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How to Lose 2,000% (Don’t Forget About Everyone Else)

By | The Friday Brief | No Comments

In 1994, three of the brightest, most successful and fiercely calculating minds in finance formed a hedge fund called Long-Term Capital Management (LTCM). John W. Meriwether, former head of bond trading at Salomon Brothers, was joined by Myron S. Scholes and Robert C. Merton. The latter two would share the Nobel Prize in Economic Sciences three years later. Prior to opening, they raised just over $1B. For awhile, the fund, which employed various and complex bond trading strategies, enjoyed some success, as you can see from the chart to the right. But then, in early 1998, it blew up. With

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The Success Mechanism Within You

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“It may seem strange, but it is nevertheless true, that up until [1950], scientists had no idea of just how the human brain and nervous system worked ‘purposely’ to achieve a goal”  Dr. Maxwell Maltz Through his phenomenally successful 1960 book Psycho Cybernetics, Dr. Maxwell Maltz changed the way psychologists, self-help authorities, athletic trainers, behavioral experts and the rest of us understand how the Success Mechanism in each of us works to achieve goals, large and small. As the computer took center stage in the late 50’s as mankind’s latest marvel of human invention, Dr. Maltz asked the question: “Could it

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Who Can Sell Stocks Better Than a Monkey?

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We have talked a lot–generally, and in the specific context of the last few months of market volatility–about the importance of an investment process that isn’t based on words like “hope” or “proprietary model” or even “I just have a good feeling about this.” This is so because we believe that markets are pretty darn efficient, and while that doesn’t always mean the price of any given stock or any basket of stocks is “right”–there’s no such thing–it does mean that markets are good at including available information of a staggering scale into the pricing of assets. That’s not to

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How to Navigate Volatile Markets

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Since October, large swings in the stock market have become commonplace, driven by a ceaseless stream of extraordinary economic and political news events. Apple hardly ever downgrades their earnings guidance. The Chinese economy hardly ever declines. Britain may be forced to leave the European Union without a trade/border deal adding significant economic, diplomatic, and political uncertainty to the region. The US dominance in space hasn’t been challenged since 1969, but China, Iran and others are now saber rattling in this new arena. The Federal Reserve hasn’t raised interest rates four times in a year since 2006. Along those lines, good

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Too Much Bah Humbug

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During the past few weeks, markets have been batted around like a pinball, flipped by the Federal Reserve on the one side and government shut-down on the other. The active bumpers of China, BREXIT, oil prices, regulating big tech, global economic slowing, TWEETS, and a host of other recent news events have bounced our pinball market all over the table with more noise than points. Stocks, as measured by the Dow Jones Industrial Index are down 5.4% year to date, while the larger market, as measured by the S&P 500 and the CRSP Total US market are down more than

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How to Time the Market

By | The Friday Brief | One Comment

Jesse Livermore was a stock trader who made his fortune during the 1929 stock market crash, in which he heavily shorted U.S. stocks and then began to buy them up near market lows. On the worst day of the crash, October 29, 1929, Livermore is said to have made the equivalent of $3 billion in one day of trading. Since then (since time immemorial, really), this notion of trading stocks based on the ever cyclical nature of the economy at large and the stock market in particular–commonly referred to as “timing the market”–has long since captured the imaginations–and fortunes!–of many an

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What Are the Markets Telling Us?

By | The Friday Brief | One Comment

Markets are in a tizzy (a state of nervous excitement or agitation). Investors are asking, is the party over, is the bull market ending or are we just taking a pause? The latest volatility has been set off by ‘tariff-tweets,’ Fed talk, economic data, and the arrest of a Chinese CEO during trade talks. As global markets are mind-numbingly complex, the answer is definitely all of the above, and a lot more. But market catalysts pop and fizzle with short lives, the more important questions are what do the signs tell us will happen in the mid-term and the long-term

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Bond Portfolios Have Been Corrupted

By | The Friday Brief | 2 Comments

I happened across this tweet last night: We got an official holdings list for Janus Henderson Global Unconstrained Bond Fund (i.e., Bill Gross's fund) today: https://t.co/2r5AKChE73 What it seems to more definitively confirm is that 1) Aetna stock was a ~15% position, 2) there was no offsetting position to hedge it. 😮 https://t.co/VNemKYc9Z1 — Jeffrey Ptak (@syouth1) November 29, 2018 If you are unfamiliar with Bill Gross, he founded the mutual fund powerhouse PIMCO and for a long time ran the largest bond fund in the world, PIMCO Total Return. He’s something of a legend in the bond world. For

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Thanks for Nothing, Headlines

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We will celebrate Thanksgiving in less than a week, on the 22nd of November (which is, incidentally, the earliest possible date we could celebrate Thanksgiving). You know how it goes when these early ones come around–we are all getting “snuck up on” and “caught off guard” by the suddenness of Thanksgiving. And this year, perhaps, in the midst of a vicious socio-political atmosphere, faced with dystopian landscapes of a burning California, dealing with our first dose of hard markets in years–maybe we find it difficult to engage the idea of thankfulness in any meaningful way. Indeed, the front-page headlines of

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2018 Year End Money Moves

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As the holidays and new year approach with alarming rapidity–but before you get swept up in parties and family gatherings completely–it’s a great time to take a look at your finances. 2018 still has some important planning opportunities, and getting ahead of 2019 could pay huge dividends, too. With that in mind, here’s a quick list of seven things you might consider doing before 2018 draws to a close. 1. Revisit your 401(k) contributions: The IRS recently announced an increase to the annual contribution limit for 401(k), 403(b) and 457 plans. The current annual limit, effective through the end of 2018, is

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