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Wise Words from Peter Bernstein

May 13, 2022 by Jon

Peter Bernstein understood markets better than most. Decades of experience gave him an inside look at the complex interplay between investor behavior, risk, and uncertainty.

Bernstein knew that realized risk was a byproduct of investors’ behavior. Behavior that is often driven by our experiences or lack thereof.

Investors usually go wrong the moment they are certain of what comes next. Probabilities, not absolutes, are the best tools we have to make investment decisions. Yet, the riskiest moments in markets are when investors en masse expect a similarly certain future.

Bernstein knew that risk results from not knowing the future. Uncertainty rules but risk isn’t always a bad thing. Surprises happen both good and bad.

Risk is simply the outcome we don’t expect. The question to ask, according to Bernstein, is what if you’re wrong? Are you prepared for the consequences of that?

Survival is key. So risk is something to be protected against and diversification is the answer. But in so doing, diversification seizes surprising opportunities elsewhere.

Most important, Bernstein had a way with words. His talent to simplify complex ideas, like those above, into a short sentence or two was impressive. I thought I’d share a few.

Here’s Bernstein: Continue Reading…

The Great Depression: A Diary by Benjamin Roth

May 11, 2022 by

The Great Depression: A Diary book coverBuy the Book: Print | eBook

Benjamin Roth was a lawyer in Ohio who realized early in the Great Depression that he was living through a financially significant time and wanted to learn from it. His diary recorded the effect the Great Depression, the economy, and financial markets had on people.

The Notes

Continue Reading…

Investing Lessons from the Great Depression

May 6, 2022 by Jon

Benjamin Roth kept a diary throughout the Great Depression. His diary was turned into the book The Great Depression: A Diary which offers a unique take on the time period from a financial perspective.

Roth realized early that he was witnessing a major financial crisis and wanted to learn from it. So he started journaling in 1931. He jotted down his thoughts on stories he heard from clients and events he observed. He tracked the stock market, local stock prices, and the economy both locally and nationally.

Three big things in Roth’s diary stood out.

First, one thing Roth repeated over and over was the lack of cash to buy bargain stocks. Nobody had money. The combination of a 90% market decline and widespread bank failures destroyed people’s savings.

Even the banks that didn’t fail basically froze their customer’s savings accounts. Limits were set on how much money a customer could withdraw in a day. In some cases, it was as low as 5% of the money in their account. Continue Reading…

Lessons from the 2022 Berkshire Meeting

May 4, 2022 by Jon

The Berkshire Hathaway annual meeting was this past weekend. Warren Buffett and Charlie Munger were back to their old ways.

Though, Buffett rambled a bit more than usual. Which probably cut the number of questions in half.

But the lessons were still there. The main takeaway from this year’s meeting is about avoiding the many ways investors can lose money. Let’s dive in. Continue Reading…

This Time Wasn’t Different

April 29, 2022 by Jon

The S&P 500 is down 12% year to date with over half of those losses coming in the past month. Yet, it’s holding up better than other areas of the market.

In fact, less than half of the S&P 500 stocks are down 20% or more from their 52-week high.

% of S&P 500 Stocks Trading 20% Below 52-Week-High

That’s tame compared to the rest of the market. About 33% of all stocks are down 50% or more from their 52-week high. For the record, less than 2% of S&P 500 stocks are down that low. Continue Reading…

Robert Wilson on Adam Smith’s Money World

April 27, 2022 by Jon

Robert Wilson falls under the title of “the greatest investor you’ve never heard of.” He turned $15,000 into $230 million from 1958 to 1986.

Wilson was a long/short investor who wasn’t afraid to use leverage. He began his career as an analyst at A.G. Becker & Co. He went on to open his own hedge fund in 1968 called Robert Wilson Associates. Within a couple of years, he was strictly running his own money. He gave it up in 1986 because he promised himself that if he ever failed to beat the market for three years straight, he’d quit.

Near the end of his career, he talked with George Goodman on Adam Smith’s Money World. He discussed his investment strategy. He also highlighted how successful investments can go to your head.

In Wilson’s case, his ego got the best of him and produced his biggest loss.

It happened in 1978. Wilson bet against Resorts International. Resorts was a small casino operator with a single casino in the Bahamas, with a second casino planned in Atlantic City. The company bet its future on legalized gambling in Atlantic City. Continue Reading…

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