As U.S. stocks and valuations have continued to move higher throughout this latest cycle there has been a growing chorus of intelligent industry observers — beyond the usual fear-mongering perma-bears — who are predicting lower stock market returns in the coming years or even decades for the stock market. The combination of higher prices, higher…

In a paper written for the Journal of Portfolio Management called The Myth of Risk Attitudes, psychologist Daniel Kahneman explains why human nature makes it so difficult to succeed as an investor: A central claim of prospect theory is that people are not consistently risk averse. Yes, they are much more sensitive to losses than to gains. But…

Finance can be a very backwards industry. I understand why so many people outside the world of finance don’t understand what it is that goes on in our industry because many of the things that people believe or do just don’t make any sense. Here are ten of them: 1. People in finance believe that when…

Napoleon Bonaparte is widely recognized as one of the greatest war strategists and commanders in history. One of the most fascinating aspects of his wartime strategy involves something that is now referred to as Napoleon’s Corporal. The story goes that during the battle planning stages Napoleon would have one of his lowly corporals shine his…

Investors are worried about stock buybacks. The following comes from a recent Bloomberg piece: Chief executive officers, who just announced the biggest round of monthly repurchases ever, executed about $550 billion of buybacks last year, according to data compiled by S&P Dow Jones Indices. That compares with a net $85 billion of deposits by customers…

As I stated last week, ETFs are a wonderful product innovation for the individual investor. However, most people don’t realize that ETFs were actually created for institutional investors. Those who are worried about passive investing taking over the markets point to the $3 trillion or so in ETFs as their main point of contention. In The…

One of my favorite books from last year was Judd Apatow’s Sick in the Head: Conversations About Life and Comedy. I was recently going through all of my Kindle highlights (a very useful feature of reading on a Kindle) and noticed that I had done quite a bit of highlighting in this book. Most of it had nothing…

The Great Financial Crisis was missed by such a large number of pundits, economists and investors that during the ensuing recovery we’ve seen a huge influx in the number of people trying to predict a the next downturn. People desperately want to call the next big one before it hits. First it was fears of…

One of my favorite scenes in the movie There’s Something About Mary  is when Ted, played by Ben Stiller, picks up a hitchhiker. The hitchhiker goes on to tell Ted about his brilliant business idea inspired by the 90s workout phenomenon, 8-Minute Abs: Hitchhiker: You heard of this thing, the 8-Minute Abs? Ted: Yeah, sure,…

One of the most counterintuitive aspects of investing is the fact that you almost need to have bad news for things to get cheap enough to create a good long-term value. Markets or securities don’t become undervalued all on their own. There’s usually a catalyst involved in the form of poor fundamentals, bad news, missed…