8/24/15

Sell without Panic

7:30 AM eastern time. August 24, 2015

Stock market futures indicate Dow jones industrial average will open down another 600 points.  This in addition to the recent declines.

What should investors do in the midst of a market decline? Conventional wisdom says sit tight. Stocks always come back.

I suggest people sell some fraction of their stocks and risky assets. For example, you could sell 10% of your stock holdings two hours from now. The current futures price suggests markets will open down 3-4%. This puts the market down less than 15% from all-time highs.

What would an investor do next? Buy back the sold stock if the market makes a new high. The loss from this trade would be 10% times 15% for a total of 1.5% of the amount invested in stocks. Painful, but manageable.

The psychological value of selling today is that it unfreezes you, and prepares for more sales. The sky may be falling.


8/1/15

Chicken Little Portfolio Performance July 2015

This is a very preliminary performance report. I am off the grid with no computer and little internet access. Using my iPhone to post.

The Chicken Little portfolio returned +2% in July. US stocks were modestly positive with the Dow Jones industrial average rising about half a percent.

The Chicken Little portfolio position remains the same; ready for a deflationary depression by owning some U.S. treasury bonds and cash.



The big question for me these days is whether the U.S. economy can continue to make its tepid progress without investment gains. Almost all investments have done poorly this year: bonds down, commodities down, stocks close to zero, and U.S. Housing price gains smaller than previous years.

I will update this post when I have computer and Internet access.

7/2/15

Chicken Little Portfolio Performance June 2015

June 2015 monthly update for the Chicken Little Portfolio.

Previous Chicken Little Posts
In June 2015, the Chicken Little Portfolio lost 1.66% while the Dow Jones Industrial Average lost 1.05%. Stocks, bonds, and gold were all down in June.

Image result for chicken little
Trying to hide in U.S. Treasury Bonds and Being Crushed

6/26/15

How Technology will Change Education

written for aeon
click to read on aeon
In September 1994, I taught a class to Harvard doctoral students. I finished my lectures the day before the course began, took my slides (printed on paper) to a shop in Harvard Square (Gnomen copy) to produce transparencies. When the course began, I placed the transparencies on the overhead projector in sequence. When all the transparencies were done, the course was over. Everyone was relieved. 

In January 2015, I taught a finance class to undergraduates at Chapman University. During the class, we day-traded stocks, we communicated through the course Facebook page, and we watched (educational) TV over the internet.  As a kid, I saw video phones on the futuristic Jetsons cartoon. In my course, we Skyped with business men and women in a variety of locations from Salt Lake City to Stockholm. One of our video calls was to a finance professional who Skyped from his iphone in a Wall Street Starbucks; Science fiction has become reality.
Video conferencing was science fiction, now mundane

6/22/15

Greece, Finance, and Politics

My thoughts on Greek debt. 

1. Greece is not going to repay its debt. 
2. Germany/Europe can afford to pay Greece's debt. 
3. Greece's debt is a political crisis, not an economic crisis. 



Trouble in Greece

6/4/15

Context for tomorrow's Jobs Report




I published this chart before the May jobs report came out because I expected the jobs report to be strong (meaning more new jobs created than Wall Street Expectations).  The jobs report was stronger than expected, See this headline, for example, "May Jobs Report Stronger than Expected with 280,000 Jobs Added."

More jobs is good for people looking for jobs, and for those who took the jobs. Is a strong jobs report good for the stock market?

5/29/15

Chicken Little Portfolio Performance May 2015


On March 30, 2015, I unveiled the Chicken Little Portfolio, which can be viewed publicly. (You can join the contest.) This post is the May 2015 monthly update for the Chicken Little Portfolio. 
In May 2015, the Chicken Little Portfolio lost 0.85% while the Dow Jones Industrial Average returned a positive 1.31%.

Still looking for Catastrophe

5/11/15

A Chicken Little Trade

On Friday, May 8, 2015, I made a change to the Chicken Little Portfolio. In this note, I describe the specifics of this trade, the possible outcomes, and the motivation(s) for the trade. There are exactly 3 possible outcomes to the trade; when one occurs I will edit this post.

Who cares about Chicken Little? 

Before reading on, you might ask yourself why you would care about a trade in the Chicken Little portfolio. 

5/7/15

Federal Reserve Secrets?



If you could ask God one question, what would you ask?  In today's economic world, Central Bankers are demi-gods. Last Friday (May 1st), San Francisco Federal Reserve President John C. Williams gave a talk at Chapman University.



Image result for john c williams san francisco fed
John C. Williams
President, San Francisco Fed



As I walked to the event, I felt the effect of being close to power. There are ten members of the Federal Reserve Open Market Committee, and I was hoping to ask a question of one of those ten powerful people. Think of what you would ask in this situation before reading more. My question was: 

4/30/15

Chicken Little Portfolio Suffers in First Month

On March 30, 2015, I unveiled the Chicken Little Portfolio, which can be viewed publicly. (You can join the contest.) This post is the monthly update for the portfolio. In April 2015, the Chicken Little Portfolio lost 1.18% while the Dow Jones Industrial Average returned a positive 0.40%.


Losing 1.18% in a month is a more dismal than it may appear for two reasons. First, the portfolio is designed for safety. Second, most of the portfolio is in cash or medium term US Treasuries. April’s performance is like losing 50-0 without leaving the bench.

4/30/15

Join the Chicken Little Stock Contest


In March 2015,  I unveiled my investment positions and made them public in realtime.



The best way to learn about financial markets is to trade with your real money. The second best way is to publicly trade a paper portfolio. I encourage readers to enter the Chicken Little contest.

4/20/15

A Trick For Higher SAT scores? Unfortunately no.

Wouldn’t it be cool if there was a simple trick to score better on college entrance exams like the SAT and other tests?




There is a reputable claim that such a trick exists. Unfortunately, the trick does not appear to be real.


This is the story of an academic paper where I am a co-author with possible lessons for life both inside and outside the Academy.

[related post: Top 5 mistakes made by college students.]
[related post: How Technology will change education]