Guess Your Way to the Future

"When someone makes a prediction, we don't expect them to call a press conference every few days revising it little-by-little until it and the events that ultimately play out coincide. Prediction is all about confidently taking a bold stance and holding on to it until you’re proven right or wrong. Who would be interested in predictions if there weren't any drama? As it turns out, just about anyone who is serious about anything."

An excerpt from my latest column at ThinkAdvisor.  

Always have a "Plan B"

"The big lesson that came out of academia – at least the one that’s on everyone’s mind today, is that it is hard, really hard, maybe impossible to construct a diversified portfolio that consistently outperforms the market.  The insight that a portfolio built to mimic an index would outperform most professional investors took a while to be accepted broadly.  But now that it has, the question being asked by more and more serious investors is, “Should I waste my time trying to find an active manager, or should I just index?”  Given recent trends, the answer is most definitely the latter.

"The historical rule on Wall Street is that every successful investment strategy that has ever been created gets too popular at some point.  There has never been an exception to this rule, until now.  Perhaps the capacity for indexing is so big and/or the ego of a certain percentage of investors is so large, that there will always be enough investors who want to make their own choices (maintaining the balance that gives indexing its advantage).  Perhaps not, and the rule will ultimately kick in at some point.  For now, indexing is king of the hill and its kingdom is expanding."

Excerpted from my latest column at ThinkAdvisor

Like Shooting Fish in a Barrel

"In 1998, at the height of the big chains’ dominance, You’ve Got Mail with Tom Hanks and Meg Ryan was released – with Hanks playing the manager of the successful but soulless book behemoth, and Ryan the perky owner of a charming but doomed children’s bookstore.  It turns out that this very popular movie was channeling the infamous 1982 Business Week cover story “The Death of Equities” (which appeared a few months before the start of the largest bull market of the century).

 

At the same time the movie was portraying the big box bookstores as unstoppable predators, Jeff Bezos and his three year-old company Amazon.com looked out at the same world and saw Borders and Barnes & Noble swimming in a barrel.  So Bezos starts shooting.  It was an unfair fight from the outset.  Borders has disappeared and Barnes & Noble, while still viable, has struggled with profitability for years.  Amazon’s current market value is 260 times larger than Barnes & Noble’s."

Excerpted from my November article at ThinkAdvisor.

The Media Exist to Serve Us, Not Vice-Versa

"Regardless of Google's intentions, with nearly 70% of all searches going through their algorithm, the end result is that our individual and collective pursuit of knowledge is being influenced by one for-profit company's version of 'relevant.'"

An excerpt from my October column at

ThinkAdvisor.

Connecting the Dots

"Achieving clarity and maintaining perspective in an investment world full of noise and distraction is an ongoing challenge. The acting paradigm when I started working was that successful people were informed people — and so began my daily ritual reading The New York Times and The Wall Street Journal. After a few decades of this practice I was successful and well-informed. But I realized I was no wiser for the experience."

An excerpt from my latest column at ThinkAdvisor.

All Macro - All The Time

From my August 2015 column at ThinkAdvisor.

"Thematic and top-down, macro research was the environment I grew up with during my 20 years at PaineWebber and it remains the cornerstone of Wall Street research and a primary focus of the financial media. The problem is — it doesn't work.


The evidence floods my inbox every day: hundreds of pages of informative research reports, white papers and commentaries of all variety. I’ve read these reports for decades, and continue to read them today. They all share one common attribute: With extraordinarily rare exception, I feel no more confidence about a course of action when I’m done reading than before I began."

It Takes a List

"We live in an investment world focused on—maybe obsessed with—big macro things: artificially low interest rates, the next bubble, European politics, climate change and a potential market crash. Admittedly, some of those big things are worth obsessing about. But of those that drive us to distraction, rarely if ever do they actualize anywhere close to our level of concern. It is the small stuff that we ignore, seemingly too trivial for our attention, where the power and leverage exists to change our future."  

Excerpted from my latest column at ThinkAdvisor

How much is your attention worth?

As hockey players increase their skills, at some point they start to experience their sticks as parts of their own body. Studies describe this sensation as “cognitive extension”; the players’ brains no longer distinguish their sticks from their arms. The increasing competence they gain with this “new” part of their body is a pleasurable and reinforcing experience.

Large gaming companies have become experts at creating an “experience” for slot machine players that mimics this pleasure/reinforcement cycle—so much so that slots have become their single most profitable source of revenue. Of course the problem is that the very real pleasure the gambler is receiving from the experience is not built on his growing competence with the slot machine, but rather a calculated deception programmed to keep him playing as long as possible.

From my June column at Think Advisor.
 

What is "Good" Advice?

 

 "Is the distinguishing factor between good advice and bad advice only in the outcome, or can we know it in advance?  Does advice have to come from another person, or can we read it in a book or access it from an algorithm?  Is advice defined by its being given or only by its being received?  Or is advice just so varied and so broad in how each of us perceives it, that the only intelligent thing we can really say is what Supreme Court Justice Potter Stewart famously opined (about pornography), 'I know it when I see it.' "

From my latest column at ThinkAdvisor.

The Taxi Driver, Jurist and the Advisor

Active investing has nothing to do with beating the market

"If you hold (as I do) that investing is just one of many human activities—then just like those other activities, we have no choice other than to be active participants. The decisions of where you will invest your money, and within that choice what kind of strategy you will employ, also require active decisionmaking."

I think that the active/passive discussion requires some re-framing and this is my latest effort.  From the April edition of Research Magazine.

The Real Point of Active Investing

Uncertainty

 

I'll be using this space to post links to my monthly column in Research Magazine.  This month I take on uncertainty - an issue that if not addressed head-on can lead to some unfortunate outcomes:

"Our desire for certainty is so powerful that it may explain the irrational behavior and incredible rationalizations that I’ve seen some investors offer up as they make one terrible choice after another."

How to Invest in an Uncertain Universe