Jason Zweig’s Artful Newsletter

Recently signed up for Jason Zweig’s newsletter from the WSJ.  The latest is a winner.

Zweig leads off with the depressing thought that the average performance of active investment managers is one or two percent lower than reported. Reason: survivorship bias. As time passes, the unfortunate returns of funds or managers that drop out of the race vanish from data bases, leaving an average based on better-performing survivors.

 Delightfully, Zweig illustrates his items with everything from ephemera to fine art. Here he uses a Koloman Moser painting that we can imagine as a  collection of deceased funds floating around in other waste matter. 

Guess what happened a few months before Prohibition? Coca Cola went public. Shares were sold on the Curb, Street brokers received orders from clerks who signaled from office windows or ran downstairs to deliver orders. Fights sometimes broke out. Here’s the Curb as shown on a 1919 postcard:  

Can’t promise all of Zweig’s newsletter will be as sprightly as this one, but they are worth a look. 

Contrary indicator?

 The New York Times has a nice, well-illustrated analysis of the inflation picture at the moment.

However, I don't trust their conclusion that we don't need to worry about inflation, that it really is transitory.  The general public perceives inflation by what they see at the gas pump and at the grocery store.  Inflationary expectations are as significant as inflation itself.  The fact that the prices of window coverings and men's suits are going down doesn't cut much ice.  Gas prices can only go higher given the new restrictions on building pipelines and fracking.  Note also that President Biden's plea to OPEC to boost production was rebuffed.

What's more, the New York Times has been practicing "agenda journalism" for the past few years, which makes me skeptical of any of their pronouncements.  "No long-term inflation to see here" sounds an awful lot like "Kabul can survive for 90 days" to my ears.  Wishful thinking.

Having said all that, I do find their data presentation and explanations to be interesting, potentially helpful.

Anniversary of a turning point in my Merrill Anderson career

 It was 40 ago today that President Reagan signed the Economic Recovery Tax Act into law.  I helped turn that event into significant profits for the Merrill Anderson Company, co-writing brochures on the benefits of the new law and on IRAs, because they became available to everyone with wages.  I did well enough that the firm's owners began grooming me for future ownership.

Background here:  https://www.powerlineblog.com/archives/2021/08/it-was-40-years-ago-today.php

August is the Coolest Month

 Cool in the sense of excellent for stock investors, that is. Instead of fixating on the "January effect", Jason Zwieg's Intelligent Investor newsletter points out, we should focus on the "August effect."

According to Bill Schwert, emeritus professor of finance at the University of Rochester, August has averaged the highest returns of any month, at 1.45%, even better than January -- the month whose supposedly superior results have been touted for years in books, blogs and research papers. 

Zweig also reminds us of what happened 39 years ago on August 12, 1982. Without fanfare the most horrendous stock market decline since the Depression ended.  Investors contrarian enough to start buying equities would have prospered mightily. Stocks rose 229% before Wall Street had its 1987 panic attack. Thereafter stocks rose another 582% percent before the dot.com bubble burst. 

Inflation-adjusted DJIA Historical Chart

How Investment Advisers Became ‘Designated Drivers’

When the merely affluent seek investment help, their advisers generally call the shots. High-net-worth investors aren’t so easy to handle. Their peer group has told them what’s “hot,” and they want their advisers to get them in on the action. Result, an expanding category of alternative asset classes, including sneakers.

Bitcoin and other cryptocurrencies are the hottest of the hot. Many advisers dislike these unstable – and sometimes unserious –mediums of exchange, but they nevertheless have to yield to clients’ insistence: “OK, we’ll put one percent in bitcoin.” 

Even Jamie Dimon, CEO of JPMorgan Chase, finds he must curb his mistrust. His bank is launching a bitcoin fund.

 Dimon recently explained his dilemma to the House Financial Services Committee: "My own personal advice to people is: stay away from it. That does not mean the clients don't want it. This goes back to how you have to run a business. I don't smoke marijuana but if you make it nationally legal, I'm not going to stop our people from banking it.”

If the high-net-worth crowd is going to bet on crypto anyway, Dimon figures, at least JPMorgan advisers can help them do it without getting ripped off. They’re the designated drivers.