Confirmation bias is one of the most damaging biases in investing. All of us want to be right. We all want to think that opinions that disagree with ours don’t have sensible arguments to support them. So we gravitate toward people who agree with ours. Whether it be in our personal relationships, or our virtual ones through things like social media, we all unconsciously want to seek out validation that proves that what we thought… Read More
By Jack Forehand, CFA (@PracticalQuant) Confirmation bias is one of the most damaging biases in investing. All of us want to be right. We all want to think that opinions that disagree with ours don’t have sensible arguments to support them. So we gravitate toward people who agree with ours. Whether it be in our personal relationships, or our virtual ones through things like social media, we all unconsciously want to seek out validation that… Read More
In a CNBC interview earlier this month, investor Bill Miller said that the current climate is one of the best buying opportunities of his lifetime. Miller, who beat the market for 15 straight years while working at Legg Mason, cited four buying opportunities in his adult lifetime: “The first was in 1973 and ’74, the second was in 1982, the third was in 1987 and the fourth was in 2008 and 2009. And this is… Read More
Small-cap stocks have taken a particularly strong beating over the past month, according to a recent article in The Wall Street Journal. “Companies in the small-cap category, which typically have a market value of about $2 billion or less, tend to be more sensitive to economic downturns than their larger peers,” the article explains, adding, “the growing fears of economic disruption caused by the coronavirus pandemic hit when small-caps already showed potential vulnerabilities.” The resulting… Read More
Unfortunately, we don’t have Jack Bogle “around to calm us down anymore,” writes Wealth Logic founder Allan Roth in a recent Financial Planning magazine article. Roth, a long-time follower of Bogle, offers a hypothetical interview with the late founder of The Vanguard Group that he created based on an actual interview from 13 years ago, during what Roth describes as “the depths of the last bear.” Here are the takeaways from Bogle’s hypothetical “responses”: Take… Read More
Bloomberg Opinion: This is Looking More Like a Financial Crisis A recent article in Bloomberg argues that the current situation resembles the start of a financial crisis: “Businesses and banks are scrambling for cash, and investors are dumping their winners to cover their losses. It all has that very fall-of-2008 feel.” The article offers the following insights: Junk bonds had held appeal for yield-hungry investors who thought that a “reckoning would be far away. Well,… Read More
A recent article in Forbes compares the current investing backdrop to that of 9/11 and the financial crisis of 2008. Following are highlights from the article: Current situation versus 9/11: “From a stock market perspective, comparisons to 9/11 are not entirely apples-to-apples,” the article says, but adds that the level of fear and uncertainty “does have parallels with today’s fears of a microorganism about which we know little.” Today’s economy is significantly stronger than it… Read More
The prospect of negative interest rates confounds Warren Buffett but doesn’t frighten him, according to a recent Bloomberg article. “U.S. policy makers have been seeking to grapple with the economic fallout of the coronavirus pandemic, “ the article notes, citing the Fed’s cutting of its benchmark rate to zero earlier this month. In his annual shareholder letter (released in February), Buffett contended that equities would outperform long-term, fixed-rate instruments in the long run if current… Read More
Stocks are bottoming, but it is a process rather than an event and will therefore take some time. This according to a recent article in Financial Advisor magazine that argues, “The reactions of governments and individuals are likely to push the world into a recession.” The article outlines the following 10 themes to consider as we navigate through current conditions: Most of the panic stage in the stock market is “in the rearview mirror,” leaving… Read More
In a recent Bloomberg article, columnist Nir Kaissar asserts that the U.S. stock market is not yet offering the “historic buying opportunity some investors have been waiting for.” In response to whether now is a good time to shop for bargains in the U.S. equities market, Kaissar writes, “the short answer is no, even after all the recent turbulence.” He notes that the price-to earnings ratio—which Wall Street favors as a stock market barometer– is… Read More