Weekend reading

Good reads from around the Web.

Josh Brown is a curious blogger and acerbic wit who publishes financial market arcana for his fellow investment pros, sprinkled with the odd post about how stupid and venal some of them are.

I like his blog, The Reformed Broker, a lot, even though it’s wildly inconsistent and goes into the unlikely-to-prove-profitable ‘guilty pleasure’ bracket alongside spread betting and CNBC1.

Anyway, this week he flagged up two factoids revealing how so-called ‘dumb money’ can be pretty smart.

In his post Why Behaviour Is Half The Battle, Josh shared a graph from Fidelity showing how keeping up steady investment throughout the turbulent market has delivered a solid result for American pre-retirees:

401k-trends-chart-1

He notes:

Behavior, ie continuing to contribute through the difficult conditions of the Great Recession and Credit Crisis, was about half the battle. Market performance did the half of the heavy lifting and those who did the right thing have been2 richly rewarded for it.

These simple investors don’t realize it, but they have outperformed almost every hedge fund manager and smart-ass market-timer in the universe.

Or perhaps they do realise it? Anyone who digs through our passive investing HQ should have a good grasp of the essentials. (i.e. That returns from expensive fund managers lag those from cheap index funds, and forecasting the market doesn’t work).

A couple of days later Josh brought us stats from Merill Lynch revealing that retail investors – that’s the likes of you and me – were happily buying the shares that gibbering money managers were throwing overboard as the market tanked.

Josh comments:

The hedge fund segment sold again last week, three in a row. They are now net sellers of the equity market on the year – they were only net buyers during the March and April period of new highs, because, en masse, they are essentially benchmark-chasing pussies who jump in and out of the tape like they’re “managing risk” and then lever up like maniacs when they begin to trail the markets.

… and of course they charge 2-and-20% for doing so. Then again, I’m blogging about how silly they are, and they are driving Ferraris. Who’s the muppet?

I wonder what car Josh drives? Metaphorically speaking, I mean. Perhaps he takes the subway when it comes to actual non-metaphorical transport.

At least he won’t get lynched by hedge fund managers down there.

From the blogs

Making good use of the things that we find…

Passive investing

Active investing

  • The permanent portfolio and a falling gold price – Crawling Road
  • The right temperament for buying stocks – Clear Eyes Investing
  • Value stocks are lagging ‘glamour’ stocksGreenbackd
  • The latest cyclically-adjusted P/E ratio for the FTSE 100 – RIT
  • Are Carillion shares a good investment? – UK Value Investor
  • A laundry list of emerging market investing options – Wexboy

Other articles

Product of the week: Want a personal loan? Two things. First, you’d better have a very good reason, because it’s far better and cheaper to save up instead. Second, Zopa now offers the lowest rate on loans up to £15,000, according to Money.co.uk. It’s charging 4.9%.

Mainstream media money

Note: Some links are to Google search results – these enable you to click through to read the piece without you being a paid subscriber of the site.

Passive investing

  • Proper diversification beats simple 60/40 long-term [Chart]BlackRock
  • How would Warren Buffett handle today’s market? – Swedroe/CBS

Active investing

  • Gold was a horrible investment from 1500 to 1965 – The Atlantic
  • Profiting from harder-to-sell stocks – Swedroe/CBS
  • I confess, buying Co-Op hybrid bonds was a mistake [Search result]FT
  • Ken Fisher: The US isn’t Greece, and nor is the UK [Search result]FT

Other stuff worth reading

  • Why aren’t annuities rising with the 15-year gilt rate? – Telegraph
  • Generation rent laments Thatcher’s ‘property revolution’ – Telegraph
  • The depressing new phenomenon of “rent-to-rent” – Guardian
  • London house prices at highest-ever premium to rest of UK – Guardian
  • Gold price approaches biggest quarterly slump for 93 years – Bloomberg
  • The world has a million more millionaires (12m in total!) – The Economist
  • Pension funds may see a silver lining in interest rate cloud – Reuters

Book of the week: I hear Guy Thomas is to release an epilogue to Free Capital, his inspiring book on private investors who live entirely off their investing wits. The chapter will reveal “what happened next” to the 12 investors profiled, and will apparently be made available on his publisher’s website for download as a PDF.

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  1. Which I just remembered he also appears on. Maybe I’ve got a man crush?
  2. Josh actually wrote “ben”, but I am happy to correct the error and make him look good, due to my man crush.

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