Posts filed under “Apprenticed Investor”
I am working on this week’s WaPo column, based loosely on last week’s open thread on the value of the Financial Media.
I have a 23 bullet points I am trying to cut down to a dozen or less. Here are two:
Too Much Noise, Too Little Signal: The biggest problem most investors encounter is the sheer volume of the stuff. There is a vast sea of news items, most of which are meaningless to your portfolio. The vast majority of news items, earnings reports and economic releases are irrelevant to your investments.
I call this my Who Really Gives a Fuck about ISM? theory.
Any given company can have a better or worse earnings report. Any economic data point can be better or worse than expected. This is simple probability. The range of potential outcomes that are consistent with normalcy include both strong and weak data. Get used to it.
Learn to tune out the irrelevancies and stay focused on the big picture. Speaking of which:
Over-Emphasis on Short term: The politicos have a 24 hour news cycle; finance has a cycle of its own. Each quarter, earnings reports are released. (This also includes the pre-announcements period). Every month, we get numerous major economic reports: Employment Situation, GDP (and 2 subsequent revisions), New and Existing Home Sales, Leading Indicators, Consumer Sentiment, Retail Sales and Durable Goods Orders, etc. Every week, we get Jobless Claims, different treasury auctions, other minor reports. Part of the reason there is so much financial media is that every day, there is something different for people to write or speak about.
The simple truth is that most of these data points matter very little to the long-term health of your investments. What matters is the longer trend, and its occasional breaks and reversals. Everything else is filler.
This is the early draft; the Washington Post version will be far less coarse; their editorial policy is no F-Bombs . . .
On Investing: The Obamacare portfolio By Barry Ritholtz, October 6, 10:11 AM Investors are best off when they leave their party affiliation and partisan views behind. I’ve said it before: “Washington, I’m here to tell you, politics and investing don’t mix. Your politics are killing you in the markets.” Keeping your emotions…Read More
> My Sunday Washington Post Business Section column is out. This morning, we look objectively at Obamacare — not the politics of it, but the investing aspect. Its called: On Investing: The Obamacare portfolio. My conclusion? If you were an objective observer of the legislation when it passed, and then again when the Supreme…Read More
Its Philosophy Friday, and I want to discuss in broad terms the same interesting conversation that keeps coming up: Over the past few weeks, I keep getting that question: Whats your forecast for the economy? Where will interest rates be at the end of the year? Are Jobs going to improve? And of course, the big…Read More
> My Sunday Washington Post Business Section column is out. This morning, we look at the role of Lehman Brothers within the broader collapse, Lehman’s thud signaled an enduring trauma. It didn’t cause it. As we have noted many times before, Lehman fell due to the same factors that drove Bear, Citi, AIG,…Read More
My Sunday Washington Post Business Section column is out. This morning, we look at how Microsoft’s slow decline in What’s behind Microsoft’s fall from dominance?. The short version is this: Once Gates & Co lost its Monopoly, they were unable to generate much in the way of successful new businesses line. Their decline was inevitable…Read More
How to Avoid Being a Wall Street Muppet Barry Ritholtz Washington Post, August 23 2013 On March 14, 2012, Greg Smith resigned from Goldman Sachs in an op-ed published by the New York Times. It was a notable moment in financial history for a couple reasons. First, Smith leveled an embarrassing public…Read More
> My Sunday Washington Post Business Section column is out. This morning, we look at how Muppet portfolios develops, and advise readers to Avoid Being a Wall Street Muppet. Here’s an excerpt from the column: “About 10 percent of the new accounts that we see are muppet portfolios. These typically hold hundreds of positions….Read More