It’s a small sampling, but backyard barbecues can give you a pretty good idea of the sentiment surrounding the stock market and economy. At these sorts of functions, I’m frequently asked what stock people should buy, or what I think of the latest hot IPO, or cryptocurrencies. However, the attitudes (and questions) these days have been centered around the economy and more specifically if we are entering a recession, or when the next recession will hit. I, of course, have no idea when the next recession will start. But the sense is that folks are nervously waiting for the balloon… Read More

It’s a small sampling, but backyard barbecues can give you a pretty good idea of the sentiment surrounding the stock market and economy. At these sorts of functions, I’m frequently asked what stock people should buy, or what I think of the latest hot IPO, or cryptocurrencies. However, the attitudes (and questions) these days have been centered around the economy and more specifically if we are entering a recession, or when the next recession will hit. I, of course, have no idea when the next recession will start. But the sense is that folks are nervously waiting for the balloon to pop and the hot air to quickly evaporate from this decade-long bull market. Despite the recent volatility, the S&P 500 still near all-time highs, the economy is chugging along at a good clip (3.1% GDP growth in the first quarter) and unemployment is at historic lows. We did see homes sales decline 1.7% in June, marking the 16th straight year-on-year decline in homes sales, which only further exacerbates people’s uneasiness about the economy. We also had one of the most notorious (and reliable) indicators alert us that we could see a recession in the next year… Why The Yield… Read More

Investors are faced with a mountain of information, strategies and tactics to choose from. Value, growth, momentum, options, futures… which strategy is right for you? While every strategy has their pros and cons, one of the better-performing strategies has come from focusing on growth stocks. Growth stocks have certainly done well over the last decade, outpacing the popular value approach over that time period. But that doesn’t mean we should ignore value.  In fact, long-term studies still suggest that following a disciplined contrarian, value-driven strategy is the best path to success. Value investors argue that while the market may be… Read More

Investors are faced with a mountain of information, strategies and tactics to choose from. Value, growth, momentum, options, futures… which strategy is right for you? While every strategy has their pros and cons, one of the better-performing strategies has come from focusing on growth stocks. Growth stocks have certainly done well over the last decade, outpacing the popular value approach over that time period. But that doesn’t mean we should ignore value.  In fact, long-term studies still suggest that following a disciplined contrarian, value-driven strategy is the best path to success. Value investors argue that while the market may be efficient in the long term, emotions often dominate in the short run. These emotions can overtake rational analysis, pushing a stock’s price above its intrinsic value during periods of euphoria and below its true worth when reacting to bad news. Value screens, such as searching for stocks with a low price-earnings ratio, typically look for low prices relative to actual measures of company performance or assets. The price-earnings ratio, or multiple, is computed by dividing a stock’s price by its most recent 12 months’ earnings per share. The price-earnings ratio is followed closely because it embodies the market’s expectations of… Read More

If you’ve been reading ​my work for any length of time then you know that I talk a lot about emotions and how they can greatly impact whether you’re successful or not in investing… and really everyday life. But we’ll stick mostly to investing in this issue. Gaining a better understanding of the emotional behavior of investors — commonly referred to as behavioral economics — can not only help you avoid common pitfalls that plague average investors, but it can also help you better understand momentum investing. You see, when it comes to finance and money, humans don’t behave rationally (part of… Read More

If you’ve been reading ​my work for any length of time then you know that I talk a lot about emotions and how they can greatly impact whether you’re successful or not in investing… and really everyday life. But we’ll stick mostly to investing in this issue. Gaining a better understanding of the emotional behavior of investors — commonly referred to as behavioral economics — can not only help you avoid common pitfalls that plague average investors, but it can also help you better understand momentum investing. You see, when it comes to finance and money, humans don’t behave rationally (part of the reason why we have momentum investing at all). When it comes to profits and losses, the fear of losing money greatly outweighs the joy in achieving additional gains. It’s this very premise that has created the mantra, “Let your winners run, and cut your losers short.” How many times have you sold a winning stock just to see it keep climbing in the days and weeks that followed? And on the flip side of that, think about how many times you’ve held on to a loser just to see it keep falling. That’s a lesson I learned the hard… Read More