A Correction Is Coming – Bloomberg 07-07-14

Salient to Investors:

Barry Ritholtz writes:

  • The market’s various new highs are bullish.
  • Corrections are normal so should not be feared: since March 2009, we have had 9 corrections from 6-22 percent.
  • Corrections are impossible to forecast because people are terrible at making predictions and we don’t know what the economy is going to do, or where interest rates are heading.
  • No one times the market especially well, aside from costs and taxes.
  • Confirmation bias is where we find what we are hoping or expecting to see and we give it undue weight in our mental models, and affects bears and bulls.
  • Longer-term investors should look at a correction as an opportunity to re-balance.

Read the full article at http://www.bloombergview.com/articles/2014-07-07/a-correction-is-coming

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Six Investment Errors You Are Making Right Now – Bloomberg 12-13-13

Salient to Investors:

Barry Ritholtz cites his trading mistakes early in his career:

  • Optimism Bias. After the costs incurred, expenses, taxes paid, time and labor invested, most of the time, it is not worth the effort to beat the market. Most traders won’t go on to become Paul Tudor Jones or Jim Simons.
  • Confirmation Bias. When we are long, we tend to read bullish research and commentary. When we are in cash or short, we seek out bearish writings. Smart Money seeks out research and commentary that challenges its existing beliefs.
  • Recency Effect. People tend to focus on what just occurred, often to the detriment of the bigger picture or the longer-term trend. Post-Crash Stress Disorder is why many investors have been carrying so much cash during a 150 percent rally – they are waiting for the next crash, having missed the last one.
  • Politicians of either side get their perceptions and predictions wrong, so ignore them.
  • Cherished Myths unsupported by evidence. For example the Death Cross, Sell in May, Buying single-digit P/E stocks.
  • Blind Faith. Research anything you read, and study the long-term track record, the methodology involved, and the overall approach.  The National Retail Federation Black Friday survey is nonsense and has been wildly wrong for the 10th consecutive year.

Read the full article at http://www.bloomberg.com/news/2013-12-13/six-investment-errors-you-are-making-right-now.html

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Bull or Bubble?: Ritholtz Chart – Bloomberg 12-05-13

Salient to Investors:

Barry Ritholtz says that since 1897:

  • Double-digit gains occurred in 75% of the positive years and single-digit gains occurred 25% of the positive years.
  • 20 percent or greater gains occurred in 29 percent of the years.

Read the full article at http://www.bloomberg.com/news/2013-12-05/bull-or-bubble-ritholtz-chart-.html

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Ritholtz Calls Ballmer ‘Worst CEO in Technology’ – Bloomberg 01-08-13

Salient to Investors:

Barry Ritholtz at The Big Picture says:

  • Obama has nowhere to go but up in selecting the new Treasury Secretary as Larry Summers and Tim Geithner were asleep at the switch when the crisis occurred and were there to help the banks and not service the taxpayers.
  • The government made loans when no one else would and got virtually nothing back  – we are nowhere close to breakeven.
  • Goldman Sachs should be given 3 months to decide if it is a bank or not – the key question is are taxpayers on the hook if Goldman loses money?
  • Does not own bank stocks because an investor has no idea what the banks own, and despite the Fed being extremely accommodative towards them and the government’s willingness to always back stop them.
  • Microsoft, which missed every major technology trend in the last decade, is the Maytag dishwasher of technology. Gates is down to less than 20% ownership of MSFT stock and has made money doing so.
  • “Persistently Overbought”  means stocks can stay at the top of their Bollinger bank for a long time.
  • Investors must have a rational plan for investing – high turnover is a big red flag you are doing something wrong.
  • Keep investing simple and ignore the plethora of noise. Ten years ago a list of the Top Ten Stocks to Own Over the Next Decade is down 75% versus the considerable gain in the market.
  • If you only invest when you are comfortable and have confidence then the stocks has already had a great run. Confidence and fear are two sides of the same coin – the  best time to invest is when stocks are cheap and no one has confidence. Uncertainty = opportunity. In late 19999 and late 2007 people were really confident.
  • Long term, you can’t hide in cash or invest in bonds at 1.8% so have to buy equities as the Fed has ordered. There never has been a 20-yr period when equities didn’t have positive gains.

Ritholtz says he has been fully invested for 4-6 weeks, that stocks are  reasonably valued. Likes a balanced portfolio.

Watch the full video at http://www.bloomberg.com/video/ritholtz-calls-ballmer-worst-ceo-in-technology-lu2YK5U0QUaVA4nFIdl1mA.html

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