7 Deadly Sins and Politics
Top 5 of the Week of February 15
This week with Bernie Sanders and Donald Trump rising in popularity, Barry Ritholtz reminds us of the investment truth: that correlation doesn’t imply causation.
After watching the movie The Big Short, Chris from Capitalist Exploits cautions us with another “truth”. People are as primal and instinctive in the stock market as they are in life. The Motley Fool blog also shadows the movie and follows the bank crises theme observing that to be a successful investor; we would do well to remember that panics and banking crises are the rule, not the exception we believe.
As fishermen are sold brightly colored lures when fish can’t see colors, so to it would seem that following the 2007-08 crisis, asset managers are taking advantage and peddling colorful investing juju, such as “smart beta,” to lure your investment dollars away from you.
Finally, while our last piece isn’t a recent article, we felt it was too good not to draw your attention to; what the seven deadly sins have to do with investing.
Politics and Investing; Mix at Your Peril
- Barry Ritholtz warns about the dangers of crediting presidents for, “good economies and strong markets and assigning way too much blame for the bad”
- Drawing a correlation between politics and investing is the same as investing on the Super Bowl Indicator—correlation doesn’t imply causation
- Ritholtz analyzes and critiques investors’ behavior for both political parties. Here, both Democrats and Republicans share something in common; that politics and investing don’t mix
Do you disagree? Are politics and investing related? Answer with your comments in the section below.
Profit from the Asymmetry in the Stock Market
- Capitalist Exploit’s blogger highlights The Big Short film (2015) as an example of the Pareto principle; how roughly 80% of effects come from only 20% of causes
- Discover how to be part of the 20% margin in the stock market, now and in the future, that has 80% probability of paying out returns
- Think with your head and not your heart, as “the majority of the market will react to situations with a primal brain, failing to think things through”
Bad Things Happen All the Time
- With 14 major bank panics in the past 216 years in the US, history has a lot to teach us according to the Motley Fool
- Bankers should not to be caught off guard and assume the business cycle will turn, and the economy has pulled itself out of the crisis
- The prudent will remain wise and act with caution following history’s lessons, those who don’t “will see their banks flounder or perish”
Asset Managers Lures and Fish Can’t See Colors
- Just as lures are designed for the fisherman rather than fish, so too ‘smart beta’ is clever marketing targeted at investors; but isn’t the fix-all remedy they are being sold
- As investors, we want all the success of investing, but none of the trials and tribulations involved—asset management firms exploit this to get our investment dollars
- “Factor investing” is nothing new, but we struggle to get excited by advantageous long-term investing and instead find short-term alternatives more appealing
7 Deadly Sins of Fund Management
- See how lust is the danger of forecasting. While Gluttony and Greed are believing we know more than the next investor, and the illusion that more information is better information
- Learn how Sloth is over-optimism and over-confidence and Wrath is revealed in investors’ “confusing noise with news in their bid to out-smart each other”
- Note that Envy is the belief that other stock brokers have growth they, in fact, don’t, and pride…well, that comes before a fall
Top 5 of the Week is a summarized collection of financial investment articles that we like and think you might like too. Having written thousands of pages of equity strategy and company research between us, we understand the allure of the ever-changing world of finance. Investing is an art form – and like everything, something you can work on and improve at. There are some excellent writers out there on the finance web, some offer a running commentary on today’s market, some are doing research, some have tips on how to Become a Better Investor, and some just lift the cloud of fog behind a lot of financial jargon. Each week we will keep you up to date with the top 5 articles worthy of your attention.
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