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Same Old, Same Old There 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 the most baffling Wall...
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Breaking A Bad Habit Smoking. 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 mar...
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The Little Engine That Couldn't There’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 engine that is the Large Cap be...
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"Lieutenant Dan got me invested in some kind of fruit company. So then I got 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 Gump One 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 years probably think that it was a “...
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Morningstar Ratings: A Study in Self Flagellation We 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 fund Star Rating...
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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 different forecasts. *...
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The Sky Seldom Falls "I've been through some terrible things in my life, some of which actually happened." - Mark Twain "How much pain they have cost us, the evils which have never happened." - Thomas Jefferson "But what torments of grief you endured from the evil which never arrived." - Ralph Waldo Emerson As the three smart guys above say in varying shades of tasteful English, we tend to worry about a bunch of stuff that never actually happens. Y2K, Bird Flu, and Killer Bees would probably f...
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The View From The Bottom Of The Pond Perceptions often differ depending on your vantage point. When we watch a duck in water, it typically appears to be gently gliding along, barely making a ripple on the surface. But that calm, serene assessment would change greatly if you were lying on your back on the bottom of the pond. In that case, you would see the rapid, almost frantic pace of webbed feet churning beneath the reflective water's surface. Simply put, there's a lot going on under there tha...
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A Fool and His Money Are Soon Parted (Hers Too) We're not quietly intimating that investors who buy stocks based on research reports are foolish. Rather, we are emphatically shouting it from the rooftops. You may remember that after the high tech stock craze of the late 1990's, and their subsequent huge crash in the early 2000's, the SEC handed out some huge fines and reached settlement with ten Wall Street firms. These firms agreed that they would separate their investment banking business fro...
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Picking Winners When your TV shows a skier shooting a rifle, and there are no police involved, you know it is once again time for the Winter Olympics. Team USA performed remarkably well this year. Few expected that. Attempting to predict just which athletes would win their events proved difficult, if not impossible. Some examples: Bode Miller In 2002's Olympics, Miller won 2 Silver medals in alpine skiing. In 2005, he won the overall World Cup title, the first American to do that in decades. H...
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