Thanksgiving Inspiration for Investors: A Powerful Message

What if you faced a life-threatening risk?  Would you have a plan?

No one could do it better than my friend, Norman Beck, who told his story in this terrific TED talk.  Norman combines emotion, insight, inspiration, and humor.  I promise that you will both enjoy and learn.

 

Norman did several things right:

  1.  He recognized the importance of the problem, and faced it logically.
  2.  He sought the best help.
  3.  Since he did not know how to find the best doctor, he enlisted the help of those who could.
  4.  He did not want someone “from the bottom half of the class.”
  5.  He recognized that this was not a commodity service, so he did not merely look for the lowest price.  He knew that all doctors were not equal.

There is a lesson here for investors.  Few  will share Norman’s life-threatening issues, but many face important financial challenges.

I hope everyone enjoys and learns from this inspirational Thanksgiving Day message.

Market Musings and Lessons

There are many events that should cause us to learn, but no one seems to be paying attention.  These are things in my notebook.  All are interesting, but not providing enough for a full article.

If you spend a minute thinking about these questions, you will be a stronger investor, but there might not be that Internet Gold Standard — Actionable Investment Advice.  You might have to digest the information and keep it in mind as you evaluate future events and data.

Whatever happened to…..

  • Due diligence.  Reports show that the UBS rogue trader wrote on Facebook that he would "need a miracle…"  Were his bosses the last to know?
  • The big question about who would buy US bonds after QE II ended?  Yes, I know that Bill Gross admitted that he was wrong about leaving Treasuries out of his portfolio, but that is not the point.  As an opinion leader he did a bogus comparison — Fed purchases versus Treasury issuance — and implied that there would be no buyers.  The right comparison (which I wrote about regularly) is Fed action to total trading, a vastly smaller ratio.  This was so obvious, and totally missed by the uncritical media.  The story has quietly disappeared.  Meanwhile, even Rick Santelli gave today's 30-year auction an "A" grade.
  • The White Sox late-season surge.  Oops….
  • David Rosenberg's 100% recession call last year based upon the ECRI data.  This happened in spite of ECRI denials about the interpretation.  A reader asked me about Rosenberg's most recent recession forecast — another 100% call using new and improved methods.  I wish I could remember who gave the example of a Neil Diamond concert.  The audience demands "Sweet Caroline."  I'll get more interested when Rosenberg gets a step closer to the mainstream, but meanwhile he has an adoring audience including those interivewing him on CNBC.
  • The Meredith Whitney avalanche of municipal defaults.  Wasn't that supposed to happen right after June 30th?  Here is a question:  Has she made any accurate forecasts since FAS 157 was limited?  Just wondering.
  • Hard-hitting questions.  Jimmy Rogers got the typical softball treatment in his most recent CNBC gig.  He stated that the rise in M2 proved that the Fed was in the market, probably lying about their actions.  This just goes to show how people can make a lot of money without knowing anything about government.  There is no way that the Fed can or would conduct secret operations.  Has he ever read the transcript from a meeting?  Does he think that there are 100 or so co-conspirators on this?  Sheesh!  Meanwhile, David Faber let this preposterous remark pass, and no one else seemed to notice.
  • US profit margin compression.  Still waiting on that one.  My guess is that it will happen eventually, but only after employment, revenue, and gross profits start growing more rapidly.
  • The collapse of the Euro.  We started hearing the predictions that it was going to parity with the dollar in May of 2010.  It is still about the same.  Meanwhile, some market pundits embrace the verdict of the thinly-traded CDS markets while rejecting the result of the deep and liquid foreign exchange market.  One sees what one wants to see.
  • The S&P downgrade, which did not seem to reduce appetite for US paper.

My favorite take on that was from last week's Mr. Boffo.  The quote of the day was as follows:

"Best & Fine" — Original name before truth in advertising downgraded them to "Standard & Poor."

And finally — I wonder…..

What would have happened if Dominique Strauss-Kahn had gotten back to Europe on his originally planned schedule.  While it is nice to see the strong position from his replacement, Christine Lagarde, no one is asking "What if?"  His arrest and detention was  a serious blow to the European stabilization effort.  It caused immediate selling both here and abroad, breaching technical levels and calling the entire effort into question.  Many weeks went by while the leadership void was addressed.  Has anyone else noticed this?

If I (or any other investment manager) had known what was going to happen to him, I would certainly have been short the market.  I suppose this was a tough one for getting inside information.

Enough musing about the unreal world of market commentary.  Back to the data!

Investment Lessons from 2010 Lists: Prosaic, Profound, Predictable, Pornographic, and Provocative

Here at "A Dash" I recommend that you join me in reading widely and critically.  Most people do not have the time for this, so let me offer a few suggestions for a 2010 review.

I want to have a little fun with this, but there are some good investment insights.  These are the "Ten Best" lists from various sources.  With a couple of exceptions, I emphasize sources you probably do not already read.  I will provide the source and my own quick take, but you will have more fun if you look at the entire list, draw your own conclusion, and add your own insight in the comments.

The Prosaic

If you really want to know what investors are thinking, why not look to the most popular articles in the mainstream media?

MarketWatch fits the bill.  I think this choice represents what average people read about the economy and stocks.  If you look at the list you will see why most people are scared silly and under-invested.  The popular articles emphasize why the world is going broke, why we may have anarchy or a revolution, how banks are going under, and similar themes.  I recommend this not for the content, but so that my astute readers can keep a finger on the pulse of the public. If you ever read the comments on these articles, you get a good sense of the mood of this particular attentive public.

It is also a good antidote for the current buzz about sentiment indicators, polls of a few investors about their opinions.  This popularity index shows what people are really thinking about.

The Profound

Try out Advisor Perspectives.  This is an undiscovered gem for most investors.  Robert Huebscher is a fine editor whose sophisticated audience of investment advisors seeks a deeper look into the financial issues of the day.  This year's list of most popular articles covers topics ranging from debt and deficits, to gold, fixed income investing, and retirement planning.

The difference between the choices of average readers and those of the advisors is noteworthy.

The Predictable

What could be more predictable than our fearless leaders in Washington?  The top political quotations from 2010 included a Vice-Presidental "F-bomb," a Supreme Court Justice dissing the Pres during the State of the Union, and explanations of witchcraft.

The lesson?  Politics often involves simplifying issues to appeal to the marginal voter.  Marginal voters are the least common denominator.  If you want to be a smart investor, you need to see beyond the predictable appeals, expecting a lot of silly commentary.  (By the way, not all of the 535 members of Congress are dumb, and many of the staffers are first rate).

The Pornographic

Suppose that we focus instead on a most intelligent and high-minded group:  Scientists.  I regularly read The Scientist because it reports issues related to pharmaceutical companies, research findings, and other related news.  Their list of the ten most popular articles had an interesting winner — a study of the effect of pornography on the incidence of sex crimes.

The lesson?  Let us move beyond the obvious conclusion that scientific readers are just as interested in porn as average people.  The investment angle:  Understanding causation and correlation.

If I were still teaching research methods, I would use this as a class example.  Everyone comes to this question with a pre-conceived notion and a reluctance to consider any real data.  It is easy to find a study showing that most sex offenders had contact with pornography.  This reasoning — going from effect to cause — is exactly what is wrong with most of current Wall Street research.

You have probably guessed the "surprise ending" to this story but read the article to make sure.

The Provocative

Since it is the football bowl and playoff season, let me share one of my favorite sports sites,  Awful Announcing.  Like most sports fans I fume at the constant mistakes made by announcers in their discussion of a game.  At Awful Announcing you can register specific complaints about announcer blunders and even nominate them for something called the "Pammies."  Here are this year's winners.

The lesson?  At some point I realized that my reaction was similar to what I felt watching financial television.  The sports announcers are actually better, since they generally do not shout at each other and are expected to be experts.  So many financial announcers now have opinions.  They believe that we are watching to hear what they think rather than to get news or listen to interviews with good guests.

There is a lot of air time to fill!

Conclusion

I hope you have enjoyed my somewhat whimsical look at some 2010 lists that you did not see elsewhere.  Investors can and should draw lessons from many sources.