There comes a time to admit defeat.
When I was a grad student I reached a point where I had taken all of the required classes. I now needed to pass preliminary exams (prelims) in various subjects. If I passed the prelims, I was an ABD (all but dissertation), and could proceed to propose and execute a major research project.
Since the prelims were conducted by panels of professors, it was important to know the work from their courses. The problem was that some of them were new, and the courses changed with time. Some of my peers thought that they needed to "audit" classes they had already taken, to catch up on new material.
My approach was different. I made a list of all of the things I needed to review, re-read (or perhaps read for the first time!) in preparation for the exam. When I finished a work, I crossed it off of the list. When I read something that pointed to some other seminal work in the field, I added it.
As I prepared for the examinations, a clear trend developed. I ignored the trend, scheduled the exams, and moved on to the dissertation stage at an enviable pace. What did I notice?
The length of the list of absolutely necessary readings was at its longest on the day I took the exam.
Anyone who is a serious scholar knows this. The more you study, the more intellectual hooks you find. They all seem important.
My Current Agenda
I have reached a similar decision point in my blog agenda. I have so many ideas, so many potential book reviews, so many great readers questions ---- and so little time. I try to highlight what I think is important, but others do not share my lens on the key issues or on the markets.
So I am throwing in the towel -- not on the blog, but on the agenda. I am going to do some short hits on certain ideas, with my plans in mind. I will try to respond to feedback on what is important and useful. I also ask current readers to remember that I am reaching out to an audience that is currently not reading -- the individual investor who may be struggling with conflicting information.
The Current List
Here are a number of topics. In each case, I am going to state a viewpoint. Unlike prior articles from me, it will be a conclusion with a hint of reasoning. In all cases I am prepared to make a more detailed case. It is not a lack of analysis, just a lack of time to write it up. The list includes must do items, things that I "star" from other comments, and good reader questions. It is not comprehensive. I have scores of items; these are the most pressing. In no particular order, please consider the following:
- Reader "Yo" asks, apparently in response to my article on how many are analyzing Fed policy in the future instead of the market, whether the people who "called the real estate bubble and were wrong for years" were stupid. My answer is a resounding "No!" I was one of the earliest in identifying outlandish real estate prices. I advised clients (prematurely as it turned out) to be wary of excessive real estate investments in 2004, pre-dating this blog. It is not "wrong" to see a potential problem, but it is better to see the time frames, and invest accordingly. I also avoid disparaging any large group by characterizing their prediction. Members of the group all have different reasoning and methods. I really hate arguments that go "these are the guys that got us into this, why trust them now." The subject deserves more careful consideration.
- Bob McTeer (a favorite source) takes off on this theme. Why don't more people pay attention to this sources? He has outstanding credentials, a free-market attitude, and a practical bent to his work. He explains why this broad-brush approach is wrong for banks.
- Reader Mike C continues to ask many excellent questions. I have decided to do an article each week related to choosing stocks. I started this last week, and I'll try to keep it up. Other astute comments have echoed this theme. I'll next turn to methods for finding specific ideas.
- Several readers have inquired about our "penalty box" and why we do not buy the highest-rated sectors from our TCA-ETF model. The simple answer is to think of this in terms of a stop loss, commonly used by nearly every trader. Our modeling guru, Vince Castelli, has analyzed thousands of situations with risk/reward and hot money in mind. His conclusion helps us to find faster exits and to avoid trades with high danger in our three-week time frame. While I cannot reveal all of the elements of his method, I have conducted many tests. The penalty box is a good short-term indicator, but may not be relevant for investors taking a longer view.
- Market strategist Ramsey King writes as follows: "Once again, just like in July, August & September, Benito juiced the system during expiry week." I have an immediate negative reaction to those who believe that using some spiffy name for the Fed Chair proves their point. If King wants to make his point, why not look to the data, as I have done in the past. We have many years of official Fed transcripts available. If he wants to do real research, why not find evidence for the conspiracy in actual data from prior meetings. These meetings include about 60 people, many of whom have now moved on to other jobs. If there is real evidence of juicing the market, plunge protection, or whatever, let us see some evidence. Otherwise, this is just another opinion piece masquerading as investment advice.
- Market strategist John Mauldin thinks that the economy will no longer even "muddle through," his long-held viewpoint. For evidence he cites one economist on the topic of the economic multiplier, an obscure issue that most will not understand. I am disappointed with John's approach to being a gatekeeper and an explainer of economics. He should, at the very minimum, state this viewpoint (from a widely-cited source) is not the only one, and represents an extreme. There is a debate among macro-economists. The impact of economic stimulus is important and deserves careful analysis. He footnotes a page in a $200 book that most people cannot verify, and does not provide even a quote. The conclusion seems at odds with other published material from the same source. Whatever we might conclude, his article does not provide a complete and balanced picture. If he wants to cite various sources and explain why he picked this one, that would be stronger and more persuasive. Mauldin is important because he has a much wider readership than any blog. It is reasonable to expect a high standard of scholarship and balance.
- The BLS estimate of job creation has broken down. Unlike most of their critics, they look at the results when actually available from state data. I need to write a more comprehensive piece on this, with special emphasis on where we are now. Hint: Our own more bearish estimates, published monthly, have been closer to the truth on employment. I think that there are many people trying to assess the employment problem. I have often stated that we should not view the honest efforts of the BLS as the official answer, but rather one measure among many.
- Brad DeLong highlights a question on my plate: How to deal with seasonal adjustments when there is a dramatic change in trend. Good question, tough to answer. I actually have some cooperating experts working on this question.
- My "summer quiz" has a winner. I need to reveal him, review the answers and award the prize. The point of the quiz was to get people thinking on the right track, and I hope that many did so.
Tonight is my anniversary (number 30) and I am getting some static, although we have a nice weekend planned. I do not know whether this approach has shortened my list of work, or made it longer. I have barely scratched the surface on the points I try to highlight:
- Finding true experts. I am not an expert on everything, but I am good at finding them.
- Analyzing data. This is my sweet spot. I taught the classes on this, and I can spot the impostors.
- Putting together risk and reward. There are always opportunities. I see two big mistakes -- polar opposites. Some are trying to "get it all back" with a big play on a risky stock. Others are frozen out like a deer in the headlights. Most of my public recommendations have done well -- CAT was today's example -- but many think they have missed out, looking backward instead of ahead.
