Market Summary – Q4 2011
Fourth Quarter 2011 Global Diversification Fourth Quarter 2011 These portfolios illustrate performance of different global stock-bond mixes. Those with larger allocations to stocks are considered riskier but also have higher expected returns over time. Hypothetical allocations are for illustrative purposes only. Global Stocks represented by MSCI All Country World Index (gross div.) and Treasury Bills represented by US One-Month Treasury Bills. Globally diversified portfolios rebalanced monthly. Data copyright MSCI 2011, all rights reserved. © Stocks,...
Read MoreDecember 2011 Newsletter: Recency Bias
Is “recency” even a word? Not in most dictionaries it isn’t. You’ll get sent back to the tray if you try to play it in scrabble or its popular online equivalent, Words With Friends. Yet the word works very well to describe one of the must‐know biases that affect the way we think in pursuing rewards and avoiding pain, as we do in investing. Behavioral Economists, those deep‐thinking scientists who help us understand why we exercise bad financial behavior when we know better, have coined “recency” to describe our tendency to put more weight than we should on recent events. And what is the cost...
Read MoreNovember 2011 Newsletter: Fallout from Europe
Should we be worried about the problems in the European Union [EU]? A certain amount of concern about government debt issues in Europe is well placed. Previously, government defaults were reserved for the emerging markets in places like Argentina and Russia. Just five years ago, the idea that Italy [gross government debt to GDP of 121%] Ireland [109%] or Portugal [106%] would be considered capable of default on their government bonds seemed far‐fetched science fiction. Now we grapple with frightening headlines from Greece [166%!] and the rest of the EU on a daily basis. Marsh, Marsh, Bill....
Read MoreOctober 2011 Newsletter: Do you suffer from Action Bias?
In the last few months we’ve experienced large fluctuations in the stock market in concert with high stakes debt ceiling negotiations, financial turmoil in Europe, Libyan unrest and, oh yes, hurricanes which are expected this time of year. We are starting to get crisis fatigue. If this piece looks familiar, it’s because it is. We felt it was important enough to make it the topic of our last investment review. We felt this was an important enough message to risk repeating ourselves. As if all the news we get isn’t enough to think about, it turns out that was just 5% of what has going on in...
Read MoreMarket Summary – Q3 2011
What’s Been Happening?
Stocks all over the globe fell precipitously starting in the middle of the third quarter. The small stocks and relatively cheap “value” stocks in the mutual funds we use suffered even more.
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