Posts filed under “Apprenticed Investor”

NFP Day? Try Doing Nothing

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 drummed into your heads, the Employment Situation report is “the single most over-hyped, over-analyzed, over-emphasized, least-understood economic releases known to mankind.” It is also of very little utility for investors, a mostly meaningless exercise, the exception being when a long-standing employment trend begins to reverse, something that occurs a few times in a decade.

Perhaps, on this philosophical Friday, we should be thinking why you as an investor spend so much time focusing on it. Unless you run a cable-news network and need ’round-the-clock filler, why should the monthly variations in a deeply flawed (but not useless) model matter to you?

This is a deep philosophical question most investors are not happy answering. There seems to be a belief that “I should be doing something, right?”

No, you shouldn’t. For the most part, you should be doing as little as possible. “Nothing” is a good start. Can you just sit there and do nothing for a while? See how long you can do nothing.

The advantage of nothing is that you, as an investor, trader, forecaster or strategist add very little. Indeed, you probably are a negative. Every time you do something, you add costs, tax bills, commissions, expenses. If what you did was only neutral, if you did no harm, then that vigorish would tip most of your activities into the red.

But you should be so lucky as to do no harm. Most of what you do is a negative — and that is before we add up the costs.

Now before you start sending in e-mails and tweets, I am not speaking to you specifically, you the residents of Lake Wobegon where, as Garrison Keillor put it, “all the women are strong, the men are good looking, and all the children are above average.” Yes, everyone who reads this is above average. You are all alpha-generating machines, none of whom engage in trading activities merely to create the illusion of value. Your activities are just fine.

Which brings us back to the Employment Situation report, out at 8:30 this morning. Why should this preliminary, soon-to-be-revised, eventually re-benchmarked single data point in a never ending series matter to your portfolios? That is the question you should be pondering.

Do you want to do something? You have all weekend to do whatever you want.

But today?

Try doing nothing.


Originally published here


Category: Apprenticed Investor, Employment, Investing

Are Stocks Pricey or Cheap?

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

Category: Apprenticed Investor, Investing, Valuation

Are Stocks Cheap or Pricey?

>   My Sunday Washington Post Business Section column is out. This morning, we look at whether stocks are cheap or expensive. The print version had the full headline Are Stocks Cheap or Not? How to Tell. The conclusion is surprisngly middle of the road. Here’s an excerpt from the column: “To know whether stocks…Read More

Category: Apprenticed Investor, Investing, Valuation

Cheap & Simple Beats Costly & Complex

  Have a look at the tables above showing the performance of various investments during the five years leading up to the financial crisis lows, and the five years after. It leads us to a rather fascinating exercise, looking at complexity, cost and performance. Let’s start with the worst performers pre-crash: US Real Estate and…Read More

Category: Apprenticed Investor, Commodities, Hedge Funds, Investing

What’s the problem with 401(k)s? You.

There’s nothing wrong with 401(k)s, except the players involved Barry Ritholtz Washington Post March 9, 2014     This past year has seen a firestorm of criticism casting 401(k)s as mostly terrible. Their performance is too poor, and the fees too high, with poor investment choices built into most of them. Typical plans are complicated…Read More

Category: 401(k), Apprenticed Investor, Investing, Psychology

What Is Your Focus: Outcome or Process?

Outcome or process — what investment focus succeeds over time? Barry Ritholtz, Washington Post, February 23 2014       “The reason investors and the investment industry rely on performance is because it’s simple, objective and easy to measure. But more importantly, performance goals, performance reviews and performance measurement are so common in business, in…Read More

Category: Apprenticed Investor, Psychology

What Kind of Investor Are You?

>   My Sunday Washington Post Business Section column is out. This morning, we look at the differences between Outcome or Process focused investors. The print version had the full headline Investing’s smart minority: The process people while the online version Outcome or process — what investment focus succeeds over time?. Here’s an excerpt from the…Read More

Category: Apprenticed Investor, Psychology

Nine Surprising Things Jesse Livermore Said

There are those who would convince you that it is somehow smart or in your best interest to be manically switching your investments around, back and forth, long and short, on a daily basis. To pay attention to this kind of overstimulation is the height of madness, even for professional traders. The most storied and…Read More

Category: Apprenticed Investor, Trading

My motto: ‘Fresh mistakes, every year’

My motto: ‘Fresh mistakes, every year’ Barry Ritholtz Washington Post February 9 2014     “More than anything else, what differentiates people who live up to their potential from those who don’t is a willingness to look at themselves and others objectively.” — Ray Dalio, Bridgewater   Once again, it is the time of year…Read More

Category: Apprenticed Investor

Your Ideology Is Killing Your Portfolio

“It’s going to blow up the deficit, won’t create any jobs and will cause all sorts of other problems.” A hedge-fund manager was lecturing me about the Jobs and Growth Tax Relief Reconciliation Act of 2003, better known as the Bush tax cuts. I had been suggesting that this fund close its short positions on…Read More

Category: Apprenticed Investor, Investing, Politics, Psychology, Really, really bad calls