I recently received this message from a client: EJ, it was great talking to you yesterday. While doing a little reading last night I came across a quote I thought you might like. The Old Testament book of Proverbs was compiled by King Solomon who many consider to be the wisest person ever. So I looked this up and I think Ben Graham and Warren Buffet and Dick Young are in good company, at least philosophically. The quote is from the book of Proverbs chapter 21 verse 5. “Steady plodding brings prosperity; hasty speculation brings poverty .“ Sounds like Solomon would have made a great financial … [Read more...]
Archives for October 2020
When Stocks Start Falling on Good News, There May Be a Problem
Despite strong results, big tech companies are under pressure. Dan Gallagher reports for The Wall Street Journal: Having a low bar helps; Alphabet’s shares have risen only 16% year to date compared with the average 56% gain by Apple, Amazon and Facebook. The company also saw a sharp bounceback for its core Google advertising business, which reported its first-ever decline in the second quarter. It also announced plans to turn its Google Cloud business into a separate reporting segment starting with its fourth-quarter report. Amazon’s share price surged 118% in 2015 when the e-commerce giant … [Read more...]
The Value Opportunity: Darkest Before Dawn?
Cliff Asness, Mario Gabelli, and Josef Lakonishok encourage investors not to give up on value. Instead, they say, if you can, double down on it. Bloomberg's Justina Lee reports: What do you get when three superstar value managers jump on a Zoom call? Self-deprecation, mutual flattery and an impassioned case for why the stock market is in a bubble. During a webinar for clients on Wednesday, AQR Capital Management founder Cliff Asness joined Gamco Investors Inc.’s Mario Gabelli and LSV Asset Management’s Josef Lakonishok in making a plea: Don’t give up on value, and if you can, double down … [Read more...]
“Amazon Ruined My Life”
"Amazon ruined my life." Those are the words of retailer Barak Govani, who moved his entire inventory into Amazon's warehouses after packing up his brick and mortar store on Melrose Avenue, Los Angeles. Much of Govani's inventory was destroyed when Amazon accused him of selling counterfeits, a claim he strenuously denies. Bloomberg's Spencer Soper reports: Barak Govani made a big bet on Amazon.com Inc. earlier this year that he now regrets. He shuttered his New York Speed clothing store on Los Angeles’s storied Melrose Avenue, packed up $1.5 million in inventory and shipped it to Amazon … [Read more...]
Market Down 900 Points and Here’s what YOU Told Me
As the market fell by 900 points midday yesterday, here’s what you and I were talking about: You called to let me know your son and daughter-in-law are interested in becoming clients, and to expect a call. That call came within the hour. We’re setting up the accounts. You were working on new account paperwork, but you had a question about the transfer process and were emailing me a quick question, then it was off to golf. You emailed me income projections on a spreadsheet for us to review in our next call. You are sending me an account statement to transfer your 403b, and then … [Read more...]
Is Your ESG Fund Betting on the Next Big Short Target?
At the Financial Times, Billy Nauman examines ESG funds and their potential as victims of short-sellers. He writes: Whenever big money starts flowing into a hot new sector, it seems inevitable that companies that list on the stock market fall short of hype and hope around them. One of the market’s current hottest areas is environmental, social and governance investing. And, like the cryptocurrency boom and cannabis stock surge, the flood of money has been followed closely by allegations of fraud. These claims are often made by activist investors and short-sellers, who bet on the fall in … [Read more...]
How to Treat Your Money (Hint: Not Like this Guy)
You and I know retirement income is hard to come by today—it’s what the weather is. You and I also know we can’t do much about the weather. But we can invest in all types of weather. One of your key components to successful investing in any weather is harnessing the power of time or, in other words, compounding. The only way to do that successfully is to treat your money with the respect it deserves. You need to protect it. You never want to lose it. You never want your money saying, “I get no respect!” like Rodney Dangerfield. You must respect your money and understand how hard it is to … [Read more...]
Double Digit Stock Market Gains Projected if Trump Wins
Many Wall Street strategists have come out in recent weeks with “research” indicating that a blue-sweep would be bullish for the economy and the stock market. See here and here for example. Somebody’s been hitting the blue Kool-Aid hard. Since when are massive tax increases, burdensome regulation, and bigger government bullish for growth and the economy? Thankfully, there is at least one strategist on Wall Street with a sober view. JP Morgan expects a Trump victory to lead to double-digit gains in the stock market. In JP Morgan’s view, a blue sweep would be neutral for the market, but … [Read more...]
Why Vanguard is Too Big: Part X: A Lesson from My Father About Paying Too Much
Your Survival Guy learned how to be a successful real estate investor from my dad. He taught me that price always matters, but he also understood the magic of time. If you need to pay a higher price to be in the game, you get in the game, especially when you’re young. When Becky and I were buying our first home, my dad couldn’t believe how much we were paying. But he also realized that when you’re young, you have a better chance of surviving if you happen to pay too much. You have time on your side—and a job—and nothing focuses the mind like a mortgage. But what if you don’t have time? Price … [Read more...]
The Reach For Yield Reemerges
Not even a year removed from a crash in risky bonds, investors are already reaching for yield again. Bond issuers are putting payment in kind (PIK) provisions into newly issued junk bonds. PIK deals allow bond issuers to make interest payments with more debt. That’s like applying for a new credit card to make the minimum payment on an existing card. With 10-year Treasury bond yields under 1% and the expectation that the Fed no longer has any red lines on bailing out investors, the reach for yield is back on. The FT has more: Private equity firms are testing investors’ appetite for … [Read more...]
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