Is There a Buying Opportunity in Rare Earth Metals? (Probably Not)
May 31, 2019 | Investing Strategies
Is there a buying opportunity in rare earth metals? Many would say yes, but you want to be careful. The smartest thing to do at this juncture is probably to stay away. The rare earth metals industry is mostly ignored. But every five to 10 years it captures public attention, producing wild boom-and-bust patterns as a result. The problem is…
How to Put Favorite-Longshot Bias in Your Favor
May 29, 2019 | Investing Strategies
Favorite-longshot bias is one of the most reliable behavior patterns in all of sports gambling. It applies to markets, too, which means most investors are impacted by it — including you and me. This doesn’t have to be a bad thing though. If you understand the concept of favorite-longshot bias and the key thing that makes it a costly error,…
Is Zillow’s New Business Model Brilliant or Crazy?
May 24, 2019 | Investing Strategies
Zillow (Z) used to be a real estate portal that made its money from advertising. More than 180 million users would visit the Zillow site or mobile app each month, and real estate agents would pay Zillow to have their services displayed alongside home listings. Now Zillow is in the home-flipping business, which requires huge amounts of capital and puts…
The Billionaire and the Winner’s Curse
May 22, 2019 | Investing Strategies
On Wall Street and elsewhere, there is something called the “Winner’s Curse.” The winner’s curse applies when the winner of a bidding contest pays too much for an asset. This happens because, as a result of competitive bidding, the price required to win goes higher (sometimes much higher) than what the asset is worth. The winner thus gets the “curse”…
Implications of the Escalating U.S.-China Trade War
May 17, 2019 | Investing Strategies
Against the odds, the U.S.-China trade war has escalated. This is bad news for companies and industries with significant exposure to China, like Apple and semiconductors. It’s a positive for areas of the market that benefit from currency wars and interest rate cuts, like gold and gold stocks. To briefly summarize, it appeared the trade talks were headed toward a…
The Peltzman Effect: How Safety Perception Increases Risk
May 15, 2019 | Investing Strategies
High-end sports car dealers like to say brakes help the car go faster. How can this be, when brakes are meant to slow a car down (or bring it to a complete stop)? The answer is that a world-class braking system makes it safer to accelerate and top out at higher speeds. If you know that you can slow down…
Berkshire Hathaway’s Amazon Investment is a Sign of the Times
May 10, 2019 | Investing Strategies
On May 2, Warren Buffett revealed that Berkshire Hathaway bought shares of Amazon as an investment. This is a “spit out your coffee” type moment. Warren Buffett is, by far, the most renowned and beloved value investor of all time. And Berkshire Hathaway, Buffett’s main investment vehicle since the late 1960s, is the most well-known and revered value investing conglomerate…
Why Retirement Risk is Not “One Size Fits All”
May 08, 2019 | Investing Strategies
Wall Street wants you to believe retirement risk is “one size fits all” so it can sell a mass-market product. But that isn’t the case. “One size fits all” is a great setup for selling pre-packaged solutions in bulk to millions of investors at once. For the actual investor who is paying attention, however, this is not a good thing….
Bulls Are Feasting on a Goldilocks Porridge of Economic Data
May 03, 2019 | Investing Strategies
Stock market bulls are feasting on a “Goldilocks Porridge” of economic data right now. Like the porridge from the famous children’s story, Goldilocks and the Three Bears, the incoming data is not too hot, and not too cold, but just right. That makes a difference because both “too hot” and “too cold” would be a significant negative for stocks, possibly…
The Dangerous Allure of Survivorship Bias
May 01, 2019 | Investing Strategies
The way to build wealth in markets is to do things that are smart and safe. If you develop a playbook of smart and safe investing decisions, you can return to that playbook over and over again. The repeat application of smart and safe habits is a wealth-accumulation process. It’s valuable to create a process like this and then stick…
