Buy the Book: First published in 1873, Walter Bagehot describes the intricacies of the money market and, more importantly, the necessary response when managing a financial crisis.
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Warren Buffett: Market Pricing, Not Timing
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Everyone wants to know what happens next. That’s the nature of market crashes. When will it end? Was that the bottom? What if it falls further?
The questions are asked a hundred different ways and the only good answer is: “I don’t know.” But that’s not what you’ll hear.
Instead, everyone also has an opinion. Many will go out of their way to express it. The trouble starts when people listen and act on it.
Warren Buffett dealt with this situation in 1966. The Dow had a rough six months to start the year. It declined from 969.26 to 870.10. That’s a loss of 8.7% after dividends, a tame decline compared to 2020. A few of his partners felt obligated to tell him what would happen next. This was his response: Continue Reading…
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The Big Secret for the Small Investor by Joel Greenblatt
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Joel Greenblatt explains why the average investor has an advantage over the pros with this introduction to investing. He covers the different methods for valuing a business, the limits of mutual funds, how different index fund weightings work, the (mis)behavior of investors, and why a long term perspective is so important.
The Notes
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There are Weeks Where Decades Happen
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There are decades where nothing happens; and there are weeks where decades happen. – Vladimir Lenin
If you feel like the last few weeks have lasted forever, you’re not alone. Here are my thoughts going forward.
The administration’s reaction to the virus was nonexistent until the market slapped them upside the head. They finally appear to be taking the coronavirus seriously. Everyone else must follow suit if they haven’t already.
Right now, I’m watching for two things.
First, is an increase in mass testing for the coronavirus. That means an abrupt end to social media posts about people being turned away from the ER or doctor’s office because they don’t meet the “requirements” for testing. This has been a horrendous failure of the administration so far.
South Korea has shown the impact mass testing has on slowing the spread of the virus. They set up drive-thru facilities with next day results by phone. They’ve tested over 270,000 people so far, roughly 4,100 tests per million people (while the U.S. was at 26 tests per million people). Continue Reading…
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Write It Down Redux
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What a week! The range of emotions felt over the last four days must stretch from kid in a candy store to panic attack. I’m guessing, for most people, the candy store sensation is absent.
But some of us feel it. And it’s just as hard for opportunity seekers not to act rashly as it is for panicky investors. That dopamine hit after every buy order clears can be just as addicting…until you’ve burned through the cash set aside for times like these.
Patience and discipline are just as important for opportunistic investors as it is for everyone else in extraordinarily volatile markets.
As the saying goes, the best time to buy stocks is when things seem bleakest. I don’t think we’ve reached that point yet (nor do I know where it is).
But some time, like five years from now, few will remember how they felt and reacted during this crash but everyone will agree it was a wonderful buying opportunity.
My suggestion: write it down! Continue Reading…
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Peter Lynch on Volatility
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With all the volatility in the stock market lately, I thought it would be a good time to point out that this is only natural. Sometimes it’s uncomfortable. It’s stomach churning. It’s downright painful. Scary, even. But it’s all part of the experience.
So if those feelings sound a little familiar, I thought Peter Lynch’s perspective might offer some reassurance to help settle your nausea:
I love volatility…I think volatility is terrific.
Okay, maybe that’s not the most helpful for a queasy stomach.
Lynch saw volatility as an opportunity. Others might see it as a burden. It all depends on your perspective. Continue Reading…
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