Market volatility always picks up at random moments every year and somehow investors seem surprised about it. Being less surprised is one of the keys to investment success.

In fact, it’s so important that Ben Graham dedicated a chapter to handling market fluctuations in his classic The Intelligent Investor. His parable of Mr. Market has been retold by others (here, here, and here) over the years for the same reason.

Mr. Market has a crazy streak. He also happens to be your partner in a number of business ventures. Mr. Market shows up day after day quoting a price to buy your shares or sell you his.

And every so often, his craziness peaks and he rattles off some ridiculous prices for those shares. Sometimes those price quotes are much higher than they were the week before. Sometimes they’re much lower. And since Mr. Market is so unpredictable, there’s no telling what prices he’ll offer up next week.

Now, it’s up to you to decide if you want to listen. You can take advantage of the offer or you can do nothing. Continue Reading…

Major market indexes generally do a good job of tracking “the market” but they don’t always tell the whole story.

For example, if you only keep track of the S&P 500, you’re probably oblivious to the increasing number of U.S. listed stocks that have declined 50% or more from their 52-week highs. As the chart below shows, that number currently exceeds 2,000.

The last time we saw numbers anywhere close to that was March 2020 and, prior to that, the 2008 financial crisis (there’s no guarantee it reaches those heights). The point stands that a portion of the market has been hit hard over the past year. Continue Reading…

Here’s what I’ve been reading the past three months:

• Baruch: My Own Story — This is the first of two volumes of Bernard Burach’s autobiography. Baruch built his fortune on Wall Street as a speculator and dealmaker, before entering public life managing the mobilization effort of WWI and advising presidents. I found it easy to read and fascinating not only for the stories of his investing hits and misses but the history of major financial events as seen through the eyes of someone who was there. (notes)
• The Pitfalls of Speculation — Thomas Gibson wrote the book in 1906 to highlight the many ways people lose money speculating in the market. Of course, those ways are still the same today. It filled my old book quota for the quarter.
• Ice Age: The Theory That Came in From the Cold — Ice Age explains the history behind the discovery of the cycle of ice ages, why it happens, and how it impacts the planet. (notes)
• The Davis Dynasty — The book tells the story of three generations of the Davis family but primarily focuses on Shelby Collum Davis and his 47-year investing career. The author, John Rothchild, does a great job weaving market history and investing lessons into the Davis family’s story. I had read the book about seven years ago so a second read-through gave me a chance to compare and update my notes.
• 100-to-1 in the Stock Market — The book promotes the idea of “buying right and holding on” to individual stocks by highlighting stocks that investors could have made 100x their money on. Unfortunately, each chapter devolves into a “had you bought” list of stocks, with a starting price and ending price as if it proves the author’s point. He makes it sound easy. It’s not! There’s no mention of why anyone would buy any of the stocks mentioned beyond happenstance (or hindsight bias) and, so far, the most difficult part of actually holding on is glossed over. I’m seven chapters in and have a waning desire to finish.

Continue Reading…