The Long Term Investor

EMMETT was able to hold up the markets for a while.....but after a while he had to give up....he cant do it all by himself. He was like Atlas holding up the world.

In the end we got a mixed close with the DOW green and the others red. I was slightly in the red today. I was helped by my non tech stocks......NKE, COST, HD, and HON....that all finished the day in the green. I also got in a beat on the SP500 by 0.32% today.

It was a good enough day today......since I DID NOT retest my low of the year. It looks like I have enough cushion left for one more down day before I am back at my YTD low for the third time this year.

 

My current YTD is (-30.08%). PERVERSELY......I am satisfied with that.....it could be a lot worse.

 

At least they are NOW starting to be HONEST.......yes.....all the rate increases up to now have been FOR NOTHING. A total waste of time and effort.....not to mention.....the ravaging of everyone's 401K and IRA accounts, the destruction of senior's retirement, the attempted crash of the real estate markets.......and......the loss of billions and billions of net worth.

Fed’s Mester says there’s been no progress on inflation, so interest rates need to move higher

https://finance.yahoo.com/m/b7ac2c03-10a4-39e3-9625-55b3374b0a18/fed’s-mester-says-there’s.html

(BOLD is my opinion OR what I consider important content)

"With little or no progress made on bringing inflation down, the Federal Reserve needs to continue raising interest rates, Cleveland Fed President Loretta Mester said Tuesday.

“At some point, you know, as inflation comes down, them my risk calculation will shift as well and we will want to either slow the rate increases, hold for some time and assess the cumulative impact on what we’ve done,” Mester told reporters after a speech to the Economic Club of New York.

“But at this point, my concerns lie more on – we haven’t seen progress on inflation , we have seen some moderation- but to my mind it means we still have to go a little bit further,” Mester said.

In her speech, the Cleveland Fed president said the central bank needed to be wary of wishful thinking about inflation that would lead the central bank to pause or reverse course prematurely.

“Given current economic conditions and the outlook, in my view, at the point the larger risks come from tightening too little and allowing very high inflation to persist and become embedded in the economy,” Mester said.

She said she thinks inflation will be more persistent than some of her colleagues.

As a result, her preferred path for the Fed’s benchmark rate is slightly higher than the median forecast of the Fed’s “dot-plot,” which points to rates getting to a range of 4.5%-4.75% by next year.

Mester, who is a voting member of the Fed’s interest-rate committee this year, repeated she doesn’t expect any cuts in the Fed’s benchmark rate next year. She stressed that this forecast is based on her current reading of the economy and she will adjust her views based on the economic and financial information for the outlook and the risks around the outlook.

Mester said she doesn’t rely solely on government data on inflation because some of it was backward looking. She said supplements her research with talks with business contacts about their price-setting plans and uses some economic models."

MY COMMENT

WOW....using "economic models".......and .....talking to business contacts. She may as well be looking at the entrails of a duck. There is NO economic model that is worth a plug nickle. The assumptions are all a complex set of BS.

It will be funny to watch as the FED raises and raises rates and NOTHING happens. Meanwhile NO ONE is doing anything to solve the REAL causes of inflation.......the continued screwed up supply chain.....the continued other impacts of the economic shut-down......the screwed up labor markets......the over-taxation and government spending that is totally out of control, etc, etc, etc.

WELL.....actually it might not be so funny to watch....since it is the regular people that are taking it in the shorts as a result of this exercise in futility.

 

The excitement for me today....was seeing my painting close about noon. Now all I have to do is wait for Thanksgiving to be able to take possession.

Now I need to successfully pick up my other painting at auction this Saturday....at a bargain price

 

As if it was not bad enough that we will get the CPI and PPI on Thursday and the BIG BANK earnings start on Friday......we will also get the FED minutes tomorrow (Wednesday). The markets are being hammered by......"STUFF".....this week.

We get so much of this "stuff" every week......all month long......it is a wonder that anyone realizes that the stock markets are supposed to reflect the actual BUSINESS FUNDAMENTALS of the companies that issue stock.....that make up the markets. No wonder many younger investors seem to have no clue what the markets are all about and view them as some sort of event, news, and media driven gambling casino.

 

Well that is how they fight inflation......they crash the economy, drive up unemployment and put real people out of work, kill net worth, and impair retirement. In other words.....they dont have any ability to actually control inflation.

Although even though I dont like the FED or our policy of allowing a small group of people ( economists for Gods sake, not actual business people) to try to control the economy....rather than the free markets......but....I do feel sorry for them since the government is ABSOLUTELY NOT supporting them in their fight in any way. They are acting TOTALLY contrary to what the FED is trying to do.

Any form of central planing of an economy as large and complex as ours is simply IMPOSSIBLE. And......YES......we are and have been in a RECESSION.....even though no one will admit it.

 

NO......I dont see the actions of the FED having any impact on inflation.....so far.

Wholesale prices rose 0.4% in September, more than expected as inflation persists

https://www.msn.com/en-us/money/mar...an-expected-as-inflation-persists/ar-AA12SntW

(BOLD is my opinion OR what I consider important content)

"Wholesale prices rose more than expected in September despite Federal Reserve efforts to control inflation, according to a report Wednesday from the Bureau of Labor Statistics.

The producer price index, a measure of prices that U.S. businesses get for the goods and services they produce, increased 0.4% for the month, compared to the Dow Jones estimate for a 0.2% gain. On a 12-month basis, PPI rose 8.5%, which was a slight deceleration from the 8.7% in August.

Excluding food, energy and trade services, the index increased 0.4% for the month and 5.6% from a year ago, the latter matching the August increase; excluding just food and energy, PPI was flat in September.

Inflation has been the economy's biggest issue over the past year as the cost of living is running near its highest level in more than 40 years. The Fed has responded by raising rates five times this year for a total of 3 percentage points and is widely expected to implement a fourth consecutive 0.75 percentage point increase when it meets again in three weeks.

However, Wednesday's data shows the Fed still has work to do. Indeed, Cleveland Fed President Loretta Mester on Tuesday said "there has been no progress on inflation."

The PPI release comes a day ahead of the more closely watched consumer price index. The two measures differ in that PPI measures the prices received at the wholesale level while CPI gauges the prices that consumers pay.

Some two-thirds of the increase in PPI is attributable to a 0.4% gain in services, the BLS said."

MY COMMENT

At least some of these people are starting to tell the truth:

"Indeed, Cleveland Fed President Loretta Mester on Tuesday said "there has been no progress on inflation."

But remember........WE ARE NOT IN A RECESSION. Just keep repeating that phrase and you will be fine.

 

We are starting with a MIXED market today. The DOW and the SP500 are currently green and the NASDAQ is red.

Stock market news live updates: Stocks edge higher amid producer price data

https://finance.yahoo.com/news/stock-market-news-live-updates-october-12-2022-121220378.html

(BOLD is my opinion OR what I consider important content)

"U.S. stocks were higher at Wednesday's open as investors weighed producer price data that showed inflation rose slightly last month.

S&P 500 (^GSPC) rose 0.24% while the Dow Jones Industrial Average (^DJI) ticked up 0.25%. The technology-heavy Nasdaq Composite (^IXIC) edged higher by 0.33%.

The September producer price index (PPI), a measure of prices at the wholesale level, rose 0.4% in September after falling 0.2% during the prior month as inflation persisted. Economists expected the headline figure to rise 0.2%. The PPI release comes before Thursday's highly anticipated release of the government's consumer price index (CPI) report.

"Prices remain elevated so it shouldn’t be a surprise to see producer goods and services rise. Keep in mind the increase is still below what we were seeing consistently month after month earlier this year,"wrote Mike Loewengart, Head of Model Portfolio Construction Morgan Stanley Global Investment Office.

"No doubt the Fed still has its work cut out for them, and if tomorrow’s CPI read is hot, don’t be surprised to see some investors come to grips with how long the road to tamer inflation may be," Loewengart added.

The minutes from the Federal Reserve’s latest monetary-policy meeting will be published Wednesday. Investors will be mulling over officials’ discussions about continued tightening and its economic impact.

“Any hope of a helping hand from the Fed minutes may not be forthcoming, with the commentary to an extent outdated at this point and policymakers seemingly unified in their goal of defeating inflation. Even a good CPI number tomorrow may do little to change that in the near-term,” wrote Craig Erlam, Senior Market Analyst at Oanda.

Wall Street has been keeping a close eye on monetary action overseas, as Bank of England Governor Andrew Bailey announced the bank would end its emergency bond-buying program Friday.

“Bailey's comments do not inspire great confidence in sterling assets. Multiple comments — including the indicative message to funds that ‘you've got three days left’ makes it clear that the BoE does not intend to roll forward its temporary asset purchases," Patrick Locke, a G10 FX Strategist at JPMorgan Chase, wrote in a note to clients.

The move could prompt further asset selloffs from U.K. pension funds amid interest-rate hikes. The impact hit yield on 30-year gilts, but U.S. Treasuries were unchanged. Treasury yields remained lower across the curve as crude oil stayed flat.

Analysts are also bracing for the first wave of major corporate earnings reports out this week, which could further show weakness as persistent inflation, higher interest rates, and a stronger dollar weigh on companies’ bottom lines. PepsiCo (PEP) posted better-than-expected results as the company lifted its annual forecasts for revenue and profits. The stock was up nearly 4% in early trading."

MY COMMENT

With everything that is happening this week......it will be a MIRACLE to end the week with a positive week. As usual NOTHING new in terms of actual......FACTS. BUT......massive opinion reporting impacting the day to day markets every day. No doubt the.....market influencer's.....will have a field day parsing the FED minutes later today.

 

Here is a FUN little article.

The stock market's 'nightmare' chart is already a reality: Morning Brief

https://finance.yahoo.com/news/the-...lready-a-reality-morning-brief-100034578.html

(BOLD is my opinion OR what I consider important content)

One of the most interesting bits of analysis that gets passed around is a chart tucked into Bank of America’s Global Fund Manager Survey.

It’s the “Biggest Tail Risk” chart over time, and it shows what approximately 250 fund managers view as the rare-but-known joker in the deck that could reshuffle the markets in a potentially uncomfortable way.

I’ve been checking this chart ever since I started reading fellow Morning Brief writer Sam Ro, and the patterns it’s shown over the years serve as a time capsule for market observers.

Remember when the Trump tariffs and the trade war with China were the hot topics? Or Brexit and EU disintegration? How about the years where it was the fiscal cliff and EU sovereign debt funding? Covid? The 2020 election? Or that moment where conflict with North Korea suddenly came to the forefront of people’s minds?

Since last spring, Inflation/Hawkish Central Banks has topped the chart as the biggest tail risk troubling fund managers.


BofA Global Fund Manager Biggest Tail Risks
The current situation: We are in a bear market, down around 25% since January 1, and are facing continued inflation that the Fed incorrectly said was transitory (with the shortages, it made sense, right?). Now that the Fed is going after the problem aggressively and is acknowledging that it’s going to hurt, it’s showing no signs of blinking as markets continue to slump.

The nightmare these fund managers had appears to be coming true.

Still, the tail risk doesn’t always manifest, as the Bank of America’s chart shows, or rather it doesn’t always manifest in a hugely impactful way. Covid did and crashed the markets 25% — which recovered in five months. The trade war fears depressed growth in Q4 2018 as well, which lasted, well, a quarter before the market found hope again.

What’s puzzling is that even if the consensus tail risk becomes reality, why is it so hard to use this information as an investor? These are not unfamiliar risks, Black Swans, or little-known fears. These are the things people could “see coming.” Mohamed El-Erian, who was early to recognize the Covid Crisis, just told Bloomberg that “the economy is starting to go through the windshield” suggesting that there are some lows to be tested in the coming months.

DataTrek’s Nicholas Colas reminded us in a newsletter this week why it’s so hard, pointing out that even though the S&P 500 is down over 23% year to date, "9 single days make up that entire decline."

“Without them, in fact, the index would be up 8.6% YTD,” Colas wrote.

The bad days, he pointed out, largely occurred on days with bad macroeconomic or Fed-related news — events that are typically scheduled! So, even though Colas suggests caution going into Thursday’s CPI release — another one of those scheduled events — the flip side of the risk picture is that stocks can go up, too, and that the big winning days are similarly responsible for the market’s path up and to the left. Just because you know what’s coming doesn’t mean you know what’s going to happen when it comes."

MY COMMENT

I find it very interesting.....assuming that it is true........that ONLY 9 single days make up the entire decline and if not for those days we would be UP for the year by +8.6%. THIS is why it is so difficult to time the markets and second guess the short term. We ALSO see this when the markets makes significant gains.....miss the few BIG GAIN DAYS......and you severely under-perform the unmanaged indexes. This is exactly why I stay fully invested ALL THE TIME. I want to capture the BIG GAIN days.

And......DUH.....yes, we all know what is the big risk and we have all known it for many months now.

 

This thread is TWO conflicting stories. On one hand you have all the data and articles and content that I post dealing with actual long term investing. That material is uniformly a POSITIVE message.

On the other hand....you have the daily data, and content that I post......which this year has been mostly NEGATIVE.

DO NOT........ let the negative DAILY content overwhelm the positive message of the long term investing content.

 

This is an interesting little study.

In this article, we examine the academic research about what millionaires invest in.
Millionaires Speak: What Drives their Personal Investing Decisions?
Journal of Financial Economics, 2022

https://alphaarchitect.com/2022/10/millionaires-invest/

What are the Research Questions?

By surveying a sample of 2,484 U.S. respondents, each of whom has at least $1 million of investable assets,18% of whom have at least $5 million, and 4% of whom have at least $10 million, the authors examine four categories of factors (investing in equities, concentrated stock ownership, cross-section of stock returns, and active equity investment managers), to find out :

1. What drives these investors’ investing decisions?

What are the Academic Insights?

The study finds the following:

#1

On average, respondents hold 53% of their portfolio in equities. Non-participation in equities is rare—only 6% of respondents hold no stocks. There is a strong home bias in respondents’ equity holdings: 83% of their stocks are U.S. stocks.

Only 10% hold any assets in hedge funds, venture capital, or private equity, but conditional on doing so, they allocate 13% of their portfolio to these funds. Professional advice, time until retirement, personal experience with markets, rare disaster risks, and health risks are the most important factors in determining their portfolio equity share.

#2

12% report that more than 10% of their net worth is currently invested in the stock of one and only one company, and an additional 3% report that more than 10% of their net worth is currently invested in the stock of each of two or more companies. A surprisingly high 67% report that their concentrated position has no effect on their total amount invested in equities; slightly more say that the concentrated position causes them to hold more in stocks than less in stocks (14% and 12%, respectively). Standard portfolio choice theory predicts that their total equity position should decrease.

The belief that the concentrated position is a superior investment seems to be the predominant motive for foregoing diversification. In fact, 46% say it is the belief that the stock would provide higher returns on average while 33% answer it is the belief that it would provide lower risk.

#3

47% of respondents think that value stocks are less risky than growth stocks, while only 135 say the reverse. Consistent with a belief in a positive relationship between risk and expected return, respondents collectively believe that value stocks have lower expected returns than growth stocks, although with considerably less conviction: 24% say value stocks have lower expected returns, compared to 22% who say the reverse. Additionally, more people believe that high-momentum stocks are riskier rather than safer (28% versus 8%), and more also believe that high-momentum stocks have lower expected returns than higher expected returns (27% versus 10%). 34% believe that high-profitability stocks have higher expected returns—consistent with the historical data—versus only 11% who believe the opposite.

38% say that high-profitability stocks have less risk, versus only 8% who believe the opposite. Generally speaking, these responses cast some doubt on rational explanations for why these stock characteristics are associated with different expected returns. These results also challenge many prominent behavioral theories of characteristic premia. Models with non-standard preferences often assume that investors have rational expectations which are inconsistent with our respondents’ beliefs about how characteristics vary with expected returns. Theories with heterogeneous investor beliefs (perhaps sustained by overconfidence) fit these findings better.

#4

45% report that they had invested in active equity investing while 49% report that they had not, with a further 6% report being unsure. Those who answered positively cite the following as motivations: advisor recommendation (45%), higher average returns (44%), and hedging demand (23%).

Additionally, 42% of respondents agree or strongly agree that past returns are strong evidence of stock-picking skill, but only 33% agree or strongly agree that there are decreasing returns to scale in active equity investment management. Overall, the pattern of responses suggests that a significant amount of active investing through funds by the wealthy is driven by a belief that they can identify managers who will deliver superior unconditional average returns.

Why does it matter?

One surprise that emerges from the study’s results is how similar the wealthy are to the average household in terms of their beliefs about how financial markets and the economy work, and in terms of the role of non-standard preferences in their decision-making (Choi and Robertson, 2020).

The Most Important Chart from the Paper:

The results are hypothetical results and are NOT an indicator of future results and do NOT represent returns that any investor actually attained. Indexes are unmanaged, do not reflect management or trading fees, and one cannot invest directly in an index.
Abstract on what millionaires invest in

We survey 2484 U.S. individuals with at least $1 million of investable assets about how well leading academic theories describe their financial beliefs and personal investment decisions. The wealthy’s beliefs about financial markets and the economy are surprisingly similar to those of the average U.S. household, but the wealthy are less driven by discomfort with the market, financial constraints, and labor income considerations. Portfolio equity share is most affected by professional advice, time until retirement, personal experiences, rare disaster risk, and health risk. Concentrated equity holdings are most often motivated by the belief that the stock has superior risk-adjusted returns. Beliefs about how expected returns vary with stock characteristics frequently differ from historical relationships, and more risk is not always associated with higher expected returns. Active equity fund investment is most motivated by professional advice and the expectation of higher average returns. Berk and Green (2004) rationalize return chasing in the absence of fund performance persistence by positing that past returns reveal managerial skill but there are diminishing returns to scale in active management. Forty-two percent of respondents agree with the first assumption, 33% with the second, and 19% with both."

MY COMMENT

All in all......it is interesting that this group of people with wealth.....for the most part......exhibit beliefs that are very similar to those of the average household. The findings on having a concentrated portfolio.....mirror what I believe and do with my 10 stock portfolio.

I assume the large percentage of respondents that only own a single stock reflects the fact that thet single stock is their business which is structured as a corporation.

It is also interesting that these people seem to AVOID the investment vehicles.......hedge funds, venture capital, or private equity........contrary to common belief.

 

Since we are looking at......actual.....research, lets continue.

Google makes you overconfident…and ruins your performance

https://klementoninvesting.substack.com/p/google-makes-you-overconfidentand

(BOLD is my opinion OR what I consider importnat content)

"A couple of months ago I wrote about an experiment that showed that people who are able to access information on Google become overconfident. Now, another group of researchers has done a series of experiments to examine how google influences our investment behaviour. And it doesn’t look good.

Traditionally, retail investors got most of their financial advice from their broker, banker, or from family and friends. No longer. Today, most retail investors get their investment information from the internet or online apps. But if you recall my previous article linked above, you know that by being able to look stuff up on google, people started to think they were more knowledgeable than they really were. The fact that you have tons of information at your fingertips blurs the lines between what you think you know and what you really know.

Adrian Ward and his colleagues designed a series of experiments with some 500 volunteers and asked them to participate in different investment tasks. But before they did that, they had to answer a couple of general trivia questions to earn starting capital for their investments. The trick: Some participants were instructed to answer the quiz without the help of the internet while others were instructed to google answers if they felt unsure.

Once the participants had earned their starting capital, they could bet some of it on their performance as investors. The more confident a participant was in her ability as an investor, the more she would likely bet on her performance. The chart below shows that participants who were allowed to look up answers to the financial quiz on Google turned out to bet more on their investment success, reflecting a higher degree of confidence in their investment capabilities.

But if you then look at the performance of their investments the participants who were allowed to use Google may have been more confident, but their actual performance in the investment task was worse. The authors of the study don’t really know why the performance is worse. It could be because the ability to use Google reduces the attention and diligence put forth in the investment task. Thus, being able to use Google would make people rely more on heuristics and other mental shortcuts that lead to lower performance. But never mind the actual mechanism in this specific experiment, we know that overconfident investors have worse performance in real life simply because they trade more and pay higher fees that they cannot compensate with higher returns. So independent of the returns in this experiment, the effect of Google and the internet on the investment of retail investors seem likely to be negative.

The behaviour of investors who are allowed to use Google


Source: Ward et al. (2022)"

MY COMMENT

WELL......not really a surprise here.....at least if you are above about age 45. There appears to be a distinct difference based on age....at least in my experience.....as to the impact of the internet on people. Many people....especially those that are above age 45 see the dependence on the internet as making people dumber.

I suspect that much of the data in this study might be "sex" based.....with younger MALES being the most subject to the overconfidence impact of the internet.

If nothing else this study is a warning against investor overconfidence. Probably a big factor as to why simple passive Index investing is very hard to beat.

 

HERE is what I would consider the "positive", long term content today. I dont know if I would call this an "article" or a "list"....I guess it is both. Also somewhat of a tie-in with some of the research above.

Little Rules About Big Things

https://collabfund.com/blog/little-rules-about-big-things/

(BOLD is my opinion OR what I consider important content)


"A few things I’ve come to terms with:

There is no such thing as more or less uncertainty; just changes in how ignorant people are to potential risks.

You should obsess over risks that do permanent damage and care little about risks that do temporary harm, but the opposite is more common.

The only way to build wealth is to have a gap between your ego and your income.

Everyone belongs to a tribe and underestimates how influential that tribe is on their thinking.

A lot of financial debates are just people with different time horizons talking over each other.

It’s easy to conflate “I’m good at this” with “Others are bad at this” in a way that makes you overestimate how valuable your skills are.

It’s important to know the difference between rosy optimism and periods of chaos that trend upward.

If your expectations grow faster than your income you’ll never be happy with your money no matter how much you accumulate.

The inability to forecast the past has no impact on our desire to forecast the future. Certainty is so valuable that we’ll never give up the quest for it, and most people couldn’t get out of bed in the morning if they were honest about how uncertain the future is.

Having no FOMO might be the most important investing skill.

Few things are as valuable in the modern world as a good bullshit detector.

Most of what people call “conviction” is a willful disregard for new information that might make you change your mind. That’s when beliefs turn dangerous.

People have vastly different desires, except for three things: Respect, feeling useful, and control over their time. Those are nearly universal.

The market is rational but investors play different games and those games look irrational to people playing a different game.

There’s a sweet spot where you grasp the important stuff but you’re not smart enough to be bored with it.

A big takeaway from economic history is that the past wasn’t as good as you remember, the present isn’t as bad as you think, and the future will be better than you anticipate.

Most assholes are going through something terrible in their life. People hide their skeletons, which requires blind forgiveness of their quirks and moods because you’re unaware of what they’re dealing with.

History is driven by surprising events but forecasting is driven by obvious ones.

Pessimism always sounds smarter than optimism because optimism sounds like a sales pitch while pessimism sounds like someone trying to help you.

Every past decline looks like an opportunity and every future decline looks like a risk.

A comforting delusion is thinking that other people’s bad circumstances couldn’t also happen to you.

For many people the process of becoming wealthier feels better than having wealth.

Something can be factually true but contextually nonsense. Bad ideas often have at least some seed of truth that gives their followers confidence.

Every market valuation is a number from today multiplied by a story about tomorrow.

Comedians are the only good thought leaders because they understand how the world works but they want to make you laugh rather than make themselves feel smart.

People learn when they’re surprised. Not when they read the right answer, or are told they’re doing it wrong, but when they experience a gap between expectations and reality.

People tend to know what makes them angry with more certainty than what might make them happy. Happiness is complicated because you keep moving the goalposts. Misery is more predictable.

Getting rich and staying rich are different things that require different skills.

Money’s greatest intrinsic value is its ability to give you control over your time.

Past success always seems easier than it was because you now know how the story ends, and you can’t unremember what you know today when trying to remember how you felt in the past.

“Learn enough from history to respect one another’s delusions.” -Will Durant

There’s more to learn from people who endured risk than those who seemingly conquered it, because the kind of skills you need to endure risk are more likely repeatable and relevant to future risks.

Nothing too good or too bad stays that way forever, because great times plant the seeds of their own destruction through complacency and leverage, and bad times plant the seeds of their own turnaround through opportunity and panic-driven problem-solving.

Most people can afford to not be a great investor. But they can’t afford to be a bad investor.

What money can and can’t do for you isn’t intuitive, so most people are surprised at how they feel when they suddenly have more or less than before.

Your personal experiences make up maybe 0.00000001% of what’s happened in the world but maybe 80% of how you think the world works.

Unsustainable things can last longer than you anticipate.

“The thing that is least perceived about wealth is that all pleasure in money ends at the point where economy becomes unnecessary. The man who can buy anything he covets, without any consultation with his banker, values nothing that he buys.” - William Dawson

Napoleon’s definition of a military genius was “The man who can do the average thing when everyone else around him is losing his mind.” It’s the same in business and investing.

It’s hard to tell the difference between boldness and recklessness, greed and ambition, contrarian and wrong.

Woodrow Wilson talked about whether something was accountable to Darwin or accountable to Newton. It’s a useful idea. Everything is accountable to one of the two, and you have to know whether something adapts and changes over time or perpetually stays the same.

Risk has two stages: First, when it actually hits. Then, when its scars influence our subsequent decisions. The recession, and the lingering pessimism that does as much damage.

Tell people what they want to hear and you can be wrong indefinitely without penalty.

Optimism and pessimism always overshoot because the only way to know the boundaries of either is to go a little bit past them.

Reputations have momentum in both directions because people want to associate with winners and avoid losers.

It’s easier to lie with numbers than words, because people understand stories but their eyes glaze over with numbers. As the saying goes, more fiction has been written in Excel than Word.

It’s easy to take advantage of people. It’s also easy to underestimate the power and influence of groups of people who have been taken advantage of for too long.

You have five seconds to get people’s attention. Books, blogs, emails, reports, it doesn’t matter – if you don’t sell them in five seconds you’ve exhausted most of their patience.

It always looks like we haven’t innovated in 10 or 20 years because it can take10 or 20 years before an innovation is an obvious success.

When and where you were born can have a bigger impact on your outcome in life than anything you do intentionally.

Most people are good at learning facts but not great at learning rules – the broad lessons from events that will apply to future events.

Everyone is making a bet on an unknown future. It’s only called speculation when you disagree with someone else’s bet.

There are two types of information: stuff you’ll still care about in the future, and stuff that matters less and less over time. Long-term vs. expiring knowledge. It’s critical to identify which is which when you come across something new.

The same traits needed for outlier success are the same traits that increase the odds of failure. The line between bold and reckless is thin. So be careful blindly praising successes or criticizing failures, as they often made similar decisions with slightly different levels of luck.

When communicating, “know your audience” easily becomes “pander to your audience.”

Most financial mistakes come when you try to force things to happen faster than is required. Compounding doesn’t like when you try to use a cheat code.

There is an optimal net worth for most people, after which not only does happiness stop increasing but more money becomes a social and psychological liability. The number is different for everyone, but is probably lower than most people think.

Risk is what you can’t see, think only happens to other people, aren’t paying attention to, are willfully ignoring, and isn’t in the news. A little surprise usually does more damage than something big that’s been in the news for months.

Innovation and economics can be miles apart. Twitter directly influences geopolitics between nuclear states and is worth half as much as Progressive Auto Insurance.

Risk management is less about how you respond to risk and more about recognizing how many things can go wrong before they actually do.

There is too much marketing (waving your arms) and not enough branding (building trust).

A lot of people don’t realize what bet they’re making. Maybe they thought they were betting on disruptive technology, but it turned out they were betting on low interest rates. Or they thought they were betting on alternative energy, but it turned out they were betting on subsidies and tax credits. Many bets don’t work not because your bet was wrong, but because you didn’t realize the bet you were making in the first place.

Housing is often a liability masquerading as a safe asset.

Asking what the biggest risks are is like asking what you expect to be surprised about. If you knew what the biggest risk was you would do something about it, and doing something about it makes it less risky. What your imagination can’t fathom is the dangerous stuff, and it’s why risk can never be mastered.

A lot of good writing makes points that people already intuitively know but haven’t yet put into words. It works because readers learn something new without having to expend much energy questioning whether it’s true. The alternatives are points that are obvious and well known (boring) or something that’s non-obvious and unknown (often takes too much effort to understand and impatient readers leave).

Emotions can override any level of intelligence.

Small risks are overblown because they’re easy to talk about, big risks are discounted and ignored because they seem prosperous before they arrive.

If you have an idea but think “someone has already done that,” just remember there are 1,010 published biographies of Winston Churchill.

No one is thinking about you as much as you are.

John D. Rockefeller was worth the equivalent of $400 billion, but he never had penicillin, sunscreen, or Advil. For most of his adult life he didn’t have electric lights, air conditioning, or sunglasses. Everything about wealth is circumstances in the context of expectations.

Read fewer forecasts and more history. Study more failures and fewer successes.

There is an optimal amount of bullshit in life. Having no tolerance for hassle, nonsense and inefficiency is not an admirable trait; it’s denying reality. Once you accept a certain level of BS, you stop denying its existence and have a clearer view of how the world works.

Most problems are more complicated than they look but most solutions should be simpler than they are.

About once a decade people forget that bubbles form and burst about once a decade.

If something is impossible to know you are better off not being very smart, because smart people fool themselves into thinking they know while average people are more likely to shrug their shoulders and end up closer to reality.

You can’t believe in risk without also believing in luck because they are fundamentally the same thing—an acknowledgment that things outside of your control can have a bigger impact on outcomes than anything you do on your own.

“Reality will pay you back in equal proportion to your delusion.” – Will Smith

A common irony goes like this:

• Paranoia leads to success because it keeps you on your toes.
  
  
• But paranoia is stressful, so you abandon it quickly once you achieve success.
  
  
• Now you’ve abandoned what made you successful and you begin to decline – which is even more stressful.
  

Risk’s greatest fuels are leverage, overconfidence, ego, and impatience. Its greatest antidote is having options, humility, and other people’s trust.

Once-in-a-century events happen all the time because lots of unrelated things can go wrong. If there’s a 1% chance of a new disastrous pandemic, a 1% chance of a crippling depression, a 1% chance of a catastrophic flood, a 1% chance of political collapse, and on and on, then the odds that something bad will happen next year – or any year – are … pretty good. It’s why Arnold Toynbee says history is “just one damn thing after another.”

People suffering from sudden, unexpected hardship can adopt views they previously would have considered unthinkable.

It’s easiest to convince people that you’re special if they don’t know you well enough to see all the ways you’re not.

A large group of people can become better informed over time. But they can’t, on average, become more patient, less greedy, or more level-headed during periods of upheaval. That will never change.

Good ideas are easy to write, bad ideas are hard. Difficulty is a quality signal, and writer’s block usually indicates more about your ideas than your writing.

More people wake up every morning wanting to solve problems than wake up looking to cause harm. But people who cause harm get the most attention. So slow progress amid a drumbeat of bad news is the normal state of affairs.

Everything is sales.'

MY COMMENT

ACTUALLY.....I like most, if not all of the above......I just dont want to do the entire article in....."BOLD". Absorb the general messages above.....in a POSITIVE WAY.......and you are a good CLINICAL REALIST investor.

 

Well.....I have a gain today so far.....small....but still a gain. So far....I am holding firm and holding off from hitting my YTD low for the third time this year. I currently have 6 of 10 stocks UP.....AAPL, AMZN, NKE, COST, HON, and GOOGL.

The day today will actually....not begin.....for the markets till the FED minutes are released. ALL the commentary and opinion about the minutes will determine how we close today.