The Transparent Advisor

by Danno ***BREAKING NEWS*** Stocks go up AND down! The Coronavirus is grabbing all the headlines, including this one, but I would caution you from giving it all the credit for this stock market selloff.  It's not that simple.  The Coronavirus is more like a feather that landed at just the right moment among hundreds of other feathers on the scale that is the markets, tipping the scale the other way.  I don’t have any medical expertise, I can barely take care of myself when I'm not sick.  I would just point you away from cable television, and toward the  CDC website  to increase your knowledge on the topic.   In the investing world, stock market seizures  like this shake out the weak hands, and bring the virtues of diversification to the surface.   There’s a saying commonly restated among investment professionals that “Diversification is the only free lunch in investing.”   In other words, every investment has a risk-reward trade-off, but diversification can disprop

by Danno Global stock markets got their asses kicked over the past 6 business days.  The news is going to spend all kinds of time talking about 3 of the 5 largest point drops EVER in the Dow!!! First of all, no serious working-age investment professional actually uses the Dow Jones Industrial Average for anything.  It's for the nightly local news channels.  It's only 30 companies!  It's best purpose is to allow communication with people who only know enough to reference the Dow.  Any financial professional who references the Dow Jones voluntarily, was born before these guys were cool: Second, those 30 companies are weighted based upon their price-per-share, not on the value of the actual company.  So if 1 company was 2% of the Dow, and they did a 1:5 reverse stock split, the exact same company would have the exact same value to its shareholders, but would suddenly be 10% of the Dow.  You could have the smallest company in the Dow weighted higher than the la

by Danno Presidential election season is once again in full swing, and it’s as embarrassing as ever.   Yes, we landed on the moon 50 years ago, but we still determine the leader of the free world via a popularity contest.  Last time we elected a reality TV star, and this time we'll either put a Socialist, a Communist, or a tech entrepreneur up against him.  American politics is perhaps as divided as it has ever been.  Not coincidentally, the wealth gap between the top 1% and the bottom 90% has never been larger, so much so, that the trust in Capitalism is being challenged.  The last time things were this extreme was in the early 1930's, and the result was that the top income tax bracket jumped from 25% to 63% in 1932, and drifted up to 94% by 1944.   Needless to say, people with money are feeling uncertain about their money, they are talking about it, and there will be numerous investment mistakes made as people try to time the markets around this election. So let's

I think it's so funny how all the talking heads want to fill in the story AFTER the markets have done whatever they have done of late. They can make the story whatever they want it to be, they just weave a story around the news of the day, and they make that "news" or a particular data point or trend into the reason why the markets did whatever they did.  One week the market went up... Why?  Because of the trade war with China.  Next week the market goes down... Why?  Because of the trade war with China.  It's noise, it's almost all noise and almost none of it is actionable.  Reduce the amount of short-term noise that you consume, especially about finance, because there are always a dozen reasons to veer from your financial plan.  It doesn't hurt to be informed, but it hurts when you feel like you  need to take action and "do something".  Zoom out instead, focus on your core competency, and stay the course. Here is some of the best stuff I read l

Choppy week in the markets.  No need to jump into action, as you might have noticed that you lack the requisite crystal ball.  Think longer term, like 5 years, 10 years, or more.  Here are some interesting things I read in the past couple weeks: Taking Social Security Early  by Blair duQuesnay at BlairBelleCurve.com Wealth is What you Don't Spend  by Morgan Housel at CollaborativeFund.com Why Market Timing Can be So Appealing  by Nick Magguilli at OfDollarsandData.com The Wager Revisited  by Adam Grossman at HumbleDollar.com Tech in 2020: Standing on the Shoulders of Giants  by Ben Evans at Ben-Evans.com You Know Less Than You Think  by Steve Rathje at PsychologyToday.com AQR Says to Get Sober About Future Returns  by Julie Segal at InstitutionalInvestor.com Why Competitive Advantages Die  by Morgan Housel at CollaborativeFund.com The State of Democracy Around the World  by Katharina Buchholtz at Statista.com Putting the Next Market Downturn into Perspective