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Misleading Statistical ‘Truths’ and Interest Rates

Top 5 of the Week of August 8

We kick off this week’s Top 5 articles with a look at low-interest rates and the impact they’re having on savers, care of Cullen Roche, author of the Pragmatic Capitalism blog. Michael Mauboussin of Market Folly has compiled a list of attributes shared by all great investors. And Barry Ritholtz, founder of Ritholtz Wealth Management, shares the investing techniques of today’s billionaires, in case you are one.

Michael Batnick, author of The Irrelevant Investor warns us about moving goalposts and half-truths in returns statistics. And Bryan Borzykowski for Morningstar examines just how long this state of low-interest rates may go on for…

“Do Savers Deserve a Risk-Free Return?”


  • In recent decades, savers have experienced the rarity of high real returns in risk-free instruments; and started to expect as high rates as during the abnormal period in 1980-2007 of rates at 2.1%
  • With the economy in the position it is in, of “stagnant productivity and weak output,” it is not viable to continue these exceptional returns on risk-free savings
  • The situation should urge us all to boost the declining output and lack of earnings in recent years, to be able to once again enjoy higher returns for savers in the future

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Great Investing Attributes


  • Be skilled at mathematics and accounting, be able to grasp value, and understand business strategies
  • Think about the odds effectively and compare risk as well as different investing approaches
  • Be open-minded and well-read; test hypotheses and always judge where your information is sourced from
  • Be careful of behavioral biases and know your limitations

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Billionaires’ Advice: “Sell Everything!”


  • Many billionaires—with Warren Buffett as the exception to the rule—are all suggesting we should exit the stock market in today’s current economic climate
  • Though it seems counterproductive to argue with someone richer than you; there’s an argument that you shouldn’t trade on the advice of a billionaire unless you are one
  • History has shown us that listening to market advice from the wealthy elite is not always a sound approach for those that have very different goals and financial plans

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Misleading Statistical ‘Truths’


  • As Benjamin Disraeli—Prime minister of the United Kingdom (twice)—once said, “There are three kinds of lies: lies, damned lies, and statistics”
  • By altering the time period, they are not showcasing lies about returns data but are easily distorting the truth
  • Be sure to do a thorough investigation into statistics, “cherry picking dates” is a great misleader when it comes to adjusting the truth about stock returns

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The Future Rise of Interest Rates; Will they or Won’t They?


  • With interest rates at an all time historical low of 0.5%, the concern for the future is how long before rates return to normalized levels or if that will even happen at all
  • If the risk-free rates were to change; owning a lower risk environment for investors to own then investors would move away from riskier equities
  • Continued low rates could have long-term negative effects on stock markets, but the Federal Reserve won’t raise rates until it looks like the economy can cope

Do you believe rates will eventually rise? Or continue at this all-time low? Share your comments in the section below

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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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DISCLAIMER: This content is for information purposes only. It is not intended to be investment advice. Readers should not consider statements made by the author(s) as formal recommendations and should consult their financial advisor before making any investment decisions. While the information provided is believed to be accurate, it may include errors or inaccuracies. The author(s) cannot be held liable for any actions taken as a result of reading this article. The Babinow Team doesn’t necessarily endorse any stocks or shares mentioned in the articles or the author of such articles linked to and summarized in Top 5 of the Week and cannot guarantee the accuracy of its information.