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All That glitters...July 16, 2013Everyone likes gold. It is so pretty and shiny. Rappers, (old) dentists, prospectors, historic James Bond villains, Scrooge McDuck (Huey, Dewey and Louie’s great uncle), King Tut’s mortician and the Rothschild family were/are all gold lovers. There are many more, too numerous to list. But most people don’t know an awful lot about this precious metal. For instance, a large majority of gold on the planet is located near the Earth’s core, hav...
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Rich and Richer, Dumb and DumberApril 16, 2013No, we're not talking about the inequities of our economic class structures, nor the 1994 comedy starring Jim Carrey and Jeff Daniels with bad hair cuts. Rather, the topic is about investors, and how on average, they repeatedly shoot themselves in the foot, market cycle after market cycle. In their attempt to ease their fear and embrace their greed, they historically do the wrong thing at the right time, or vise versa.Dalbar, the stock market res...
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A Sheep In Wolf's ClothingJanuary 10, 2013The inverse of the above idiom comes from the Bible. "Beware of false prophets, which come to you in sheep's clothing, but inwardly they are ravening wolves." In every day usage, this verse has become a warning about bad guys disguising themselves as good, or at least harmless, and tricking an unsuspecting victim.But that's not what we're talking about here. In fact, we are talking about just the opposite. More like a meek and h...
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ObdurateSay what? For those who think we haven’t been erudite or scholarly enough in these quarterly reports, we hope your mind will now be changed. For non-English majors, the word “obdurate” means pig headed, inflexible, rigid, unyielding. Not the stuff that makes for a good marriage. You might be hard pressed to find an instance where being obdurate is good. However, in the investment world, you should really hope that your investment vehicles are all ver...
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Same Old, Same OldThere always seems to be some type of unpleasant revelation lurking on Wall Street. It hides in the darkness until its discovery causes surprise. The huge trading loss by J.P. Morgan Chase is in that category. It seemed to take everyone, including most JPMC officials, by surprise. The blatant overvaluation of Facebook's IPO was another type of surprise, especially if you were a retail investor who was "lucky" enough to get in on that "deal." But perhaps ...
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Breaking A Bad HabitSmoking. Talking with your mouth full. Forgetting to put the seat down. All bad habits. Some will kill you; others will simply make you unpopular. But bad habits in investing are the worst, because they are guaranteed to make you poorer!One of the most insidious of these habits is known as Recency Bias. It occurs whenever we use our more recent experiences as a basis for expecting a future event. It happens all the time with the stock market. People often forget about market ...
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The Little Engine That Couldn'tThere’s a 100 year-old heartwarming story about a little engine that persevered by repeating “I think I can, I think I can,” until it was finally able to pull a line of railroad cars up a mountain. Small, but mighty. In the investment world, we have our own diminutive hero, known as the Small Cap asset class. You probably remember hearing that this asset class has superior long term performance compared to the behemoth blue chip engi...
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"Lieutenant Dan got me invested in some kind of fruit company. So then Igot a call from him, saying we don't have to worry about money no more.And I said, 'that's good. One less thing.' "-- Forrest GumpOne Less Thing. Or Was It?That’s the $64,000 question, because we don’t actually know what Forrest has done with his Apple stock since the bus picked up his son at the end of the movie. Investors who have watched Apple’s advance over the past couple of y...
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Morningstar Ratings: A Study in Self FlagellationWe have nothing against Morningstar, the ubiquitous mutual fund research service. In fact, it’s an American success story. In 1982, its owner started the company with an $80,000 initial investment. The company is now worth $3.1 billion. It’s not that Morningstar doesn’t provide some helpful information; in fact its databases contain hundreds of data points for virtually every mutual fund. But upon further review of its mutual fun...
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They Put The Goo In “Market Guru”If you are getting the impression that we are not too impressed with market prognosticators, you would be correct. We continually remind you of this fact because of our belief that market forecasters inflict meaningful damage to investors’ performance results. For example, as was pointed out in a blog entry* on The New York Times website earlier this year, three different “famous” market gurus have come out with three really, really ...
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