This article is behind a paywall, but you can get the general gist from the opening two paragraphs. If the pay of local fund managers were based on ability, the vast majority would be delivering newspapers to make ends meet. China is considering slashing pay of fund managers who underperform their benchmarks as part of…
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One of the most frustrating things in trading is the persistence of idiocy, which holds traders back. The chart below or a variation on it regularly appears on my social media feeds—generally posted by someone who trumpets the initial CMT or CFT after their name. I’ll tell you more about them in a minute. The…
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Imagine it’s ten years ago and you are assessing the relative merits of market cap weighted exposure to US equities and an equally weighted allocation. Across a range of valuation metrics you can see that the equal weighted index is moderately cheaper. As luck would have it you also have a crystal ball that tells…
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The modern world is full of risks, from natural hazards such as flooding to the existential threat of nuclear war, artificial intelligence and climate change. With the scientific and technological progress of the past few centuries, we’ve created new hazards that threaten our very survival and, in this series, emergency planner and disaster recovery expert…
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Hendrik Bessembinder’s latest paper asks the question – which US stock has generated the highest long-term returns?[i] The answer is Altria Group (formerly known as Philip Morris). Over 98 years the tobacco company produced a cumulative return of 265,000,000.00 percent! Based on this it would be easy to write about how lucrative it can be…
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Adaptation Adaptation is the delicate equilibrium that distinguishes despair from triumph in the realm of trading. In this domain, where uncertainty reigns supreme, achievement demands more than analytical prowess; it necessitates an acknowledgment of the market’s inherent unpredictability. Every trade presents a dual possibility: it may propel a trader forward, redefining their trajectory, or it…
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All forms of trading require decision-making. Sometimes, this decision-making is logical and generates a natural, logical endpoint that anyone can follow. At other times, it is narrative-based and relies upon stories and feelings—neither of which works.
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Trading is a learned profession—no one is born a fully formed trader. Each response and subsequent activity is learned. The difference between a good trader and a habitually poor trader arises in the mechanism of learning and how they interpret the feedback from each of their actions. The matrix below shows the differences in how…
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The Market Is a Mirror: Understanding the Psychological Dynamics of Trading. One of the more well-known books on investing, Blood in the Streets, was written by the Rothschild family. It’s a classic that examines the psychology behind market upheavals. Whenever there’s a sharp decline in the stock market, media outlets often refer to it as…
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