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The Best of What They Said and I Read Week Ending 2/24/19

The Best of What They Said and I Read” week ending 2/24/2019

Short excerpts from articles I found interesting.  I may not agree with the author and the following material is not intended as investment advice

Barron’s – February 22, 2019 – Stocks’ Winning Streak Rolls On – Lawrence C. Strauss

  • “…The Dow industrial finished the four-session trading week, shortened by the Presidents Day holiday, at 26,031.81, up 0.57%. The S&P 500 rose 0.61%, to 2,792.67. The tech-heavy Nasdaq Composite finished at 7,527.54, up 0.74%. And the Russell 2000 Index, a barometer of small-cap stocks, gained 1.33%. It closed at 1,590.06.  The S&P is only about 5% off its all-time intraday high of 2,940.91, set on Sept. 21, and it’s appreciated 18% since its recent trough of 2,351–where it closed on Dec. 24.”
  • “…Last year to be successful, you had to find a way to stay appropriately cautious in the face of nothing but optimism,” he says. But this year, he observes, investors must “stay bullish in the face of nothing but pessimism” on fears of slowing earnings growth, trade wars, and other threats.”

Barron’s – February 22, 2019 – Central Banks Worldwide Are Lifting Stocks, Is the Stability Masking Trouble Ahead? – Randall W. Forsyth

  • “… The Dow Jones Industrial Average notched its ninth straight weekly advance, for a cumulative gain of 16% over the span, the longest winning streak since May 1995, according to our colleagues at Dow Jones Market Data. The rise has put the blue-chip gauge within just 3% of its record close on Oct. 3.  The advance has also been global. The Shanghai Composite Index scored its seventh straight weekly gain, totaling 12.4% during the period. The Nikkei 225 ended its sixth winning week in the past seven and is up nearly 12% from its December low. And the Stoxx Europe 600 had its seventh up week in the past eight, ending up 12.6% from its Dec. 27 low.”
  • “…The March 1 deadline to work out a trade deal arrives on Friday but is likely to be extended. Also looming is the expected report from special counsel Robert Mueller III’s investigation on Russian influence on the 2016 election. And in case you’ve forgotten, the March 29 deadline for Brexit also looms.  March Madness this year could refer to something other than college basketball, which doesn’t seem priced into the markets.”

AAII Investor Update – February 21, 2019 – Avoiding Overconfidence by Knowing What Type of Investor You Are – Charles Rotblut

  • “…Among the many unintended consequences of the internet is an unrealistic sense of overconfidence…Overconfidence, especially when it comes to overestimating one’s abilities, is nothing new. The well-documented Dunning–Kruger effect is the failure of people to recognize their own level of incompetency. This mental misinformation drives investment decisions and causes people to believe their returns are higher than they actually are.”
  • “…Among the ways overconfidence can manifest itself in a person’s portfolio is prompting them to invest in a manner or in securities that they shouldn’t. Examples include options and currencies. Skilled salespeople and instructors pitch seminars and online courses with the promise of training investors on how to realize BIG returns. Often, it’s the sponsor of the course who is raking in the dollars, not the participants.”
  • “…This doesn’t mean a person can’t learn by watching videos, reading books and going to conferences. We at AAII believe individuals can become better at investing through education. If we didn’t, we wouldn’t have much of a reason to exist as an organization. Nonetheless, there is a difference between learning and doing. Reading and watching can only take you so far; you still have to jump in the water and make decisions. Some of the decisions will be good and others won’t be so good. The ability to look at both types of decisions, separate outcomes into what is attributable to skill, luck or mistakes and apply that knowledge going forward is what will make you a better investor.”
  • Part of the knowledge acquired through experience is identifying the type of investor you are most successful at being. This ties back to a quote attributed to the Greek poet Archilochus: “A fox knows many things, but a hedgehog knows one big thing.” Knowing what type of investor you are has two benefits. First, it allows you to identify the types of strategies you can stick with no matter what the prevailing market conditions are. Secondly, it allows you to tune out the many ideas existing beyond the walls of your strategy.”

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