Jason Zweig

Recommended reading, economic debates, predictions and opinions.
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Re: Jason Zweig

Post by StuBee » 24 Feb 2013 14:50

Bylo Selhi wrote:
jiHymas wrote:Ignorant, perhaps. Stupid - I doubt it. It is often useful - not to mention diplomatic - to remember the difference!
As the magnet on our fridge door reads, "Ignorance is curable. Stupidity is forever."
No, stupidity can be cured, you just have to apply yourself to the task. It is not within our nature to be stupid, we are not stuck with it, though it can be (perhaps is) a part of us to some more or lesser degree. It it possible to learn (or grow) ones way out of it. But, then again perhaps I am being stupid :lol: . If that is the case then ignore me.
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Re: Jason Zweig

Post by IdOp » 25 Feb 2013 14:27

You Can't Fix Stupid

(3.5 MB .wmv)

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Bylo Selhi
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Re: Jason Zweig

Post by Bylo Selhi » 02 Mar 2013 11:13

The Intelligent Investor: Have They Finally Cracked the Stock-Picking Code? - WSJ.com ($$) [or Google the title to get free access]
Believe it or not, there could be a new holy grail for investors. "Great ideas come along maybe once every 20 years or so," David Booth, chairman of Dimensional Fund Advisors in Austin, Texas, which manages more than $262 billion, told me this week.

Lately, he and other leading investors have gotten excited about a financial measure called "gross profitability" or "quality." The measure appears to identify companies that will earn even more money in the future. New funds are launching based partly on it. What should you know before you consider joining in?...
Sedulously eschew obfuscatory hyperverbosity and prolixity.

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Re: Jason Zweig

Post by ghariton » 02 Mar 2013 19:17

From the article linked by Bylo:
"There's something there, and I don't think it can be ignored," says William Bernstein, a money manager and investment theorist at Efficient Frontier Advisors in Eastford, Conn. "We don't know exactly why it works, but it works."
I hate that. If we don't know why it works, how do we know it will still work tomorrow?

George
The plural of anecdote is NOT data.

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Re: Jason Zweig

Post by BRIAN5000 » 02 Mar 2013 19:38

From the boggleheads forum.
The Other Side of Value: The Gross Profitability Premium
http://rnm.simon.rochester.edu/research/OSoV.pdf

Controlling for gross profitability explains most earnings related anomalies, and a wide range of seemingly unrelated profitable trading strategies.
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little bit longer and wish you would’ve sold early - this is just part of the game.” - Frank Zorilla via Abnormal Returns

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Re: Jason Zweig

Post by Peculiar_Investor » 14 Apr 2013 10:15

Some interesting background behind the numbers, The Intelligent Investor: Can the Bond Market Really Be This Easy to Beat? - WSJ.com ($$) [You might need Google as your friend]
Over the past 12 months, investment-research firm Morningstar estimates, intermediate bond funds have surpassed the indexes against which they measure themselves by an average of 1.8 percentage points; long-term government bond funds have beaten their chosen benchmarks by 2.5 points.

Since bond managers have long struggled just to break even with the averages, such market-pounding performance seems close to miraculous. But investors need to realize that the laws of financial physics haven't been suspended. All these funds are run by active bond pickers. If history is any guide, they won't outperform the averages forever.
To summarize the remainder of the article, more recently the active bond funds are achieving their outperformance based on having longer duration (interest rate risk) and lower average credit worthiness (credit risk). Zweig also notes that "the vast majority of active bond funds have fared poorly in bear markets—as in 2008" and offers the recommendation to "See how it did in 2008; the best test of whether a manager can avoid the next disaster is whether he avoided the last one."

As someone who has been building and running my own bond ladder over the past few years (post 2008), this does give me pause for thought to examine my choices vs. the comparable index to ensure I fully understand the level of interest rate and credit risk embedded in my choices.
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Re: Jason Zweig

Post by AltaRed » 14 Apr 2013 12:00

I consider bonds, particularly investment grade corporate bonds, to be somewhere in the middle ground between a GIC ladder and an equity portfolio. I have a few ST mid-grade corporate bonds in my RSP that fit within my GIC ladder timing, and have a partial position in ZCM in my TFSA. Both of these are fairly 'risky' bets from my perspective but part of my 'learning' process (meaning emotional learnings). I am loathe to increase this exposure since the potential reward is low relative to the risk going forward. A GIC ladder is still the basis of my 'sanity' in the FI space.
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Re: Jason Zweig

Post by ghariton » 14 Apr 2013 12:36

Peculiar_Investor wrote:...to ensure I fully understand the level of interest rate and credit risk embedded in my choices.
The mechanics of interest rate risk are fairly straightforward. Once you calculate the duration and the convexity, all you need to do is plug in the value of future interest rates. Of course, nobody knows what those will be, so you end up in a simulation exercise.

Credit risk is the challenging one. The bond rating agencies are of some help, but as we saw in 2008, they cannot be blindly relied on. Anyway, I think that a AAA or AA rating for a government doesn't mean the same thing as a AAA or AA for a corporation. The nature of the credit risks are different and I don't think that they are directly comparable.

FWIW there are tables of default probabilities for each credit rating grade at various time horizons. These are based on experience, and assume that the future will resemble the past, not a bad assumption when other information is lacking, but one which requires sensitivity analysis as well. I think that these are generally useful for corporations, but not for governments, as there have been too few government defaults to estimate the rates reliably -- at least in developed countries like Canada.

You may have seen the MacDonald-Laurier Institute' report on provincial solvency, but just in case, let me point to Tables 9 to 11, which summarizes historic defalt rates for different credit rating scores. (The rest of the report is not very useful in my opinion, except perhaps for Appendix B.) The problem, once again, is that these are for corporate bonds and it is not clear to me that they would apply to government bonds. Still, they are a starting point.

You didn't mention liquidity risk. I assume that this is because you plan on holding to maturity.

George
The plural of anecdote is NOT data.

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Re: Jason Zweig

Post by Taggart » 14 Sep 2013 04:35

Another good read from Jason Zweig:

---------------------

Why the Dow—Quirks and All—Is Beating the S&P 500

This coming week, the dowager gets a makeover. Here's why it's still relevant.

----------------------

You'll probably need the google link below to access it

https://www.google.ca/#q=Why+the+Dow+Is ... +S%26P+500

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Re: Jason Zweig

Post by Peculiar_Investor » 18 Jan 2014 01:59

Staying up late to beat Taggart to the punch :wink: Yet another good read from Jason Zweig:

---------------------
New Warnings From an Investing Pioneer

Nowhere to run, nowhere to hide — and no one to get unbiased advice from.
----------------------

You'll probably need the google link to access it Google search for New Warnings From an Investing Pioneer.

My takeaways to contemplate.
Jason Zweig wrote:For some forthright suggestions on how investors should think about today’s markets, I turned to investing pioneer Dean LeBaron, one of the most original and open-minded financial thinkers I know of. His motto has long been: “Look for the questions that are not being asked.”
Hmmm. What would those be? What hasn't been printed in the media lately or discussed on FWF?
For decades, the name of the game for investors has been to make as much money as possible. From now on, Mr. LeBaron thinks, the prime directive will be to “lose as little money as possible.”

He warns, “If we are in a transition period, then the person who is in the most danger is the one who has recently done well, because he’s done well on things that are about to change.”
Reminds me of my hockey playing days and Walter Gretzky's advice to Wayne "skate where the puck's going, not where it's been".
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Re: Jason Zweig

Post by DenisD » 18 Jan 2014 03:04

Hmmm ... you mean I should buy all the shorted companies in the 2014 Hedge Fund contest? :shock: :D

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Re: Jason Zweig

Post by AltaRed » 18 Jan 2014 13:17

Dogs of the Dow? Dows of the TSE? Consumer Staples? There is little doubt in the merit of becoming more defensive, especially in sectors that have had a good run.
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Re: Jason Zweig

Post by Peculiar_Investor » 15 Mar 2014 09:38

Some thought provoking takeaways from today's article, The Bull That Got Away -- How investors can keep their emotions from dominating decision-making. (paywall)
Jason Zweig wrote:Psychologist Daniel Kahneman, who won the Nobel Prize in economics in 2002, likes to say that one of the keys to investing successfully is properly anticipating your regret.

<snip>

"Some investors have an overwhelming, self-defeating desire to adjust their asset allocation based on recent past results," says Frank Armstrong, president of Investor Solutions, a financial-advisory firm in Miami. "While markets are reasonably efficient, many investors are hopelessly inefficient."
The Kahneman quote resonates with the general vibe from FWF posters who've been around through 2009-09 and through to now. From my point of view, five years after the financial crisis it does seem that those events and our reactions seem to be fading further from view, at least from those participating on FWF. After all, we are a self-selecting group.
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Re: Jason Zweig

Post by George$ » 16 Mar 2014 06:38

WSJ links don't work for me - this did
Jason Zweig - Haunted by the Bull That Got Away
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Re: Jason Zweig

Post by Norbert Schlenker » 16 Mar 2014 13:56

Kahnemann via Zweig (and P_I) wrote:properly anticipating your regret
Yes, yes, yes.

Investing conversations back in 08-09 were all about the regret of losing money, of deferring retirement, of fear. The typical investing conversation today, and I just had one this morning with an old friend, is all about the regret of missing out on a market that's nearly tripled off that near-death experience. Now it's the regret of not making money, of not keeping up, and lo and behold still deferring retirement. It's rear view mirror thinking.

Make a plan when you're calm and rational. Stick to it when you're not. Realize that there will still be regrets, no matter what.
Nothing can protect people who want to buy the Brooklyn Bridge.

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Re: Jason Zweig

Post by parvus » 16 Mar 2014 20:29

Yes, agreed. Make a plan and stick with it. I did nothing in 2008-2009. I would have invested more, had I had the free cash flow, but I didn't. But I didn't sell anything either.
Wovon man nicht sprechen kann, darüber muß man schweigen — a wit
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Re: Jason Zweig

Post by AltaRed » 16 Mar 2014 20:50

parvus wrote:Yes, agreed. Make a plan and stick with it. I did nothing in 2008-2009. I would have invested more, had I had the free cash flow, but I didn't. But I didn't sell anything either.
I agree with sticking with the plan. I think we all know folks personally who bailed and only recently are recognizing they missed the train. I did some swapping for tax loss harvesting* benefits back then but was overall a net buyer during that period.

* At the risk of being pompous, that benefitted me in the near term to offset capital gains since then including (but not enough) to cover an RE sale last year. Alas, I will pay the price when I eventually have to sell (or my estate will have the joy of the tax bill).
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Re: Jason Zweig

Post by Peculiar_Investor » 13 Sep 2014 10:05

Not sure if one or the other, or both, are behind the WSJ paywall, but IMHO these two articles are worth the read Charles Munger: Secrets of Buffett’s Success? - MoneyBeat - WSJ and the follow-on A Fireside Chat With Charlie Munger - MoneyBeat - WSJ.

A few nuggets worthy pondering about yourself
he added, “I think we have had a temperamental advantage: Warren and I know better than most people what we know and what we don’t know. That’s even better than having a lot of extra IQ points.”

Mr. Munger continued: “People chronically misappraise the limits of their own knowledge; that’s one of the most basic parts of human nature. Knowing the edge of your circle of competence is one of the most difficult things for a human being to do. Knowing what you don’t know is much more useful in life and business than being brilliant.”
Might the answer to this question help in the discussion about Something my wife can manage.?
You have to strike the right balance between competency or knowledge on the one hand and gumption on the other. Too much competency and no gumption is no good. And if you don’t know your circle of competence, then too much gumption will get you killed. But the more you know the limits to your knowledge, the more valuable gumption is.
Seems like very prudent advice to me.
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Re: Jason Zweig

Post by zinfit » 20 Sep 2014 21:13

Peculiar_Investor wrote:Staying up late to beat Taggart to the punch :wink: Yet another good read from Jason Zweig:

---------------------
New Warnings From an Investing Pioneer

Nowhere to run, nowhere to hide — and no one to get unbiased advice from.
----------------------

You'll probably need the google link to access it Google search for New Warnings From an Investing Pioneer.

My takeaways to contemplate.
Jason Zweig wrote:For some forthright suggestions on how investors should think about today’s markets, I turned to investing pioneer Dean LeBaron, one of the most original and open-minded financial thinkers I know of. His motto has long been: “Look for the questions that are not being asked.”
Hmmm. What would those be? What hasn't been printed in the media lately or discussed on FWF?
For decades, the name of the game for investors has been to make as much money as possible. From now on, Mr. LeBaron thinks, the prime directive will be to “lose as little money as possible.”

He warns, “If we are in a transition period, then the person who is in the most danger is the one who has recently done well, because he’s done well on things that are about to change.”
Reminds me of my hockey playing days and Walter Gretzky's advice to Wayne "skate where the puck's going, not where it's been".
With all the money that central bankers have pumped into the system and the very low interest rates the obvious question is were is the inflation?

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Re: Jason Zweig

Post by zinfit » 20 Sep 2014 21:13

Peculiar_Investor wrote:Staying up late to beat Taggart to the punch :wink: Yet another good read from Jason Zweig:

---------------------
New Warnings From an Investing Pioneer

Nowhere to run, nowhere to hide — and no one to get unbiased advice from.
----------------------

You'll probably need the google link to access it Google search for New Warnings From an Investing Pioneer.

My takeaways to contemplate.
Jason Zweig wrote:For some forthright suggestions on how investors should think about today’s markets, I turned to investing pioneer Dean LeBaron, one of the most original and open-minded financial thinkers I know of. His motto has long been: “Look for the questions that are not being asked.”
Hmmm. What would those be? What hasn't been printed in the media lately or discussed on FWF?
For decades, the name of the game for investors has been to make as much money as possible. From now on, Mr. LeBaron thinks, the prime directive will be to “lose as little money as possible.”

He warns, “If we are in a transition period, then the person who is in the most danger is the one who has recently done well, because he’s done well on things that are about to change.”
Reminds me of my hockey playing days and Walter Gretzky's advice to Wayne "skate where the puck's going, not where it's been".
With all the money that central bankers have pumped into the system and the very low interest rates the obvious question is were is the inflation?

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Re: Jason Zweig

Post by Mike Schimek » 20 Sep 2014 22:31

With all the money that central bankers have pumped into the system and the very low interest rates the obvious question is were is the inflation?
In the stock market!

:P
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Re: Jason Zweig

Post by zinfit » 20 Sep 2014 23:50

Mike Schimek wrote:
With all the money that central bankers have pumped into the system and the very low interest rates the obvious question is were is the inflation?
In the stock market! I suspect that is the a good part of the answer. I figure a big aging population is another factor. I am 69 and I just don't have the shopping spirit that I had 20 years ago. I do suspect my group is driving up the cost of healthcare.



:P

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Re: Jason Zweig

Post by Taggart » 27 Apr 2015 16:16

A few weeks ago, Jason Zweig wrote an article titled Would Benjamin Graham Have Hated Index Funds?

What is surprising to me that Zweig did not include in the article Graham's 1963 speech in San Francisco where in parts of that speech Ben seemed to endorse investing in something similar.

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Re: Jason Zweig

Post by Bylo Selhi » 27 Apr 2015 16:37

Taggart wrote:What is surprising to me that Zweig did not include in the article...
Why? He devotes most of his article to quotes that confirm Graham's acknowledgement and even endorsement of indexing. His distinction between “defensive” and “enterprising” investors nicely captures what to me is the gist of the debate between the indexing and active factions on FWF.

What puzzles me is Zweig's column opener, "My Intelligent Investor column this weekend looks at the question of whether the rush of money into index funds could undermine the efficiency of markets." Where in this article does he (or Graham for that matter) deal with that old canard?
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Re: Jason Zweig

Post by Peculiar_Investor » 26 Aug 2015 08:49

An oldie, from 2001, that I'd suggest is well worth the read -- Fat Tails, Thin Ice | Jason Zweig
A few excerpts:
• “…the real lesson of the late 90s mania and the 2000 massacre is that certainty is every investor’s worst enemy. The only universal truth that the past offers about the markets is that they will surprise us in the future. And the corollary to that law is that the markets will most brutally surprise those who are most certain what the future holds.”
• “Being right is the enemy of staying right—partly because it makes you overconfident, even more importantly because it leads you to forget the way the world works.”
• “If you have centered your practice on your ability to forecast markets…then you have positioned yourself on thin ice in a world of fat tails.”
These excerpts seem as relevant today as they were in 2001.

FWIW, a tip of the hat to The Irrelevant Investor blog which lead me to find this gem.
The Irrelevent Investor wrote:Since turnover is negatively correlated to investment performance, no post that stand the test of time will include trade setups or forecasts. In my writing, nothing is particularly actionable, but hopefully it is thought provoking because for 99% of investors, more good comes from thinking then from acting.
I've found the last statement particularly true and helpful to me as an investor. Most of my investing efforts are spent researching and reading and generally lead me to do nothing in particular other than gain knowledge and information. It can sometimes becoming frustrating expending the effort and then taking no specific investment action. But it has definitely served me and my investments well.
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