Posts filed under “Apprenticed Investor”
My Sunday Washington Post Business Section column is out. This morning, we look at a famous aphorism from Sir John Templeton. The print version has the hedder When is ‘this time’ really different? while the online version used the fuller Investors must recognize what ‘this time it’s different’ really means.
The column tries to draw the difference between the psychology of when investors are rationalizing paying anything in a speculative bubble versus the times when there are actual differences in fundamental economic metrics. Despite the differences between these two situations, people apply — and mis-apply — Templeton’s famous aphorism.
Here’s an excerpt from the column:
“So what is the formula for recognizing what “this time it is different” means? (And why is it that it’s never different? The answer, I believe, is two parts math, two parts psychology.
The math part begins with the traditional formula for valuation. In its most simple expression, it is price relative to earnings, or the P/E ratio. That is the oversimplified version. There are many other factors that also impact valuation: economic growth, inflation, interest rates, cost of capital, investment options, etc. And there are countless variations of how to measure it. Last year, Merrill Lynch’s quant team looked at 15 metrics that measured equity valuation — but the basic formula is typically a version of price relative to a profit related metric.”
I really like what the Post did in the dead tree version of the paper — the chart below, and the headline on the jump – Think this time is different? Take your temperature. Then check the data.
click for ginormous version of print edition
Think this time is different? Take your temperature. Then check the data.
Washington Post, May 18 2014
Pay close attention to what’s motivating market commentary Barry Ritholtz Washington Post, May 4, 2014 Have you ever heard a talking head or commentator say something and immediately wonder, “Why did he say that?” I don’t mean the Donald Sterling kind of stupidity, but rather, specific comments on the economy or the markets…Read More
> My Sunday Washington Post Business Section column is out. This morning, we look at the motivations of various market commentators. The study of investor bias and psychology has long fascinated me. This column revisits the subject of different roles investors must play in order to confront these problems. I tangentially mentioned this in…Read More
What’s gone up won’t always come down Barry Ritholtz Washington Post, April 20 2014 U.S. equity markets made substantial gains last year. The Standard & Poor’s 500-stock index, the traditional benchmark for equities, was up 29.6 percent. Add in dividends, and it’s well over 30 percent. Technology and small-cap stocks did even better, with…Read More
> My Sunday Washington Post Business Section column is out. This morning, we look at What’s gone up won’t always come down. The print version had the headline You might think the markets are ready for a breather after last year’s gains, but . . . Here’s an excerpt from the column: “You might think…Read More
Category: Apprenticed Investor
Whenever we see any sort of disruption in markets an explanation usually follows. The headlines will explain that “Markets are going up/down because of this good/bad thing.” News anchors will solemnly intone why the volatility is significant and what it means for one thing or another. None of these casual explanations can withstand close examination….Read More
In a new project at Bloomberg I will interview some of Wall Street’s most influential thinkers. I’ll share more details with readers when we get closer to a launch date, but several consistent themes have become clear to me, even at this early stage. The one I want to discuss this morning is the concept…Read More
Our monthly letter to clients was picked up and excerpted by Barron’s Market Watch: A Sampling of Advisory Opinion. This is the section of the commentary relating to investor sentiment: Unsentimental Investors April Insight by Ritholtz Wealth Management 90 Park Ave., New York, N.Y. 10016 April 2: Anyone who thinks stock market sentiment is…Read More
While I have been busy kvetching about the weather, another payrolls report has snuck up on us. Estimates are for a 200,000 increase in nonfarm payrolls, the most since November, according to the median forecast of 90 economists surveyed by Bloomberg. But really, I have to ask: Why do you care? As I have relentlessly…Read More
How to know whether stocks are cheap or pricey Barry Ritholtz Washington PostTerms March 23, 2014 Last week, the Fed shared some widely expected news: It will taper more — keeping up a policy of slowly reducing its bond-buying program with the goal to wind it down by year’s end. It has telegraphed…Read More