Novel Investor

Charlie Munger has a knack for delivering witty common-sense advice like this:

I’m a very blocking and tackling kind of thinker. I just try and avoid being stupid.

He shared some of his witticisms in an interview last month. Three of the more interesting highlights are below.

The first is Munger’s answer to the question: what traits are needed to be a great investor? Continue Reading…

2020 was a historic year, full of surprises. Nobody expected a global pandemic or how global stock markets would react to it.

Global stock markets declined in unison in the first quarter of the year following the outbreak of a pandemic. It was one of the fastest market crashes in history. Practically all markets experienced double-digit losses in the first quarter, most well in excess of -20%.

Shelby Davis once said, “Bear markets make people a lot of money, they just don’t know it at the time.” The global crash in markets gave everyone the opportunity to experience what Davis describes.

Of course, Davis’s quote only hints at the mental difficulty of the prospect. Those who buy stocks in a bear market are eventually rewarded. The difficulty lies in not knowing when or how big the reward will be. Nevermind that buying stocks amidst a crash feels about as unnatural as…social distancing. Continue Reading…

In most years, the market sits in the gray area between the two extremes of the cycle. 2020 was not one of those years. It was unique. It went from fear to greed within a matter of months.

One of the fastest crashes in market history.

The chart is the S&P 500, Russell 2000, and the Nasdaq crash in March. Everything fell. All three indexes peaked around February 19th. By March 23rd they each hit bottom.

The Nasdaq fell the least and the Russell 2000 fell the most. It was one of the swiftest crashes in market history.

Here’s what the S&P 500 looked like on a daily basis from the February peak. Continue Reading…

As the year comes to a close, it’s a good time to review some of the lessons from the more popular posts of 2020.

Below, you’ll find a collection of posts on a range of topics. The posts are a product of interesting things I’ve read this year and felt was worthy of sharing.

The best part is I have no clue what post will gain traction once I hit publish. So the list below is entirely the fault of the readers. Thanks for reading and sharing!

In the list, you’ll find some wisdom from Buffett, Graham, and Fisher. Peter Bernstein made the list twice. A few posts cover growth companies, major drawdowns, and the difficulty of holding on. And then there’s the history to remind us how often today’s market events rhyme with the past.

There should be something for everybody. Let’s dive right in. Continue Reading…

A. Newton Plummer was a corporate publicist. He was also a stock promoter. He helped pool operators manufacture huge profits during the 1920s bull market.

A pool was a group of people that pooled their money to buy a stock, manipulate the price higher, and then sell it to the unsuspecting public at a huge profit. At the same time, PR was used to draw up publicity around the stock. That’s where Plummer came in.

Plummer wrote press releases filled with good news about the stock. He sent them to newspapers around the country in the hopes of being published. To guarantee it, of course, he bribed the reporters.

One example of this was the Armour & Co. operation run by Plummer: Continue Reading…

The basic principles of sound investing have not changed in a couple of centuries. But neither has the most common errors made by investors.

A perfect example of how little investor misbehavior has changed can be found in a book by Thomas Gibson. Gibson wrote several books on investing and speculation. One of his more recent was published in 1923.

In it, Gibson recounts a study he did of the trading history of some 4,000 brokerage accounts over a 10 year period.

Two patterns really stood out. Far more people bought at high prices than low prices and almost every account that showed some type of plan for buying and selling not only gave up on the plan but would have made a profit had they stuck with it. Overall, losses were an overwhelming result.

His book, The Facts about Speculation, sums up the most common errors he found and the best ways to correct them. You’ll find a few highlights below: Continue Reading…