If you play long enough in Las Vegas you will eventually lose. The odds are stacked against you. In the stock market the opposite is true. Stock prices are based on corporate earnings and over time corporate earnings go up. Historically they have increased approximately 7% per year over ten-year or more periods. The amount […]
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Why we Make Suboptimal Decisions…
In ice hockey, if you’re down by one goal and the clock is ticking down, should you take the chance of pulling your goalie to get a sixth attacker on the ice and increase your chances of scoring? And if you decide to go for it, when is the optimal time to pull the goalie? […]
Go Ahead and Spend a Little!…
Retirement planning is difficult for a very simple reason. In most cases, it requires deferring consumption today in order to fund a goal sometime in the future. This effort requires a well developed sense of self-control. Self-control comes more easily to some people than others, but for most it is emotionally difficult. A wide range […]
The 2-Minute Thought: On Investment Errors – Part II
When do you know your investment decision was wrong? That was the topic of my post last week. I wrote that you may not know if you are right or wrong at a given moment, but eventually you will — after enough time has passed. As part of my examination of our errors among the […]
The 2-Minute Thought: When Investments Go Wrong
Columbia Business School professor and investing guru Bruce Greenwald has said that you do not need to be right all the time to be a good investor. He has said that if you can get things roughly right 60 – 65% of the time, you’ll end up in the top 1% of investors. That would […]
Not a Matter of If but When…
I am talking about the next Bear Market. The stock market has been going up pretty much non-stop since March 2009 (see below). Stock market advances do not end just because of old age, but nothing grows to the sky and eventually we will get a recession and a market downturn after this impressive expansion. […]
Why China May Very Well Win a Trade War…
In a recent New York Times International piece (May 4, 2018) Thomas Friedman noted that America and China are coming at the current trade discussions from very different angles. The Trump Administration wants to draw the line now on trade before it is too late, before China gets too big. The Chinese believe they are […]
What the S&P 500’s Composition Tells Us…
The S&P 500 is an index of 500 large U.S. stocks weighted by their market capitalization or market value. We know it today as one of the most important gauges of U.S. stock performance, covering a broad swath of 11 sectors. But when the index started in 1957 in its current form, its composition was […]
Moving Things from Here to There…
By almost any measure Corporate America performed well in the first quarter. Revenues of S&P 500 companies grew on average 8.5% over year ago levels, and earnings before taxes advanced 13.2%. But behind these rosy numbers a few concerning items stood out. High freight costs weighed on results of a wide range of companies. Some […]
The 2-Minute Thought: Secular Decline . . . or Not?
Do people still go to movie theaters? And will they keep going in the future? It’s a tough question because 2017 was a really tough year for theaters. Bloomberg wrote that 2017 was the worst year for movie ticket sales in the U.S. in over two decades. The Atlantic called last summer “Hollywood’s summer from […]
The 2-Minute Thought: A Reminder that a Little Knowledge is a Dangerous Thing
It was Alexander Pope who said, “A little learning is a dangerous thing,” and according to Carmen Sanchez and David Dunning in the Harvard Business Review, it’s true. It’s not complete beginners that need to worry. According to Sanchez and Dunning, when people are entirely new to a task, they stay alert and cautious. The […]
A Little Knowledge is a Dangerous Thing…
You might have run across the article earlier this year about the class at Yale University that has attracted 1,200 students. Yes that’s right, 1,200 students – including 24 teaching assistants. The people in the cheap seats in the back, really are in the cheap seats. The name of the course is Psych 157, Psychology […]
