Valuation models, like the CAPE ratio, are great for informing investors where the market stands. The models are meant to show how over or undervalued the market is in relation to its historical average. And if you believe that markets revert to a mean, then at some point any excess valuation will swing back to the norm.

Some people see valuation models as a timing tool except none actually say when. Two questions that rarely get asked are how reliable is mean reversion and how relevant is the historical average? Continue Reading…

Sometimes we don’t make the obvious choice or the one that makes the most sense or even the favorite.

A scientist ran a study where participants were given a choice between two candy bars. Of course, they picked their favorite. But when the number of choices increased, they were less likely to do so. Continue Reading…

I do my best to ignore it but this year it’s hard not to look away. Like a car wreck at an intersection, this year’s political circus has grabbed a lot of attention. Train wreck probably better describes it. I’ll spare you my opinion of the candidates, except to say it looks like a choice for the least worst option. Neither candidate is a glowing example (spray-on tan doesn’t count) of much. But I’m cynical.

As is so often the case, there is perception – what you’re being told sold – and reality. And 20-second sound bites drive most of what voters perceive (not much different then the markets). Reality, on the other hand, requires a bit more time and thought and logic to weigh outcomes and trade-offs of all the complex issues being discussed. But our time is short, so 20-seconds suffices for too many of us. Continue Reading…