Good reads from around the Web.
I loved this warning from Ben Carlson at A Wealth of Common Sense [1] this week:
Everyone invested in stocks loses money in a correction. For some, it’s temporary. For others, it’s permanent.
Stock market corrections are where successful investors make money and unsuccessful investors make mistakes.
Brilliant! Maybe it’s a well-worn quip that’s escaped my obsessional reading, but in any event Ben gets the credit from me.
Another way this is sometimes put is that bear markets [2] are when you make your profits – you just don’t know it at the time.
It’s true in my experience, whether you’re a stock picker or a passive investor.
Ploughing money into a market that’s fallen 30-40% is like the supermarket sweep of capitalism. Chuck it all in your trolley!
Provided the revolution doesn’t come, things should bounce back sooner rather than later and your beaten up shares rebound.
They almost always do [3], though one notable exception was with the Communist revolution in 1949 in China…
Correcting a correction
Of course, judging when it’s time to stride boldly into the market like JP Morgan in the old days and buying everything you can… that’s the tricky bit.
Remember: A stock that’s fallen 90% is one that fell 80% – and then halved.
It’s something China’s latest generation of speculators have grappled with this week, as their market has had more swoons and recoveries than your local amateur dramatics’ performance of Hamlet.
Chinese investors have other problems, too, such as a Government that encourages them to buy shares on margin and then commands that prices stop falling, by halting trading and banning sales.
It’s enough to make our own Central Banks look positively lackadaisical! But I don’t expect it to work, long-term.
It’s one thing to have a command economy with a bit of capitalism on the side.
It’s quite another to try to control a free market when such a market consists only of prices and confidence.
Indeed, all those worrywarts who act like our stock market is rigged have two choices.
They can read Monevator and other such resources and learn why it isn’t…
Or they can invest in China where it is.
As Barry Ritholtz put it for Bloomberg View [4]:
Why would anyone want to invest in a market where you might not ever be able to sell?
Happy Wimbledon watching!
Budget mini-special
- At-a-glance key points – BBC [5], Guardian [6], Telegraph [7], ThisIsMoney [8]
- Winners and losers – Guardian [9], ThisIsMoney [10]
- Dividend rule changes to hit 700,000 [Search result] – FT [11]
- Another look at the Budget’s dividend raid – FIRE v London [12]
- UK dividend tax calculator for new rules – Hargreaves Lansdown [13]
- How to reduce any dividend tax hike – ThisIsMoney [14]
- New curbs on buy-to-let tax relief – ThisIsMoney [15]
- BTL income could halve – Guardian [16] on the end of the gravy train [17]
- Brokers point to buy-to-let loophole [Search result] – FT [18]
- Budget may really affect houses prices long term [Search result] – FT [19]
From the blogs
Making good use of the things that we find…
Passive investing
- Raining on the All Seasons portfolio – Canadian Couch Potato [20]
- Wade Pfau on CAPE – Part One [21] and Part Two [22]
Active investing
- A dozen things learned from Leon Cooperman – 25iq [23]
- There could be worse to come in China – The Value Perspective [24]
- Why it’s a good time to be a stock picker – The Reformed Broker [25]
- SAB Miller looks pricey – UK Value Investor [26]
- Marc Andreesen: How companies really get valued – Via Twitter [27]
Other articles
- E-Car Club is crowdfunding’s first exit – Crowdcube [28]
- Diversify your retirement income – Can I Retire Yet? [29]
- Overcoming fear – The Escape Artist [30]
Product of the week: Not content with Black Friday and the Boxing Day Sales, Internet juggernaut Amazon has now created its own mega-sales event exclusively for Amazon Prime members. Dubbed Prime Day [31]
Mainstream media money
Some links are Google search results – in PC/desktop view these enable you to click through to read the piece without being a paid subscriber of that site.1 [32]
Passive investing
- Are people really ‘front running’ index trackers? – Bloomberg One [33] & Two [34]
- Rob Arnott: The true elements of Smart Beta – ETF.com [35]
- Beware the ETF with a 60% (!) bid-offer spread – ETF.com [36]
Active investing
- Overseas investors selling unbuilt luxury flats [Search result] – FT [37]
- Fundamentally analyzing ETF’s portfolios – Morningstar [38]
- Permabear James Montier will be right. One day. – Bloomberg [39]
Other stuff worth reading
- The moral choices around inheritance and opportunity [Podcast] – BBC [40]
- Morgan Housel: The hierarchy of investor needs – Motley Fool [41]
- Generation X earns more but has less to show for it – Bloomberg [42]
- Michael Kitces’ financial freedom quest – Bloomberg [43]
- All about sleep [Podcast] – Freakonomics [44]and New Yorker [45]
- The office loo: Another reason to quit the rat race – Bloomberg [46]
Book of the week: This week’s roundup – like most weeks – features Ben Carlson and his blog, which he’s now literally written the book on. A Wealth of Common Sense [47]
Like these links? Subscribe [48] to get them every week!
- Note some FT articles can only be accessed through the search results if you’re using PC/desktop view (from mobile/tablet view they bring up the firewall/subscription page). To circumvent, switch your mobile browser to use the desktop view. On Chrome for Android: press the menu button followed by “Request Desktop Site”. [↩ [52]]