Gold bullion — physical gold has outperformed gold-mining company shares over the past three years by one of the largest margins in decades. Gold recently hit a new all-time high above $2,200 an ounce, while the PHLX Gold/Silver Index XAU is below where it stood three years ago — as you can see in the chart below.
Investors need not waste time worrying about what they can’t control, like market volatility and its many causes, because there is a greater threat to their financial success and it comes from within.
The internal battle we face is a war between our primitive minds and our current reality, where some of these primal survival skills are outdated, if not useless. The cognitive biases that kept the species alive, can lead to making less than optimal financial decisions – especially if we are unaware of them.
According to James Clear (Atomic Habits), much of our behavior is rooted in reducing uncertainty, relieving anxiety, and winning social acceptance/approval. At the heart of these inclinations is the goal of propagation of the species. Our cognitive biases encourage us to be part of a tribe to stay safe (and alive) in order to multiply. But for a modern-day investor, the greatest success comes from taking risk, and going against the crowd’s greed or fear. Understanding these cognitive biases is crucial to overriding them and not mistaking them as “gut instincts.”
The Last Experience Might Not Be Replicated
Our ability to not repeat mistakes is the Recency Effect at work, which is how we learn not to touch a hot stove. We associate the last experience in a given situation as one that will be replicated. But, not all situations have as certain an outcome as this. When it comes to investing, this bias leaves investors believing that the next experience they have will be the same as their last (for better, or for worse). This can lead investors to be overly fearful, sitting in cash at the worst time; or, investing aggressively, thinking the next new high is on the horizon. However, just because it happened last time isn’t a strategy.
Fear is Instinct, Not Intuition
Survival instincts have us place more emphasis on negative thoughts and perceived threats. This Attentional Cognitive Bias even shapes the way we remember experiences. We are more likely to remember the magnitude of the pain of loss than the highs from the joy of a win. When combined with the Recency Effect, it is a potent cocktail that keeps once-bitten shy investors perpetually sitting on the sidelines, waiting to re-enter, and never able to jump back in. The result is missed opportunity and wasted years that could have been spent compounding investment results to build wealth overtime.
Surrounded by Information and Agreement Clouds Judgment
A cognitive bias made particularly potent in our modern era is Availability Heuristic, which places greater importance on information that is readily available (e.g., virally spread) regardless of its merit. In addition, algorithms serve up a daily diet of content that echoes what we already believe. And this Confirmation Bias creates confidence that we are right because there is a whole tribe of people in agreement. This is how irrational exuberance takes hold, leading investors to gorge en masse on stocks that cost more than they are actually worth.
Dial Back on Emotion
The only way to handle our modern day investment challenges is to dial back on the very thing that helped keep us alive – our emotional response to stimuli. Fortunately, there is data going back to the 1920s that shows how different types of investments have performed over various time frames (with stocks being the strongest performer). We can look to volatile times in the market’s history and see now that these were buying opportunities for long-term investors. While past performance is no guarantee of future results, probability is all an investor can look to.
Still, on an emotional level it can be difficult to make the decision to invest. This is where automation and technology can be used to establish a systematic investment plan to buy every month, regardless of market performance. Automation frees investors from the angst of decision making, or trying to time their investments. It offers a reprieve against the onslaught of information (and misinformation) that triggers our cognitive biases.
Most importantly, it makes it easier to tune out the noise, resist where our primitive minds would lead us, and learn to get comfortable with the uncomfortable. And perhaps this is the greatest survival skill of all.
Dave Lutz Jones Trading European stocks just marked their best quarter in a year as traders remained optimistic about the economy and that interest rates would come down soon. The spotlight is turning to corporate earnings to drive the next leg of the rally in the region’s shares. Analysts expect profits to rebound 4% in 2024 after slumping last year, according to data compiled by Bloomberg
4. Silver Following Gold Break-Out
SLV moves above Dec 2023 levels.
5. Gold Miners Have Been Lagging Gold but Technicals Changing
10. 8 Things I Managed to Get Right When I Retired
Psychology Today Meg Selig
What did that path look like? Here is a rough account of my retirement journey:
1. I had enough money. I was fortunate to build my retirement on a solid financial foundation. I say “fortunate” because I was not money-savvy during most of my early life. Just by luck, my various jobs in education and counseling were all part of the same healthy public school retirement system. When I was ready to retire after over 32 years in education, a traditional pension was waiting for me. Thanks to my union, the National Education Association (NEA), I was able to escape the burden of money worries that contribute to anxiety and depression among retirees and workers alike.
2. I had a sense of purpose. While I loved my last, longest, and best job as a counselor at our local community college, I had an intense desire to write a book on successful habit change. I already was teaching a short personal development course inspired by the loss of a wonderful aunt who had died from lung cancer because she couldn’t stop smoking cigarettes. I figured it was now or never for my writing ambitions. But would it work out? Freelance writing is a chancy business. I’m not a risk-taker nor particularly entrepreneurial. What would I do with myself if I had no job or meaningful preoccupation? I sensed that, for me, a sense of purpose would be essential to a happy retirement. (As it turns out, many retirees feel the same way.)
3. I retired gradually. To hedge my bets, I decided to continue to work part-time at the college after retirement. I checked with my supervisor; luckily, he was happy that I could still be a resource for the counseling department even after I took the retirement plunge. I would be able to teach short courses part-time, plus I could help out during registration. I worked part-time for about four years while I labored on the book that would become Changepower! 37 Secrets to Habit Change Success. Nowadays, retiring gradually is often dubbed a “phased retirement.” A Yahoo! Finance article predicts that phased retirements will be the wave of the future; if so, I was just slightly ahead of my time.
4. I stayed in touch with my work friends. I still meet regularly with my beloved colleagues from the college. And “beloved” is not too strong a word to describe how I feel about my fellow and sister workers. Two colleagues and I have had monthly lunches together for at least 10 years. My wonderful supervisor of over 20 years throws a yearly holiday party that I would not miss for the world. Here, I reconnect with lovely people, catch up, and reminisce.
5. I had a little bit of luck—OK, a lot of luck. With the help of another colleague, I succeeded in finding a publisher for my book. The cream in the coffee was that the publisher linked me to the blogging opportunity here at Psychology Today, a creative outlet that I’ve enjoyed for 14 years and counting. At that point, I retired from part-time work at the college and became a full-time author.
6. I created a helpful structure for my days. Some people nearing retirement probably have a rosy picture of sleeping late and then doing whatever they want whenever they want. More power to them. But oddly enough, research indicates that a predictable and pleasant daily structure is linked with both happiness and mental health. My weekday schedule was built around my goals of health, purpose, pleasure, and relationships. For the curious, it usually includes breakfast, 20-30 minutes of exercise, business details and email, lunch with friends or with the New York Times crossword puzzle, writing, watching Jeopardy, dinner, reading, or TV.
7. I am grateful to have a solid support system of family and friends. I have a supportive partner who loves to cook. He cooks dinner! Think of the time I save. Although my family lives elsewhere, we speak frequently and visit regularly. I Zoom with my granddaughter once a week. I have regular lunches or coffees with close friends.
8. I make room for volunteer work, fun, and mini-adventures. While our interest in big travel has waned as we’ve aged, we still enjoy one-tank trips to various spots near home and are dedicated in-town tourists.
2. History of S&P Returns After Back to Back 10% Quarters
From Dave Lutz at Jones Trading Bespoke notes the S&P just had the second straight quarter of double-digit percentage gains. That hasn’t happened in 12 years.
10. Stephen A. Smith says opportunities are ‘the only thing that should be equal,’ not outcome
Opinion by Alexander Hall
Stephen A. Smith, an ESPN commentator known for his hot takes on sports and politics, sounded off on the idea that many Americans, including those in politics, expect equality of outcome rather than opportunity.
During an appearance on the PBD Podcast hosted by Patrick Bet-David, Smith called upon Americans to accept the fact that “people who produce more ultimately end up more successful than those who don’t.”
He went on to observe, “We just have too many people in this world, especially on Capitol Hill as well, that want to give this impression or want to literally go about the business of changing that and making things equal. The only thing that should be equal is opportunities. But what you receive from your level of production is on you.”
His speech on meritocracy began earlier in the podcast when he said, “One of the things that I have a problem with when I look at things that are transpiring in this country, you can’t in the same breath talk about capitalism, talk about how it’s equal opportunity that we want, but everybody doesn’t deserve the same, it’s about your level of production. Some people are high-end earners, some people are high-level producers and stuff. And you know, they’re getting treated, they might earn more than somebody that just don’t have that skill set. That’s the world we’re living in.”
By contrast, the commentator argued that there are “a lot of people here that want to act as if ‘You know what? We’re after a different culture. We want everything the same for everybody.’” To those people, he declared, “You’re lying. You are lying.”
Smith then recalled he and his mother’s humble origins: “I grew up in the streets of Hollis, Queens, New York City. My mother was on welfare for a little while. And it killed her, killed her.”
“Wow,” Bet-David replied.
The sports commentator added “She was sick to her stomach that we had to get government cheese and bread and all of this stuff, and she got the hell off of it as soon as she possibly could. And I know that when she sent me out there to work, she didn’t send me out there to be like just anybody. She sent me out there to be the best that I can be. Why? So I can earn more for myself than the average typical person, and most people in a capitalistic society believe in that.”
Smith went on to reiterate his earlier critique, “When you have folks walking around, like everybody is supposed to be the same — that’s nonsense. You’re lying to the American public, you’re lying to yourself, it’s not true. And in the end, people who produce more ultimately end up more successful than those who don’t.”
He added, “Jimmy Johnson, the former coach of the Dallas Cowboys said it best, ‘I will be very consistent in my inconsistencies. Those who produce will be treated better than those who don’t.’ And I appreciated his candor. Whether you like it or don’t, that’s the reality.”
At an aggregate level, companies in the S&P 500 Index excluding financials are holding cash at levels that are near 10-year highs. This could fuel stock buybacks, M&A activity or dividend payments. For instance, over the last few months, there has been an increase in M&A activity among some larger oil and pharmaceutical companies, deals that could help drive long-term earnings growth. Companies have also been increasing their dividend payouts, which contribute to total stock returns. Recent high-profile examples are Meta and Salesforce announcing their first-ever dividends, which bode well for capital allocation discipline.
Capital expenditures will no doubt be on the rise to meet the needs of technology companies, including the large investment in data centers required for AI, but also for the infrastructure investment needed to support the reshoring of supply chains. This investment should translate into steady cash flow growth for a broad array of companies across many sectors.
3. Funds that Systematically Trade Options has Grown 51% in One Year
Dave Lutz Jones Trading Goldman says AUM of funds that systematically trade options has grown 51% year-over-year…
4. Another EV Stock Falling…Battery Maker CATL -15% One-Year
5. Uber Ride Since Covid
Vitaliy N. Katsenelson We bought Uber a few months before the pandemic. (I wrote about it here). Uber’s stock went up 30% right after we bought it and then declined around 80% within months (the shutdown economy was not good for the ride-sharing business). As the economy started to reopen, the stock went up a lot (we almost doubled our money on the original purchase). Then it more than halved. Two years later, it has tripled from that point.
Barrons By Paul R. La Monica Even if you assume that TMTG revenue ended the year at $6.8 million—double its first nine months—the stock would be valued at a price-to-sales ratio of more than 1,200. Meta, by comparison, trades at nine times 2023 sales, while Snap goes for four times trailing revenue. Shorting the stock looks tempting, but that is also risky. Short sellers borrow stock and sell it, aiming to buy it back at a lower price. Annualized borrowing costs are now steep, however, averaging 150%. And with nearly 12% of shares held short, the stock is vulnerable to a squeeze, whereby a stock can pop as short traders are forced to liquidate shares. According to research firm S3 Partners, DWAC/DJT shorts have lost $158 million so far this year, including $93 million in March.
Chartr Blog While artificial intelligence dominates the headlines of business and tech newspapers around the country, America’s energy industry has been quietly thriving. Indeed, 3 weeks ago the US Energy Information Administration (EIA) reported that the US had produced the equivalent of 12.9 million barrels of crude oil and condensate per day last year, 28% more than the world’s previous top producer, Russia, and 33% more than even the oil-rich Kingdom of Saudi Arabia.
And, it’s not just oil.
Thanks to hydraulic fracturing (or fracking), a wave of previously inaccessible, or at least uneconomical, oil and gas reserves are now being extracted at record speed. Indeed, as recently as 2015, America’s liquefied natural gas (LNG) never left the country: now it’s a key component of one of the country’s most geopolitically important exports.
Uncomfortable truth: While America’s fossil fuel output is breaking records, sensors in the world’s oceans are also reading temperatures that we’ve never seen before, leaving researchers and scientists “astounded”. www.chartr.com
8. Market Keeps Rising But Most Investors “Expect Correction” and $6 Trillion in Cash
From Callum Thomas Blog @Callum Thomas (Weekly S&P500 #ChartStorm) Correction Risk? Yet, interestingly enough, apparently most people expect a correction. Perhaps they expect it to be a small bump in the upward sloping road — a dip/pullback to buy, rather than something to hedge.
1. Market Returns Around End of Fed Rate Hiking Cycle
JP Morgan Guide to Markets
2. Record High Liquidity
Torsten Slok, Ph.D.Chief Economist, Partner One way to measure liquidity is to add bank reserves and money market assets, see chart below, which shows that there is record-high liquidity to push stock prices higher and credit spreads tighter. In particular, once the Fed starts lowering interest rates, some of the $6trn in money market funds is likely to find its way into stocks and credit.
3. Small Cap Stocks Not Joining Rally Yet.
Micro Cap Stocks +2% 2024
Small Cap Stocks that make money IJS-S&P small cap 600 -1.5% 2024
4. Apple Biggest Underperformance vs. S&P Since 2013
5. Tesla vs. S&P Chart
6. S&P Global downgrades outlooks on five regional US banks to ‘negative’
By Reuters The S&P Global logo is displayed on its offices in the financial district in New York City, U.S., December 13, 2018. REUTERS/Brendan McDermid/File Photo Purchase Licensing Rights, opens new tab March 26 (Reuters) – Ratings agency S&P Global on Tuesday downgraded five regional U.S. banks to due to their commercial real estate (CRE) exposures, in a move likely to reignite investor concerns about the health of the sector. The ratings agency downgraded First Commonwealth Financial (FCF.N), opens new tab, M&T Bank (MTB.N), opens new tab, Synovus Financial (SNV.N), opens new tab, Trustmark (TRMK.O), opens new tab and Valley National Bancorp (VLY.O), opens new tab to “negative” from “stable,” it said. “The negative outlook revisions reflect the possibility that stress in CRE markets may hurt the asset quality and performance of the five banks, which have some of the highest exposures to CRE loans among banks we rate,” S&P said. Representatives for the banks did not immediately respond to request for comments outside business hours. As of Tuesday, S&P had negative outlooks on nine U.S. banks, or 18% of those it rates, it said, adding most of those ratings “relate, at least in part to sizable CRE exposures.” The company rates a range of banks of varying sizes. S&P Global downgrades outlooks on five regional US banks to ‘negative’ | Reuters
KRE Regional Bank ETF vs. S&P sideways along lows.
But starting in mid-January, the year-over-year increases of the listing price shrank and then started hobbling along the 0% line, and in the most recent week, the listing price was below a year ago (-0.6%), as sellers face more competition from other sellers and fewer buyers. This year-over-year weakness in the listing price is an indicator that the median sold price through the spring selling season will also see year-over-year weakness. In its note sent out two days ago, Realtor.com explained: “It marks the first week of year-over-year price declines since July 2023, attributed to mortgage rates hovering around 7% and an ongoing increase in available for-sale homes, notably an upsurge in affordable listings spotlighted in the February Realtor.com Housing Trends Report. With mortgage rates nearly returning to 7% in February, many potential buyers are postponing their purchasing plans in hopes of securing lower rates. Consequently, lower buyer competitions exerted downward pressure on prices.”
Prices were below their 2022 peaks in 9 metros of the 20 metros in the Case-Shiller index (% from their respective peak in 2022, month of peak):
Jack Ablin Cresset Magnificent Seven insiders have unloaded nearly $13 billion of stock over the last six months, the most selling in over a year. Michael Dell unloaded nearly $340 million of his eponymous stock earlier this month. This marked increase in insider selling may be an indication that the recent tech stock rally, fueled by excitement over generative AI, might face headwinds.
9. Daniel Kahneman Father of Behavioral Economics Dies
Morningbrew
Daniel Kahneman, the father of behavioral economics, died yesterday at 90 years old. He’s best known for applying psychology to economics and uncovering biases and mental shortcuts that make people act irrationally, as he chronicled in his best-selling book Thinking, Fast and Slow. Kahneman, along with his long-time collaborator and friend Amos Tversky, developed “prospect theory,” or loss-aversion theory, which earned him the Nobel Prize in Economics in 2002 (which he shared with fellow economist Vernon Smith). The idea is that people value losses and gains differently, so we feel more bad about losing $100 than we feel good about making the same amount. He applied this theory to investors, who had previously been considered rational decision-makers. It shows up elsewhere, too—for example, golfers putt better when they’re facing the loss of a stroke than when they might gain one. A few other biases he identified that are probably buried in your brain (whether or not you learned them in Psych 101):
The “peak-end rule” that people remember an experience primarily based on how they felt at its most intense moment and the final part of it. It’s why you consider a whole vacation good if the last day was good—or the opposite.
The conjunction fallacy where people erroneously think the probability of two things being true is more likely than just one thing, which the famous “Linda the Bank Teller” problem illustrates.
For further reading: Kahneman and Tversky were the center of Michael Lewis’s 2016 book, The Undoing Project.—MM
Kierkegaard’s rules for a more authentic, meaningful life.
Søren Kierkegaard, a Danish philosopher, theologian, and poet is considered by many to be the father of existentialism. His work focuses on individual experience and the importance of personal choice and commitment, and his philosophy offers insights into living authentically and finding fulfillment amidst the distractions and pressures of the modern world.
In the course of Kierkegaard’s writings, instructive themes emerge for how to navigate life’s complexities with integrity and purpose. Here are four:
1. Cultivate Self-Awareness and Introspection
Kierkegaard emphasized the importance of self-awareness and introspection as foundational to understanding one’s own existence and making authentic choices. He argued that true self-knowledge requires a deep and honest examination of one’s thoughts, feelings, and motivations, involving questioning assumptions and beliefs inherited from culture and upbringing, a theme echoed in his fascination with Socratic self-knowledge.
In early autobiographical reflections, Kierkegaard acknowledged an enjoyment of attention and recognition as a personal weakness, exemplifying the kind of self-scrutiny he advocated. In The Sickness Unto Death, he explored despair as arising from a lack of self-awareness and the failure to live up to one’s own ideals. Kierkegaard’s struggle with melancholy and sharp self-critique is evident in his journals and correspondences, where he often reflected on his own shortcomings and the nature of existence. Introspection following his broken engagement with Regine Olsen contributed to many of his profound insights about the self and its complexities. Elsewhere, he examined the role of self-awareness in authenticity.
2. Embrace Uncertainty and Ambiguity
Kierkegaard’s philosophy also challenges us to embrace uncertainty and ambiguity. He contended that life’s complexities cannot be reduced to simple answers or solutions. Instead, we should be willing to live with paradox and contradiction, remaining open to new ideas and perspectives. This openness requires a willingness to change our minds in the face of new information, a stance that stands in contrast to the search for absolute certainty. Kierkegaard critiqued a purely aesthetic or contemplative conception of self-knowledge and emphasized the importance of engaging with life’s uncertainties actively and responsibly.
Kierkegaard employed a writing technique he called “indirect communication” to illustrate the complexity of existence and the limitations of direct knowledge. He did so in several ways, especially by publishing writings in which fictitious authors engaged in dialectical dialogue, each representing distinct perspectives and worldviews. He also used irony and paradox to provoke readers to think beyond surface-level understanding. And he used a technique he called “double reflection” in which he presented ideas in a way that required readers to reflect not only on the content of the text but also on their own existence and relationship to the ideas presented.
Kierkegaard often refused to conform to societal expectations, as seen in his critique of the established church and resistance to an academic career. He challenged prevailing views of his time, advocating for a personal leap of faith rather than adherence to systematic or institutionalized belief systems.
3. Take Responsibility for Your Life and Choices
A central tenet of Kierkegaard’s philosophy is the imperative to take responsibility for one’s own life and choices. He argued that individuals cannot blame their circumstances or external factors for their problems. Instead, they must own their thoughts and actions, acknowledging their weaknesses and flaws. This process of self-improvement and growth is essential for overcoming despair and achieving a state of self-acceptance. Kierkegaard’s emphasis on the teleological view of the self and the quest for narrative unity highlights the ongoing nature of this responsibility.
Kierkegaard’s insistence on personal responsibility was a recurring theme in his work. He believed that individuals must take responsibility for their own existence, choices, and the meaning they ascribe to their lives. One might contend that his decision to pursue a writing career over a more conventional path was a kind of existential reflection of this theme. His works, including Either/Or and The Concept of Anxiety, explore the necessity of making choices and the ethical implications of those choices.
4. Accept Your Own Mortality
Finally, Kierkegaard urges us to embrace our own mortality, recognizing that life is fleeting and impermanent. Accepting the uncertainty of life and the inevitability of death can lead to a sense of peace and contentment that transcends fears and anxieties. This acceptance encourages living in the present moment, fully engaging with the richness of life’s experiences. Kierkegaard’s perspective on faith and the presence of God deeply shaped his conception of acceptance, as he suggested that a deeper sense of purpose and meaning can be found in our utter dependence upon God.
Kierkegaard’s reflections on the finite nature of existence are central to his thought. In Concluding Unscientific Postscript, he discussed the significance of an individual’s subjective relationship to truth, including an awareness of mortality. Kierkegaard’s health issues and early deaths in his family, including of his father and several siblings, influenced his preoccupation with mortality and the urgency of living authentically. Kierkegaard’s personal experiences with loss and contemplations of death are reflected in his philosophical works, where he emphasized the importance of living in the present and making meaningful choices in the face of life’s transience.
Kierkegaard’s philosophy remains profoundly relevant, providing valuable insights into the human condition.
