Posts filed under “Rules”

Beware Consensus: When to Ignore the Investment Experts

One of the more interesting aspects of the market in 2014 is how much it has managed to defy expectations. Consensus has been consistently wrong; indeed, it seems that any time there is an agreement of sorts on just about any issue, the opposite has happened.

Merrill Lynch’s legendary strategist Bob Farrell put together “10 Rules for Investing,” and rule No. 9 states that “When all the experts and forecasts agree — something else is going to happen.” That certainly seems to be the case so far this year.

Consider the following cherry-picked anecdotes in support of Farrell’s dictum:

No. 1. Rising-rate environment. It seemed like all any investing year-in-preview article could talk about was rising interest rates: “How to Adjust a Bond Portfolio in a Rising-Rate Environment,” “Investments To Watch In A Rising-rate Environment” and others graced my inbox the past month.

It was clear that rates had nowhere to go but up (didn’t they?).

The only problem was that we began the year with the 10-year Treasury at a bit higher than 3 percent, and its yield proceeded to fall to as low as 2.6 percent.

No. 2. Worst February start for stocks in 32 years. At least, that was what they were writing a week ago, after a loss of more than 300 points in the Dow Jones Industrial Average on Monday, Feb. 3. A weak bounce the next day emboldened bearish writers. But then the Dow had triple-digit gains on Feb. 6 and again the following day. In sum, after the worst start to the month of February — is there even a February Barometer? — the market finished the week with gains.

I was as bearish as one could be in 2007 and 2008, but markets were already wobbling. I can’t imagine how punishing an environment this is to be a bear.

No. 3. Gold miners and Treasuries were the worst sectors in 2013. Treasuries had a dismal year in 2013, recording their third-biggest annual loss in four decades. Their saving grace was that they weren’t gold-mining companies, whose stock prices were cut in half last year. Consensus was just as negative this year.

So how have these two done? In January 2014, Treasuries had big gains; the 20-year bond rose 7 percent. And gold miners jumped 17 percent.

We never know what the future holds. When all the experts agree about what is going to happen next, it might be fruitful to consider taking the other side of that trade.

Originally published Here



Category: Investing, Really, really bad calls, Rules

Jeremy Grantham: Mistakes Made Over 47 Years

Jeremy Grantham’s quarterly GMO letter is out. It is a long rambling look at everything from Tesla to Fracking to Fertilizers to Food. But the narrative culminates with how as a young lad, Grantham made a trade based on a neighbor — legal inside information. He explains how that worked out, via his 8 lessons…Read More

Category: Investing, Psychology, Rules

Huprich: Wisdom Comes in the Smallest of Packages.

We previously published Art Hurpichs’ Market Truisms and Axioms back in 2011.  Art is a CMT with Day Hagan Asset Management, and he returns with an updated set of Stock Market Rules to Remember. Enjoy. ~~~ As you are reading this, we are in the process of moving our “youngest” to Virginia, as he prepares for…Read More

Category: Rules, Technical Analysis, Trading

Kass: 10 Laws of Stock Market Bubbles

I like this list from Dougie: Debt is cheap. Debt is plentiful. There is the egregious use of debt. A new marginal (and sizeable) buyer of an asset class appears. After a sustained advance in an asset class’s price, the prior four factors lead to new-era thinking that cycles have been eradicated/eliminated and that a…Read More

Category: Markets, Psychology, Rules

More Signal, Less Noise

Its Friday, the day I like to step back and get all Zen on y’all. As promised yesterday, our subject this morning — indeed, over the past few months — is how to reduce the meaningless distractions in your portfolio (and your life). You want less of the annoying nonsense that interferes with your investing,…Read More

Category: Cognitive Foibles, Financial Press, Investing, Psychology, Rules

90% of Everything is Crap

Source: Mental Floss     As someone who has spent his fair share of time debunking nonsense, I love the elegant way Theodore Sturgeon trashed this anti-SciFi trope in the March 1958 issue of Venture: “I repeat Sturgeon’s Revelation, which was wrung out of me after twenty years of wearying defense of science fiction against…Read More

Category: Philosophy, Quantitative, Rules

Byron Wien’s 20 Rules of Investing & Life

Outstanding list from a man who has accumulated much wisdom over the years:   Lessons Learned in His First 80 Years 1. Concentrate on finding a big idea that will make an impact on the people you want to influence. The Ten Surprises, which I started doing in 1986, has been a defining product. People…Read More

Category: Investing, Rules

Are You Trying to Get Rich — Or Stay Rich?

Last week, Bloomberg caused a minor stir with their story on C/NET founder Halsey Minor (How Halsey Minor Blew Tech Fortune on Way to Bankruptcy): “How do you sell the technology company you founded for $1.8 billion and five years later file for personal bankruptcy? For Halsey Minor, it may have been a fascination with…Read More

Category: Rules, Wages & Income, Wealth Management

Random Thoughts: Comebacks, Intraday Reversals and the like

Since it is a Friday before a 3 day holiday weekend, it is a good time to kick back and think about what the recent market action might (or might not) mean. • Most Day-to-day market action is noise, There is very little signal involved, with the vast majority of commentary simply after-the-fact rationalizations of…Read More

Category: Investing, Markets, Psychology, Rules, Sentiment, Technical Analysis

Bernard Baruch: 10 Rules of Investing

“Being so skeptical about the usefulness of advice, I have been reluctant to lay down any ‘rules’ or guidelines on how to invest or speculate wisely. Still, there are a number of things I have learned from my own experience which might be worth listing for those who are able to muster the necessary self-discipline:…Read More

Category: Investing, Rules