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Quotes From – The Battle of Investment Survival, by Gerald M Loeb

  
  Education
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LoebHere are some interesting quotes from The Battle of Investment Survival, by Gerald M Loeb, Simon and Schuster, 1957 (14th printing).

“There are some rules that hold, and my first is to buy only something that is quoted daily and can be bought and sold in an action market daily. The greater the volume of trading and the broader the market in a particular security, the closer to a fair price at a given moment that security is likely to be.”

“In my opinion, the primary factor in securing market profits lies in sensing the general trend. Are we in a deflation or inflation period? If the former, I would hardly bother to analyze most equities.”

“In short, in my opinion everything of an analytical nature covering specific securities should be persistently linked to past market appraisals and set up for use solely to determine future market possibilities.”

“Any program which involves complete investment of all capital at all times is certain to fail unless the amount of it is extremely small.”

“All this suggests the question – are we learning to trade for the quick turn or to invest for the long pull? We are investing for appreciation, and the length of time one holds a position has noting to do with it. I lean towards rather short turns for many reasons. To begin with, experience is gained much more rapidly that way. Short-term investing once mastered has very much more the elements of dependable business than the windfalls or calamities of the long pull.”

“Obviously, our ideas will sound wrong to the most people. Any investment policy followed by all naturally defeats itself. Thus the first step for the individual trying to secure or preserve capital is to detach himself from the crowd.”

Warren Buffett’s Biggest Losses

  
Analysis, Education
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Unless you can watch your stock holding decline by 50% without becoming panic-stricken, you should not be in the stock market.” – Warren Buffett

A good starting point to gauge investment performance is to compare your results against a simple buy and hold portfolio.

While there are certainly ways to improve the performance of buy and hold, there are many more ways to make it much worse.  You have to determine if the effort and actions you take with your portfolio strategy are worth it when compared to this simple (but not easy) alternative.

Investors generally fare much worse than buy and hold so this is an important decision for the average investor to consider.

When you hear about the average long-term gains of 9-10% in the stock market you must remember that those returns contain every single type of market environment. That means high valuations, low valuations, high interest rates, low interest rates, high inflation, low inflation, bubbles, recessions, booms, busts and everything in-between.

It’s an all-inclusive number that contains the good and the bad. (more…)

15 Biggest Insurance Claims in Modern History

  
Analysis, Education
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Biggest Insurance Claims

15. Most-Expensive Pet

The most-expensive claim stood at $22,000 and it was in 2010 for feline renal surgery. Apparently, the pet as not a pedigree feline, but just a good-old gutter cat that somebody had decided to insure.

14. Rowan Atkinson

The British actor that is famous for his role as Mr. Bean had the most expensive automobile-insurance claim in history. The actor crashed his £640,000 McLaren F1, resulting in a payout by his insurance company for £900,000 in repairs. The insurance company had agreed to pay out that much since the price of that car had risen to in the region of £3.5 million when the accident happened in 2011. Prior to this, the highest payout by an insurance company for a car had stood at just over £300,000.

13. Bugatti Veyron

In 2007, engineers crashed 2 Bugatti Veyrons while running tests for a prototype. Each of the vehicles was worth over $800,000.

12. Ice Slip 

In 2012 in Virginia one winter a resident of an apartment building went outside and slipped on the ice and the snow. A few bones were broken in the resident’s legs and complications led to the person being amputated of their lower legs. The claim was settled for a payout in compensation of $7.75 million because the landlord of the building had failed to clear the ice and snow in front of the building. He was therefore held responsible and it stands as the highest payout. (more…)

A Short Note

  
Analysis, Education
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“Jack Bogle likes “cheap” index funds. I don’t know why as they are risky and expensive considering the heavy losses, limited “work” involved and lack of skill. If a firm “manages” $1 trillion and charges “only” 20bp, that is $2 billion PROFIT every year even when returns are negative and retirement plans are wrecked! Lose investors’ hard-earned money? It’s the market’s fault not theirs, right? Get someone to make a list of stocks for a benchmark, buy them, and then endure many years below the high water mark! Who would invest in such a dangerous product as an index fund? No-one with fiduciary responsibility.”

Links For Traders -Investors

  
Education, LINKS
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Interesting reads:

Clever take on how fraudulent the banking system and Wall Street was and still is 15 Lessons from the Movie The Big Short

  
  Education
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Embedded image permalink15 Trading Lessons from the The Big Short

  1. It’s possible to be right about a market move, but your timing can be too early.
  2. If you trade too big, you can lose all your capital before you have the time to be proven right.
  3. AAA agency ratings are more to make their clients who sell bonds happy than to protect investors.
  4. In markets that are not liquid, you can get in trouble by being right but your assets not reflecting it with a big move.
  5. When there is no risk of ruin to bankers and mortgage brokers they will risk the ruin of their companies and the world economy in pursuit of quick and easy money.
  6. When there is little ‘skin in the game’ bankers and mortgage brokers take risks that they are not held accountable for.
  7. Macro traders have to be able to take a lot of heat and losses on their positions before they are right.
  8. Hedge fund investors want consistent returns on their money and not drawdowns. They are quick to pull their money out during a losing streak.
  9. You want to have a large risk/reward ratio on your trades. Betting $1 for a chance to make $20 is a good trade.
  10. There is a lot of fraud in the financial world.
  11. Financial fraud is almost never prosecuted in the banking world.
  12. The SEC has little oversight in the banking industry.
  13. Bailouts can cause you to lose on a trade you would have made money on.
  14. You have to take your profits off the table while they are available.
  15. “Whenever you find yourself on the side of the majority, it is time to pause and reflect.” – Mark Twain

The best investors (and traders) are modest

  
  Education
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Let’s face it you suck at investing. Your advisor sucks at investing too.  You have all seen where monkeys picking stocks or throwing darts at a list can do better than many if not all advisors.

But Quartz is out with their annual analysis of just how bad you suck at this game.  If you had picked the best stock to buy every day you could have turned $1000 into $179 billion by mid December. That is a 17.9 billion percent return.

Did you even get a 1 billion percent return? How about 1 million percent? 1000%? 100%? If you did not hit a 100% return then you did not get even 4/10 millionths of what was out there. Translation: You suck at stock picking. People like Jack Bogle will use this type of data to tell you that you are wasting your time even trying and that you should just index your portfolio.

Coincidentally he runs a few dollars in an index fund. I find it more interesting when some manager makes a killing and convinces themselves that they are geniuses. No one in this game is a genius. 100% return sucks remember? (more…)

The Secret to Trading Success

  
  Education
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Secret-ASRThe most important thing you must learn in every market cycle  is where the money is flowing. It is flowing into the companies where the earnings are growing. As long as mutual funds have capital in flows instead of net out flows then they must put new money to work investing in stocks. If you want to make your job as a trader much easier then find where the flow is going. Mutual fund managers can not go to an all cash position they can only move money around. A bear market sinks most stocks because managers have to sell everything to raise money to redeem shares. In an uptrend they have to buy stocks with the incoming money flows. Where does this money go? It goes into the sectors and stocks that are in favor due to increased earnings in a sector and individual stocks that are dominating their sector and changing the world in the process. You want the leaders not the has been. You want the best the market has to offer. Where are consumers dollars flowing into? That is where the money is going. What companies have the best growth prospects? The stock can only grow in price if the underlying company does. Mutual fund managers are the biggest customers in the market when they start buying a stock that increases huge demand and price support.

Your job is to follow the big money, shorting in bear markets, going long in bull markets. Following the trend of what is in favor. Do not fight the action, flow with it.

Quit having opinions and start being a detective looking for the smart money, the fast money, the big money and where it is going now.

Links For Traders

  
Education, LINKS
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Chain Links

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Use losers to learn a lesson and strengthen your trade execution

  
  Education
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Losing trades can be the best ‘teacher’ you’ll ever have. However, just as with winning trades, it’s important to note that there will be a normal statistical variance of losing trades within any trading edge. So, you should not fall into the mental trap of thinking that EVERY losing trade you have was a major failure or that it means something is ‘wrong’ with your trading method or trading ability. Sometimes, perfectly good trade setups will fail, as that is just part of the game we call trading, so you just have to accept these trades and move on…assuming that you stuck to your trading strategy and the trade wasn’t taken out of greed, revenge or fear (over-trading).

The losing trades that you NEED to learn from and that you can learn a lot from, are those ‘stupid’ losing trades that you unfortunately did take out of greed, revenge or fear…and I know you know what I’m talking about here. After the trade is finished, you can record in your trading journal what you did wrong and why the trade was a failure; use these types of losing trades as a lesson and dissect what went wrong, you can then use this information to strengthen commitment to sticking to your trading strategy and plan.

The aim here, is to hopefully not make the same ‘stupid’ trading mistake twice, after all, your hard-earned money IS on the line every time you enter a trade. As you learn from ‘stupid trades’ it should help build your confidence because you will begin to see the power of remaining disciplined and consistent in trading, and you will start to see that you CAN trade successfully if you just stop making stupid trades.

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