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The Friday Brief

Good Comes from Market Corrections

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We are nearing the 10-year anniversary of the stock market’s incredible recovery following the Great Recession which saw stocks lose 50% or more of their value. Since March 9th, the S&P and Dow are up nearly 300% while the US Total Market index is up 400%, not counting dividends. During this time, there have been six corrections in which markets have fallen more than 10% from earlier peaks.    While no one who owns stocks particularly enjoys market corrections, they are not only inevitable, they are valuable for free markets in that they ‘correct’ abuses and excesses. Continually rising stock

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Gerald Should Have Shared His Password

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You remember Bitcoin, right? The flashy cryptocurrency that no one understood but everyone was talking about in 2017? It hasn’t been making as much noise lately, mostly due to the fact that the price has fallen from a high of nearly $20,000 per bitcoin to less than $3,500 over the past 14 months. Well, it’s back in the news again, but this time it has nothing to do with price, investment potential or an opportunity for the average person to actually make use of it. On January 15th, it was revealed that a gentleman named Gerald Cotten passed away on

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Market Volatility Down For Now

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Remember that awful market drop starting in mid-September of last year? A strong market rally in January, the strongest in 30 years, is two thirds the way toward erasing it. The Fed pausing their rate increases for a while, China coming to the bargaining table in earnest, thousands of new private sector jobs created suggesting businesses largely ignored the government shutdown and bad weather, and 71% of S&P 500 companies reporting positive earnings surprises have all combined to restore confidence in the US economy among investors. The Federal Reserve likely deserves a large share of the credit for both the

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

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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

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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?

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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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