Posts filed under “Rules”

Lessons from 2012 Presidential Election

I am always on the look out for lessons that I can apply to investing and business. This post-election morning is not any different.

Let’s take a look at some of the more interesting aspects of the election season, and try to discern what lessons there are, for investors and others to learn:

1. Process Matters: Sharp data analysis beats squishy feelings. The accuracy of a handful of statisticians versus the bloviating punditry is for me, the single most dramatic storyline of the election.  Nate Silver showed data, logical reasoning and mathematics outperform “gut feel” and instinct.

2. Think Deeply Before You Speak: Grand pronouncements with limited upside but immense downside are suicidal in every field. The Romney OpEd about letting Detroit go bankrupt may have doomed his candidacy in Ohio, Michigan and Wisconsin.

3. Be True to Yourself: Romney is a former moderate, pro choice governor who worked as bipartisan chief executive in Massachusetts creating a state wide healthcare program. He ran away from that, first tacking hard to the right to win over the base, then shifting to the middle during the election. He should have ran on his credentials instead of trying to please every one.

4. Planning and Execution Matter: The blocking and tackling in states like Ohio Florida and Virginia were a huge advantage to the incumbent. His team executed well, where as Romney team (apparently) came up short. Being able to put together a smart plan and then execute on it is crucial.

5. Choose Your Business Partners Well: The VP choice is a major decision a Presidential candidate makes, and Romney’s selection of Paul Ryan added nothing to his chances. If you are trying to shore up your base at your convention, you have not done the requisite planning. Ryan could not even deliver his home state and fumbled his debate to a grinning goofy Biden. All told, a net negative for the Romney campaign.

6. Dont Live in a Bubble: Large swaths of the conservative movement live in an alternative universe where facts don’t matter and science is irrelevant. The selective perception of bubble people who never venture beyond Fox News and Drudge and UnskewedPolls is self reinforcing. If you spend most of your time rationalizing why the polls are inaccurate and the media is biased, don’t be surprised at what happens next.


I may try to expand this later . . .

Category: Investing, Philosophy, Rules

Economists: Things We Are Ignorant About

Economists have been stumped by the past dozen years.

The Dotcom collapse was an early warning that economists, as a class, were not clued in. Sure a handful recognized that there were budding problems — think Bob Shiller — but he was notable as an exception.

Then we had the entire debacles of 2000s – derivative implosion, housing collapse, credit crisis, market crash — and we found that the vast majority of economists are academic theorists who were completely blindsided by events in the real world. And those were the good ones, as opposed to the biased hacks whose goals have nothing to do with discerning objective reality.

We need to admit that Economists, as a profession, are stumbling around in the dark.

To quote  Edward Hadas, “Policymakers and pundits still make confident pronouncements, but the conclusions are radically different. The expert disagreements give away the truth: ignorance reigns.”

Hadas identifies six questions which professionals should stop pretending they can answer:

1) What creates retail inflation?
2) How do financial asset prices affect the real economy?
3) Do big fiscal deficits damage the economy?
4) What does quantitative easing actually do?
5) How much leverage is too much?
6) How to deleverage without damaging the economy?

If economists cannot explain the basic workings of the economy, perhaps we should be relying on them much less for policy advice . . .


Admit economic ignorance
By Edward Hadas
Reuters, October 31, 2012

Read More

Category: Economy, Really, really bad calls, Rules

Rosie’s Rules to Remember (an Economist’s Dozen)

Yet another rule to add to our ongoing collection. This one comes from Economist David Rosenberg, formerly Merrill Lynch’s chief dismal scientist, now at Gluskin Sheff: 1. In order for an economic forecast to be relevant, it must be combined with a market call. 2. Never be a slave to the date – they are…Read More

Category: Rules

Morgan Housel’s 9 Financial Rules

Another set of instructive rules for investors, this one from Morgan Housel: 1. Nine out of 10 people in finance don’t have your best interest at heart. 2. Don’t try to predict the future. 3. Saving can be more important than investing. 4. Tune out the majority of news. 5. Emotional intelligence is more important…Read More

Category: Investing, Rules

10 Lessons from 1987 Market Crash

Nice set of rules from Wallace Witkowski of MarketWatch: 10 lessons from the market crash of 1987 1. Stay objective when others get emotional 2. Be like Buffett: Buy on the fear, sell on the greed 3. Make a crash shopping list 4. What goes up fast comes down faster 5. There’s no such thing as…Read More

Category: Investing, Psychology, Rules

(Not so) Golden Rules About Investing (& Not Investing)

After last week’s Rules frenzy, Cassandra Does Tokyo sent this in. Enjoy: ~~~ Trolling the blogosphere, it seems to be the season for sharing one’s so-called Golden Rules of Investing. So here goes…   Cassandra’s 25-3/4 (or so) Tungsten-Filled Golden Rules #25-3/4. Do as I do – not as I say – but do it…Read More

Category: Humor, Rules

WaPo: Ritholtz’s Rules of Investing

> My Sunday Washington Post Business Section column is out. This morning, we look at Ritholtz’s rules of investing. The dead tree edition has the headline Think like a contrarian: Ritholtz’s rules of investing. We have 6 rules today, and 6 more rules next week: 1 Cut your losers short and let your winners run…Read More

Category: Apprenticed Investor, Investing, Rules

Sir John Templeton 16 Rules For Investment Success

Interesting set of rules from legendary investor John Templeton:

1. Invest for maximum total real return
2. Invest — Don’t trade or speculate
3. Remain flexible and open minded about types of investment
4. Buy Low
5. When buying stocks, search for bargains among quality stocks.
6. Buy value, not market trends or the economic outlook
7. Diversify. In stocks and bonds, as in much else, there is safety in numbers
8. Do your homework or hire wise experts to help you
9. Aggressively monitor your investments
10. Don’t Panic
11. Learn from your mistakes
12. Begin with a Prayer
13. Outperforming the market is a difficult task
14. An investor who has all the answers doesn’t even understand all the questions
15. There’s no free lunch
16. Do not be fearful or negative too often


Complete explanation after the jump



Read More

Category: Investing, Rules

Investing & Trading Rules, Aphorisms & Books (Fall 2012)

Back in 2011, I pulled together a full run of Trading Rules & Aphorisms.

It turned out to be a worthwhile exercise, and so I began updating this semi annually. This is a list of my favorite traders, analysts, economists and investors views’ on what to do — and what not to do — when it comes to markets.

This is the latest updated version of my:

Trading & Investing Rules, Aphorisms & Books

Livermores Seven Trading Lessons

Bob Farrell’s 10 Rules for Investing

James Montier’s Seven Immutable Laws of Investing

Richard Rhodes’ 12 Trading Rules

John Murphy’s Ten Laws of Technical Trading

Six Rules of Michael Steinhardt

• David Merkel: The Eight Rules of My Investing

Art Huprich’s Market Truisms and Axioms


Lessons from Merrill Lynch

Louis Ehrenkrantz’ 7 Golden Rules for Investing

Rosie’s Rules to Remember

In Defense of the “Old Always” (Montier)

Lessons Learned from 37 Years of Futures Trading

Richard Russell’s The Power of Compounding

The golden rules of investing (India)

25 Common Sense Money Tips


If you have any suggestions for any good lists of rules I may have missed, please link to them in comments. If they are worthy, they will get added tot he list.

After this run, I plan on updating this list 2x per year . . .


My own trading rules and favorite Trading Books are after the jump

Read More

Category: Investing, Rules, Trading

10 Rules for Dealing with the Sharks on Wall Street

10 inviolable rules for dealing with the sharks on Wall Street Barry Ritholtz August 31, 2012     Back in 2001, a very curious deal was struck between the government of Greece and Goldman Sachs. It was an exotic dollar/yen swap for euros. What possessed Greece to do such an unusual — and expensive —…Read More

Category: Apprenticed Investor, Rules