Archive for the ‘Investor Sentiment’ Category

Happy Birthday, EVH

February 2, 2012 Leave a comment

Eddie Van Halen recently turned 57. This is not important for investors to know. But in a way, it sort of is.

Eddie was/is a heretic—he was never taught music, he never went to a formal school. Instead, he loved it so much he taught himself. There are stories of him sitting on the edge of his bed in high school, when everyone else was out, playing the guitar the whole night through, for many nights in a row. He never followed anyone else’s path (though he did learn a lot of Clapton songs), and as a result his take on the instrument is so singular and unique, you can tell it’s him in just a few notes, and no one can truly mimic him to this day.

This is what investing is all about. If you follow some program, or some other set way of thinking about the world—all you’re doing is mimicking, and that almost never works in investments because known and accepted programs get priced in. You can’t be Warren Buffett or Ken Fisher, only they can be. You have to forge your own way, your own style of thinking. You have to be unique.

From Wikipedia: The All Music Guide has described Eddie Van Halen as “Second to only Jimi Hendrix…undoubtedly one of the most influential, original, and talented rock guitarists of the 20th century.”[1] He is ranked 8th in Rolling Stone’s 2011 list of the Top 100 guitarists.[2]

I wanted to be Eddie when I was a kid. I still do. I’ve logged so many thousands of hours trying to play like him, and spent so much money on his gear…at some point around age 22 I realized I would never be a great guitarist because I was trying to be somebody else. I took that lesson into my career at Fisher Investments, and I spend all my focused thought trying to forge my own way, and learn from it when I’m wrong.

Eddie doesn’t do many interviews or speak very much, but I remember him once saying, “You only get twelve notes, it’s what you do with them that counts.” In investing, we all pretty much have the same information now, all the same newspapers and so on, for the most part. It’s what you do with the information that counts—it’s the unique insight. No computer or algorithm or statistic can do it for you.

I couldn’t be more excited for Eddie, now 57 and on the eve of the new Van Halen album and tour. The VH sound has always been both distinct and consistent, even when singers changed. And yet Ed tends to reinvent himself every time—there will be something new he pioneers in this album, some sound we’ve never heard before. If only we could all do that in investing: consistent innovation, driving the whole system forward along with us.

Happy Birthday, Eddie Van Halen!


Great Advice: Avoid Investment Newsletters

January 27, 2012 Leave a comment

Jason Zweig’s piece in last weekend’s WSJ is spot on, and important advice:

What business has an estimated one million clients, operates on the fringe of securities law and can say just about anything without immediate consequences? It is the investing-newsletter industry. And the public should approach newsletters with caution, even when they come with a celebrity endorsement.

Meet Suze Orman’s Newsletter Guru — Jason Zweig

Fisher Investments’ Latest Stock Market Outlook

November 11, 2011 Leave a comment

For a cogent synopsis on the current market environment, check out Fisher Investments’ newest Stock Market Outlook. Click here.

Why Worry? The Obama Tax Plan Is DOA Anyway

September 22, 2011 Leave a comment

Wow! Check these out:

This is just from yesterday morning’s press. There is clearly a lot of bluster about the newest Obama plan. But forget your ideology for a moment and think like a rational investor who cares less about who’s in office and more about asset prices. On that basis, there’s not much reason to fret about the Obama plan—it is probably a lifeless corpse on arrival. Maybe some small pieces will make it into the final deficit cutting commission’s plan come November, but otherwise the plan will likely get zero support in the chambers of Congress. The part that’s hard to figure is Obama’s current political gambit—it doesn’t seem this plan (even its mere proposal) is likely to win him many centrist voters in battleground swing states. Then again, the election is still more than a year away, and much can happen in between.

Irene Is a “Teaching Moment” for Economists

September 1, 2011 Leave a comment

I’ve always believed meteorology has been a good way to think about economic forecasting models. Simply, economists can, via statistical analysis, have some visibility on what might happen next, but the system (be it ecological or economical) is so vast and complex we just don’t have the models to know with precision what will happen, even in the immediate future. So, after the Irene panic over the weekend, we instead get headlines like ‘People assume we can predict everything’…NYT: Experts Misjudged Structure and Next Move…IRENE: A PERFECT STORM OF HYPE…, and so on. It’s not that the meteorologists did a bad job—they’re just limited in what they can do, and in a situation where lives are on the line they will err on the side of caution.

This is basically—almost precisely—how to think about economic forecasts. Are we headed for another recession? Maybe. My sense is probably not. But recent weak economic data don’t guarantee anything either way. Quarterly and monthly data especially is lumpy, and never moves in a straight line. So, you get a headline like this that surprised a lot of folks this week:

Consumer Spending in U.S. Climbs More Than Forecast on Purchases of Autos — Bloomberg

Statistical economic analysis in forecasting, even just a month ahead, is at this point a lot like meteorology—the system is too complex to predict with perfect accuracy.


Reasons to be Optimistic

August 31, 2011 Leave a comment

Call me Pollyanna, but I’m more sanguine on the global economy than most right now. Here’s a grab bag of positives our team at Fisher Investments came up with that aren’t being widely considered in my view:






U.S. Bureau of Labor Statistics (BLS)

U.S. Bureau of Labor Statistics (BLS)

The Conference Board, Inc

U.S. Department of the Treasury

U.S. Department of the TreasuryFederal Reserve, United States

U.S. Bureau of Economic Analysis (BEA)


IP Rips

August 18, 2011 Leave a comment

For all the soft economic data of late, and there’s been plenty, it’s particularly interesting to see July’s US Industrial Production number come in so strongly—not just higher than expected, but the fastest growth of the year. Additionally, June’s IP was revised up. This, of course, partly reflects a rebound from Japan-related supply constraints (auto & light-duty truck production rose 10.4% m/m), but also possibly a general reacceleration, as already very lean inventories can’t wait long to be restocked. Only time will tell, but this was an encouraging report.


Fisher Investments Graph

Fisher Investments Graph of US Industrial Production

Source: Federal Reserve

Saving the World from Debt Ceilings

August 1, 2011 Leave a comment

Around my office the last few weeks we’ve joked that—once this debt ceiling drama is finally resolved—politicians would take credit for “saving the world”. Well, it turned out not to be a joke:

We’re Trying to Save Life on this Planet as We Know it Today’…

Forget about the ideology and bombastics of these types of statements (which, by the way, come from both sides of the aisle). What this really demonstrates is the wanton and venal quality of the beltway: that this is in fact mostly a drama being played out on the public stage to use as a fundraising and general election issue.

To get the real skinny on the US debt, deficit, and debt ceiling situation, head to and read these:

Economy versus Earnings

July 29, 2011 Leave a comment

One of the great lessons of investing is that earnings matter. Banal? Trite? Tautological, even? Sure. But it’s amazing how folks lose sight of such a simple thing in times like these.

Open any financial periodical, on any given day this year, and you’ll read about how this “recovery” is a weak one relative to history (even though GDP is at new all-time highs). And in those same publications you’ll find stories buried in the back pages about earnings that continue to beat expectations.

So, there’s a disconnect for many in terms of understanding why or how the market has been so strong the last couple years. Many have gotten into the modus of believing economic metrics like unemployment, durable goods orders, services indexes, sentiment indexes, even GDP itself, are proxies for how stocks will do. They are not—economic indicators are not earnings. Econ metrics, of course, are relevant in understanding how earnings will come in (and because I work for a top down money manager, I tend to believe that stuff matters more than many), but they are not a straight proxy for earnings.

Simply, this is a time where earnings are zooming globally (and continue to—so far 2Q reports have trounced expectations), but other parts of the economy are not (like employment). This is actually pretty typical as new bull markets and early to mid cycle economic recoveries go—corporations get leaner and more efficient faster than the broader economy, with their prosperity rising before it’s reflected in the aggregate economists’ numbers. This is particularly true right now as governments (federal all the way on down to municipal) are still contracting and laying folks off. The private sector has fared better lately. The net result is mushy, and masks booming earnings growth.

The lesson: don’t ignore macro economic news, but don’t take your eye off the earnings of publically traded firms, which continue to be robust globally—those are telling a much different tale than today’s “slow recovery” gurus realize.

Grey Pigeon Alert

July 28, 2011 Leave a comment

Back in April, I highlighted a phenomenon scrambling investors’ minds by the score: people were seeing so-called “black swans” everywhere:

Sorry, but Japan’s earthquake (devastating as it was in human terms), or the problems of the Middle East are not only NOT Black Swans, they’re not all that uncommon. I challenge someone—anyone—to find a year where some major geopolitical, geological, financial, or otherwise big scary event didn’t happen. The world is full of them through history—now is no different than any other, though folks always feel the present moment is “different this time”. Goodness gracious, 1998—a fabulous year for stocks—was also the year of Long Term Capital Management, among other things like the Russian Ruble problems and Asian banking issues.

As I said on Fisher Investments MarketMinder months ago, the whole point of a real black swan (if they exist at all) is that they’re hugely rare. Note that recent events did not crater the markets—they were grey pigeons.

4/11/11 – I’m Adopting “Grey Pigeons”

To my mind, the issue of the US debt ceiling is archetypal Grey Pigeon drama—one that’s played itself out scores of times in US history, has never sunk global markets, yet folks fret about it often. Now we’re getting theories about Swans hopped up on some kind of hallucinogen to make them glow: Forget About Black Swans, the One Floating Ahead is Neon.

Scary as it might feel, today’s US debt ceiling drama is a classic, not a new thing. Grey Pigeons are flying again.


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