The Way Way Back of Market Cycles

“Be very careful using the past to understand the future. Past multiples are only relevant to the degree to which the underlying drivers of value are consistent through time. In fact, many of these drivers have changed, greatly diminishing the utility of past averages.” – Michael Mauboussin

The Curious Case of John Hussman: Understanding the Biases in Your Process

“We have no control over outcomes, but we can control the process. Of course, outcomes matter, but by focusing our attention on process we maximize our chances of good outcomes.” – Michael Mauboussin Barry Ritholtz wrote a great column for the Washington Post recently on an important topic that investors must understand to be successful…

What if You Only Invested at Market Peaks?

Meet Bob. Bob is the world’s worst market timer. What follows is Bob’s tale of terrible timing of his stock purchases. Bob began his career in 1970 at age 22. He was a diligent saver and planner. His plan was to save $2,000 a year during the 1970s and bump that amount up by $2,000…

On the Merits of Being a Financial Historian

“You can’t predict. You can prepare.” – Howard Marks I received a decent amount of comments and questions on my recent post on the 60/40 portfolio. Some were constructive, but others missed the point so I thought I would take the time to clarify a few things. These are my thoughts on using historical data to…

Volatility is not Your Enemy

“Risk means more things can happen than will happen.” – Elroy Dimson Here’s an overused cookie cutter answer you’ll hear from investment strategists and financial advisors when they’re asked how the stock market is going to perform: We think there will be increased market volatility ahead. But we are cautiously optimistic. You can’t go wrong…

The Rick Ferri 60/40 Portfolio

“Sixty/40 is anchored in a really important existential point—the benefit of diversification.  So, to say that 60/40 is dead is basically to say that diversification is dead—at least as far as it goes between stocks and bonds.” – Nicholas Colas The 60/40 stock/bond portfolio is often used as a simple benchmark for a balanced asset allocation….

My Favorite Warren Buffett Shareholder Letter

“If you can’t explain it simply, you don’t understand it well enough.” -Albert Einstein I feel that one of the greatest signs of intelligence is the ability to explain complex topics in a plain and simple manner that people can understand. This is what makes Warren Buffett such a genius. That’s not to say that…