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David Merkel

The Little Market that Could

Picture Credit: Roadsidepictures from The Little Engine That Could By Watty Piper, Illustrated By George & Doris Hauman | That said, for every one that COULD, at least two COULDN’T======================================So what do you think of the market?  Why are both actual and implied volatility so low?  Why are the moves so small, but predominantly up?  Is this the closest impression of the ...

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“Bank” Some of Your Gains

Photo Credit: Scoobyfoo=======================Recently I read Jonathan Clements’ piece Enough Already.  The basic idea was to encourage older investors who have made gains in the risk assets, typically stocks, though it would apply to high yield bonds and other non-guaranteed investments that are highly correlated with stocks.  His pithy way of phrasing it is:If I have already won the game, why would I keep playing?His inspiration for the piece stems...

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The Many Virtues of Simplicity

Photo Credit: Christopher || Maintaining a marriage is simple… if you do it right…==============There are at least eight reasons why taking a simple approach to investing is a wise thing to do.UnderstandableExplainableReduced “Too smart for you own good risk”Clearer risk managementLess tradingTaxes are likely easierNot TrendyCheapUnderstandableYou have to understand your investments, even if it’s just at the highest overview level.  If you don’t have that level of understanding, then ...

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Estimating Future Stock Returns, June 2017 Update

I’d say this is getting boring, but it’s pretty fascinating watching the rally run.  Now, this is the seventh time I have done this quarterly analysis.  The first one was for December 2015.  Over that time period, the expected annualized 10-year return went like this, quarter by quarter: 6.10%, 6.74%, 6.30%, 6.01%, 5.02%, 4.79%, and 4.30%.  At the end of June 2017, the figure would have been 4.58%, but the rally since the end of the quarter...

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How to Invest Carefully for Mom

Photo Credit: stewit========Just a note before I begin. My piece called “Where Money Goes to Die” was an abnormal piece for me, and it received abnormal attention.  The responses came in many languages aside from English, including Spanish, Turkish and Russian.  It was interesting to note the level of distortion of my positions among those writing articles.  That was less true of writing responses here.My main point is this: if something either has no value or...

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Book Review: University of Berkshire Hathaway

I feel like the skunk at the party here. I have no argument with the authors, per se. They came up with their concept and executed it adequately. No one else that I know of has done a book of their notes from Berkshire Hathaway annual meetings, in this case extending over 30 years.But the bar for writing Buffett books is low, because they sell so well.  Many ...

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Book Review: Big Money Thinks Small

Joel Tillinghast, one of the best mutual fund managers, runs the money in Fidelity’s Low-Priced Stock Fund.  It has one of the best long-term records among stock funds over the 28 years that he has managed it.The author gives you a recipe for how to pick good stocks, but he doesn’t give you a machine that produces them...

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Where Money Goes to Die

Photo Credit: eFile989==============It is often a wise thing to look around and see where people are doing that is nuts.  Often it is obvious in advance.  In the past, the two most obvious were the dot-com bubble and the housing bubble.  Today, we have two unrelated pockets of nuttiness, neither of which is as big: cryptocurrencies and shorting volatility.I have often said that that lure of free money brings out the worst economic behavior in...

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The Crisis at the Tipping Point

Photo Credit: Fabio Tinelli Roncalli || Alas, there were so many signs that the avalanche was coming…==================Ten years ago, things were mostly quiet.  The crisis was staring us in the face, with a little more than a year before the effects of growing leverage and sloppy credit underwriting would hit in full.  But when there is a boom, almost no one wants to spoil the party.  Yes a few bears and financial ...

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