Aristotle’s Ethics has some pretty useful insights.
Raphael: School of Athens; Source: Wikipedia
Aristotle talked about the “golden mean.” He linked happiness and virtue to finding the balance between excess and deficiency in any particular trait. For example, the mean between cowardice and recklessness is courage. In politics, the mean between anarchy and tyranny is democracy. In the investment context, Aristotle’s “golden mean” would advocate finding a “golden balance” in your portfolio.
Continue reading Classical Investing, Part 4: The Golden Mean
Sophocles’ Oedipus show us another investing principle.
Source: Dorling Kindersley
In Oedipus Rex the hero begins an inquiry to find out what happened to the former King of Thebes, who disappeared mysteriously. Although it looks like he’s going to incriminate himself, Oedipus doggedly looks for the truth, even gainsaying the Queen who claims that some things are better left unknown.
Continue reading Classical Investing, Part 3: Time for Truth
What can the Classics teach us about investing? A lot.
In Homer’s Iliad we learn a lot about war and the ups and downs of life in the Bronze Age. In one memorable scene in Book 12 one of Homer’s heroes gives his rationale for fighting: since he enjoys the fat of the land, it is his part to bear the fortunes of war as well.
Continue reading Classical Investing, Part 2: Fight the Good Fight
The classics are often filled with sound advice for investors. And no wonder. Good investment guidelines are usually common sense tripped out in financial language. But since the best of the classics address timeless truths of human nature, it’s no surprise that they contain sage exhortations that have stood the test of time.
Continue reading Classical Investing, Part 1: Solomon and Markowitz
Are you ready for retirement?
Source: International Living
Over half of us aren’t. Ultra-low interest rates, Social Security’s rising age for full benefits, and stricter rules on mortgages have combined to make it extremely difficult for families to maintain their pre-retirement standard of living.
Continue reading Working, Saving, Retiring
Don’t put the cart before the horse!
That’s what I thought when I heard that the Fed is targeting wages as an economic indicator. Over the past several years hourly earnings have been stagnant. Some say the Fed shouldn’t raise rates until household income improves. And since real wages haven’t moved, Fed policy should stay where it is. Only in the past couple years have wages begun to outpace inflation.
Continue reading Employment, Wages, and the Fed
What good is market timing?
When JP Morgan was asked what the market would do, his answer was, “It will fluctuate.” It’s almost impossible to predict short-term movements. Your emotions get engaged and play tricks on you. But long-term trends are another matter. A little reflection and analysis gives some perspective.
Continue reading Kitchen Timers, Market Timers, and Time (Part 2)
Is market timing possible?
Market timing has a bad reputation. We associate it with shady characters. But we use timing lots of ways. We time our commutes, we use kitchen timers. Why should stocks and bonds be different?
Continue reading Kitchen Timers, Market Timers, and Time (Part 1)
Why is investing so hard?
One reason is because markets are adaptive. They adjust to expectations. Sometimes we get concerned about a market melt-up. That’s where prices adjust so quickly to expected good news that there isn’t time to take advantage of the improved outlook. Moreover, an overpriced market sows the seeds of its own correction: new deals are put together that make little economic sense. Eventually, these shares fall.
Continue reading Safety in Numbers?
Can investing ever be emotion-free?
Source: Trent Capital
In the short-run stocks are driven by investors’ emotions. A company may be up 4% one day and down 7% the next, based on a of couple analysts’ comments. Has the fundamental value changed that much in 48 hours? Keynes famously noted that the market can be a beauty contest, where judges don’t choose the best looking contestant, but the one they think the other judges will choose.
Continue reading The Emotional Investor (Part 3)