Your investment success or failure may come from how you invest, not necessarily what you invest in. As you know, the pangs of pain from losing money far outweigh the euphoria of making it. We are human. We like to win. We hate to lose. Why, then, do we tend to invest in areas that are going up instead of areas that are going down and offer good “value?” FOMO or fear of missing the boat? To understand risk and reward, I’ll point you to the efficient frontier. The Efficient Frontier, created by Harry Markowitz in 1952, measures the efficient diversification of investments that delivers … [Read more...]
FOOD INFLATION: Spending More to Buy Less
When Americans visit the grocery store today, they know that things aren't what they used to be. Food inflation is killing family budgets and shocking shoppers. In The Wall Street Journal, Stephanie Stamm and Jesse Newman take a look at food inflation over the last few years. They write: In grocery stores, a Benjamin just isn’t what it used to be. Grocery prices were up 1% in February from a year earlier, Labor Department data show. They were up 10.2% in February 2023 versus a year earlier, and were up 1.2% in February 2019 from a year earlier. Prices for hundreds of grocery items have … [Read more...]
Index Investing: Losing Your Vote in America’s Business
Are you losing your sense of place in America? Specifically, are you in touch with how you’re investing and not simply on autopilot? Because what we’re seeing with firms like BlackRock, State Street, and Vanguard (collectively managing $23 trillion), is their views are being voted with other people’s money. You, the investor, are the one with some skin in the game. Shouldn’t you be heard and not looked upon as a tool for their politics? I think so. When it comes to index investing, which used to be a passive endeavor, it’s a long way from where it started. Even the Total Stock Market Index … [Read more...]
The Danger of Ownership Consolidation
What happens when a small number of asset managers use their investors' money to control America's corporate world and, more specifically, its banks? It might not be what's best for shareholders. Instead, it may be what's best for fund managers and their friends in Washington, D.C. When it comes to banks, there are special rules that require asset management companies to operate as passive owners rather than become actively involved. Now, the FDIC is worried that the asset management oligopoly of BlackRock, Vanguard, and State Street might be getting too involved in the business of the banks … [Read more...]
Be Careful with CD Rollovers
If you have CDs rolling over into lower yields, don’t lose sight of the opportunities in fixed income. If you need help crafting your bond portfolio, let’s talk. … [Read more...]
Holiday Gatherings Are Tough on The Prudent Man
Holiday gatherings are tough on The Prudent Man. Because while everyone is happy to tell you how well they’re doing in the stock market, it’s The Prudent Man who knows how fleeting temporary gains can be. The Prudent Man knows his course, his path. He’s not quiet about it. Hardly. He locks eyes with the storyteller, knowing the final chapter’s end before it’s written. Yes, The Prudent Man tells his listeners the way he sees it—his vision—understanding that most investors won’t be able to handle his path. Temptation in markets, especially ones moving higher, is too much for lay investors to … [Read more...]
Are Some Bank CDs Fool’s Gold?
Beware bank CDs that mature and roll directly into another CD, potentially at a much lower rate. Imani Moise explains this scenario in The Wall Street Journal, writing: John Furlong signed up for a certificate of deposit last year that paid 3.85%. When he checked his account in February, he was surprised to find the bank was only paying him 0.05%. The 62-year-old construction manager thought there was a mistake. Then an employee at his branch in Henderson, Nev., told him that his $50,000 CD had matured and automatically rolled into a new one that was paying a lower rate. The only way to … [Read more...]
RIP Daniel Kahneman: Thinking, Fast and Slow
Daniel Kahneman, one of the founders of behavioral economics, a branch of thought that sees people as they are, impulsive, prone to mistakes, and pushed by their emotions, rather than the fully rational actors of traditional economic thought, has passed away at 90 years old. Kahneman was a psychologist first, and an economist by happenstance. He understood that people's desire to "do something," is what could get them into trouble. He said, "All of us would be better investors if we just made fewer decisions." Sounds like Jack Bogle's "Don't just do something, stand there." Making emotional … [Read more...]
Happy Easter: A Family Hunt for Dow 80,000
As you prepare for the quarter’s end, let’s reflect on where we’ve been. As the Dow Jones Industrial Average temporarily crossed 40,000 were you reminded of how far we’ve come? Because in my conversations with you, you tell me you remember when it was Dow 10,000, 6,000, or lower. The older we get, the higher the Dow goes, the more astonishing its new highs become. I know this isn’t your father’s or your grandfather’s stock market. But it can feel like it. What has been true at different stages for them might be true for you: Stocks tend to go up, but not on your schedule. Who doesn’t … [Read more...]
A Warning from Japan
It takes more yen to buy a dollar today than at any time since 1990. Not even during the Asian Financial Crisis did the yen become this weak compared to the dollar. Foreign exchange is a matter of comparison, and right now, the US Dollar happens to be a nice house in a bad neighborhood. The Wall Street Journal's editorial board writes of the yen: Excitable market analysts talk as if the main risks to the global economy are when and how much central banks will raise interest rates. A different danger came into view in Japan on Wednesday as the yen plunged to another multi-decade low … [Read more...]
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