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Wednesday, September 20, 2017

Market Update: U.S.

Here is a brief update on what is going on in U.S. markets.

Friday, September 15, 2017

Understanding the Marketplace

Here is a quote by Howard Marks (taken from a post by Michael Batnick):

"First-level thinking says, “It’s a good company, let’s buy the stock.” Second-level thinking says, “It’s a good company, but everyone thinks it’s a great company, and it’s not. So the stock’s overrated and overpriced; Let’s sell.”
First-level thinkers see what’s on the surface, react to it simplistically, and buy or sell on the basis of their reactions. They don’t understand their setting as a marketplace where asset prices reflect and depend on the expectation of the participants. They ignore part that others play in how prices change. And they fail to understand the implications of all this for the route to success."

Thursday, September 14, 2017

The Piggly-Wiggly Corner

After Tulipomania made an appearance in popular business news (see yesterday's post), I thought I would share another famous/interesting finance story: the Piggly-Wiggly Corner.

Wednesday, September 13, 2017

Bitcoin/Tulipomania

Jamie Dimon, the CEO of banking behemoth JP Morgan, recently shared some harsh words about Bitcoin.

Friday, September 8, 2017

Equifax Hack

By now, everyone has heard of the hack at Equifax Inc. that has exposed personal information for over 140 million consumers, so I thought I would show our readers what that does to a stock.

Click to Enlarge

The stock falls 13% on astronomically high trading volume.  Far right of the above chart is very ugly.  
Moral of the story - don't get hacked...and if you must get hacked, don't be a $17 billion company that has the personal information of almost every American adult.

Thursday, September 7, 2017

Importance of Diversification

We talk a lot here about why diversification is important, but sometimes a picture is worth a thousand words.  So, here come 1,000 words because I can't find a good picture.

Just kidding.

Here is a picture. (click to enlarge)


While the highest performing asset class is constantly changing, the diversified portfolio (orange box) consistently hovers near the middle of the pack.  This consistent performance, and more importantly the avoidance of large drawdowns, is very important for taking advantage of compound interest over the long term.

Wednesday, September 6, 2017

Saving Rate vs. Investment Returns

In our recent post on lifestyle and controlling expenses (here), I commented that "Investment returns are mostly determined by the broader market over which neither you nor your financial advisor have much control and your time horizon is determined by aging and dying...which just kind of happen.  Lifestyle creep (living more extravagantly with each pay increase) is incredibly difficult to avoid, but by simply controlling it through things like systematic increases to 401k contributions, we can make a big difference in our path to retirement."  I have decided to reiterate that here because: 1. copying and pasting was super easy, and 2. I just came across a new article that made the same point in a far more eloquent manner.