Six Months of Chicken Little

In 2013, I published my first PBS Making Sen$e article worrying about the economy and financial markets. Over the subsequent period, my fearful articles caused Paul Solman, business and economics correspondent for the PBS NewsHour, to label me the “Chicken Little of Finance”.

The Chicken Little of Finance

Six months ago, I embraced the Chicken Little moniker and revealed my own investment positions. I have been publishing monthly performance updates. This article takes a slightly longer-term perspective and reviews Chicken Little’s macroeconomic views and the Chicken Little Investment Portfolio over the full six months. (You can compete against Chicken Little, and see the Chicken Little portfolio performance in real time by clicking here; you have to register with the website that hosts the contest) .

The article has four parts.

Part I: Chicken Little’s Perspective on Government Policy.

Part II: The First Six months of Chicken Little’s Investment Portfolio.

Part III: Chicken Little’s Current Investments.

Part IV: Advice for other Chicken Littles.

Chicken Little Portfolio Performance September 2015

September 2015 monthly update for the Chicken Little Portfolio.

In September 2015, the Chicken Little Portfolio gained 0.89%. The Dow Jones Industrial Average lost 1.35% in September.

You can view the portfolio performance in real time by clicking here.

Chicken Little has decreased the short position in both US stocks and Non-US stocks.

Chicken Little Hunkered Down

Abolish the Fed

Click for Article

Chicken Little Portfolio Performance August 2015

August 2015 monthly update for the Chicken Little Portfolio.

In August 2015, the Chicken Little Portfolio lost 0.36%. Chicken Little worries that the sky is falling, and the Dow Jones Industrial Average lost over 6% in the month.

You can view the portfolio performance in real time by clicking here.

Chicken Little has increased the short position in both US stocks and Non-US stocks.

Chicken Little is Shorting Stocks

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.


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Chicken Little is Powerless Against Central Bank Money Printing

Postscript July 2016
The Dow Jones Industrial Average made a new all-time high in July of 2016, 14 months after its previous high in May of 2015. 

Chicken Little never bets against markets at new all-time highs; according, when the new high was made in July 2016, Chicken Little bought US stocks to cover a short position, and,  in addition, bought more US stocks to establish a tiny long position. 

Read July 2016 post "Chicken Little Buys US stocks." 

Chicken Little Portfolio Performance July 2015

July 2015 monthly update for the Chicken Little Portfolio.

In July 2015, the Chicken Little Portfolio gained 1.74% while the Dow Jones Industrial Average gained 0.59%.

Chicken Little is now betting on stocks going down with a very modest short position in both US and Non-US stocks.

Chicken Little is Shorting Stocks (in Poultry amounts)

Chicken Little Portfolio Performance June 2015

June 2015 monthly update for the Chicken Little Portfolio.

Previous Chicken Little Posts

Join the Chicken Little Contest (please join)

March 30, 2015 - Where does Chicken Little Invest?

April 2015 performance

May 2015 performance

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.

Trying to hide in U.S. Treasury Bonds and Being Crushed

How Technology will Change Education

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

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

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?

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

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.