't it go to 3500? Now, it is so easy to look back and say Don't Panic.
"Insurance is cheap".....however, if I had purchased insurance 10 yrs ago...the 10 year cost on insurance would not have been cheap.
Roger has the keenest sense in money management....definitely departs much wisdom. Thanks Roger.
Winslow, thank you for the kind word
Cheap insurance can come in many forms. Perhaps the best insurance comes in the form of wise financial counsel as Winslow points out above. Other forms for the do-it-yourself crowd would be to keep trailing-stops in place or even long puts as a few ideas.
Very interesting piece, thanks for posting that. In my opinion the U.S. dollar is in a lot of trouble in the long run because the Fed is now caught in a position where it cannot withdraw the stimulus or stop the money printing without severely damaging the economy. So one of the few ways for people to protect themselves from this fiat currency debasement in my view is to keep adding to gold positions when possible. And I recently came across an article titled "Canadian Gold Stocks Rally as Gold Price Opens 2010 Higher" at http://www.goldalert.com/ which discusses the outlook for a bunch of gold-related sectors, including several gold mining companies based in Canada that have benefited and should continue to benefit from the bull market in gold.
Post a Comment