RESOURCES

This fun read was Richard Thaler’s account of his both his own journey and how behavioral economics started as a fringe movement and ended up being widely accepted as more explanatory of how decisions are made in the real world than classical economics.

The most up to date national home value information I found goes through April, and shows a long steep rise in home prices, followed by an inflection even steeper. This is consistent with the bubble paradigm where investment bubbles have steady increases in value culminating in a “blow off top” where greed and fear of missing out takes over to push values to unreasonable levels. I do not know whether houses are in a bubble, but the evidence, including this chart, point to that conclusion.

Quarterly letter with Market update, Personal update, Business update, Personal improvement and book review.

There were two big issues last quarter that captured investors’ attention. The first was interest rates. The second issue that has rightfully held investors’ interest is geopolitics. Sentiment has moved around over the last several quarters. It now has shifted to convinced optimism. Very few people are expecting a recession now, and some have already begun their victory dance, complete with taunting the naysayers.

Stock market valuations have clearly been rising since early 1982. In fact, investors now pay over five times as much as in 1982 for a dollar of cyclically adjusted earnings, and 11% more than in 1929, when economist Irving Fisher declared, “stock prices have reached ‘what looks like a permanently high plateau.’” Indeed. Nearly a century later, have we finally entered a “permanently high plateau”? Are fat pills and algorithms able to do what online commerce and cat videos couldn’t? Readers must make up their own minds. The data hasn’t supported this yet, but investing is all about looking forward. As you do, I hope you look forward to my next article on what current valuations mean for future returns.

This book was a pretty easy read, though at times it felt like a rant and was redundant. On the positive side, he calls out that many investors are not being well served by their brokers or advisors. Many people, especially with very simple financial situations may be able to take care of their own investing needs. He rightly calls out so-called advisors who are actually sales people and who don’t work under the fiduciary standard, which requires working in their clients’ best interests. He sheds light on how hard it is to pick stocks or to time the market, and how much time and money is wasted in this endeavor.