Hal Holbrook had a wonderful supporting role in the Watergate saga All the President’s Men, a 1976 Alan J. Pakula film based upon the book of that name by Pulitzer Prize winning reporters Bob Woodward and Carl Bernstein of The Washington Post. Holbrook played the conflicted, chain-smoking, trench-coated, shadowy source known only as “Deep Throat” […]

Before being closed down by the Federal Trade Commission, a revenge porn site called “Is Anyone Up” came up with a creative but disgusting twist on the sleazy genre by including a link to a phony “independent third party team” that would get the offensive pictures taken down for a fee.1 In other words, the […]

2015 Outlook Forecasting Follies Nobody’s perfect. That universal truth is easy to prove, of course, and no sane person would deny it. Indeed, even the smartest of us are far from immune even in our areas of expertise when we’re actively trying to do our best. A famous study by the U.S. Institute of Medicine […]

We readily recognize that facts are not the same thing as truth. Facts are true by definition (or they wouldn’t be facts), but they require analysis, understanding and interpretation to become useful and actionable, to become truth. Logically, we should decide what the facts are as objectively as we can and then interpret the facts […]

Larry Walters had always wanted to fly. When he was old enough, he joined the Air Force, but his poor eyesight wouldn’t allow him to become a pilot. After he was discharged from the military, he would often sit in his backyard watching jets fly overhead, dreaming about flying and scheming about how to get […]

Value has persistently outperformed over the long-term.  Why is that?  In the most general terms, growth stocks are those with growing positive attributes – like price, sales, earnings, profits, and return on equity.  Value stocks, on the other hand, are stocks that are underpriced when compared to some measure of their relative value – like price […]

Since at least 1981, when Rolf Banz published The Relationship Between Return and Market Value of Common Stocks, the idea of a small cap premium has been pretty well established.  Thus, over time (though it may take a very long time), we can expect higher average returns for common stocks of smaller companies relative to larger […]

It is axiomatic in the investment world that as an asset class becomes more popular, it suffers from both falling expected returns and rising correlations.  In other words, good trades get crowded and their advantages tend to disappear.  This crowding happens because success begets copycats as investors chase returns.  Mean reversion only tends to make […]

Five years ago my family and I were awakened early in the morning and forced to evacuate our home due to raging wildfires burning out of control near our home in Southern California and fanned by winds gusting to over 100 miles per hour (as shown right).  Unlike many of our neighbors, we had time to gather […]

My series on risk is available at these links:  Reckoning with Risk (1) begins to look at how to deal with risk. Reckoning with Risk (2) explains and categorizes different elements and types of risk. Reckoning with Risk (3) shows our failings at dealing with low-probability, high-impact events. Reckoning with Risk (4) looks at what the Yale Endowment experience […]

When I was a kid I had a paper route.  One of my customers was a barber who made book on the side.  Shocking, I know.  The giveaway was the group of guys always hanging around but not getting their hair cut and the three telephones on the wall that rang a lot.  Even as […]

Barry Ritholz (of The Big Picture and a Sunday Business columnist at The Washington Post) recently contributed Investors’ 10 most common mistakes to The Washington Post Business Section quarterly investing section. It’s a commentary that he has been working on for a while — the ten topics are listed with links to longer discussions of […]

There is a famous story, almost surely apocryphal, that makes the rounds with some regularity in our industry.  As the story goes, a new, struggling advisor buys a mailing list of 10,000 potential prospects. He then writes two separate newsletters about the same, high beta stock. One newsletter advises a leveraged short of the stock and […]

On account of the success of Moneyball (both the book and the movie, nicely satirized here), baseball management is often compared to investment management, and with good reason. Moneyball focused on the 2002 season of the Oakland Athletics, a team with one of the smallest budgets in baseball.  At the time, the A’s had lost […]