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Jeff Saut Reveals The Great Secret To Investing (Advisor Perspectives)
When Jeff Saut was young, his father told him that people learn "The Great Secret" when they're dying. As he grew older, Saut writes that he realized life is a "series of great secrets". One of those secrets is figuring out how to make money grow. That's why people become investors in the stock market. To learn "The Great Secret” about how to make money on Wall Street."
Looking back to post World War II common wisdom was that bonds were the better asset in the long term. But in the decade that followed inflation averaged about 4% per annum while large capitalization stocks returned 16.7% per year, long-term corporate bonds 1.8% per year, and long-dated government bonds about 1.3% per year." But portfolio's continued to center on bonds for another decade before people began to seriously consider investing in stocks. Everyone dived into stocks in the mid-60s until 1968 when the Dow peaked and a long-term bear market began. With that in mind, Saut writes, "In the stock market 'The Great Secret' is when you see the crowd in the rear-view mirror, go contrary to the crowd, and then wait for the great Humble daring to think differently."
As advisors grow, they become more selective in their choice of clients. They focus on a clients in a certain line of work, or move on to wealthier clients. But firms don't want to lose the clients. This transition is tricky.
Scott Mahoney at Morgan Stanley Wealth Management told the Wall Street Journal that they moves clients to different programs, and some even have "pre-approved letters" that let clients know their accounts will be handled by a new advisor. The letter could for instance say something along these lines: "During a recent review of my client database, I realized that we have not spoken in quite some time. I would like to recommend you to someone who I feel can provide you with the level of service I feel you deserve."
JP Morgan's Tom Lee first took on a short term bearish tone with the stock market in January. And the following month he essentially said he was looking for a stock market sell-off. But stocks hit all-time highs in the first quarter, and Lee now he admits he was wrong.
"We capitulate on our 'correction' call," he wrote in a note to clients. "A stronger bull market (than anticipated) is underway in 2013, tracking more closely with a typical 5th year than we anticipated (average 5th year gain is 19%, implying 1700 by year-end).
"What went wrong with our call over the past 6 weeks, in our view, is two-fold: first, economic data, while softening, did not weaken as anticipated and more importantly, markets looked through this (the March jobs report was the final example for us) and second, the market has worked off 'contrarian sell' signals (HF beta, MF beta, AAII, etc.) without correction (digesting rather than correcting)."
Gold entered bear market territory today. But gold ETFs have seen outflows in recent weeks and analysts had warned that this is a huge negative for the commodity.
Bloomberg, Business Insider
Howard Marks told John Mihaljevic at Beyond Proxy that "risk consciousness" is the most dangerous thing to neglect.
"I think it is risk consciousness. I think that the great accomplishment in investing is not making a lot of money, but is making a lot of money with less-than-commensurate risk. So you have to understand risk and be very conscious of it and control it and know it when you see it.
"The people that I think are great investors are really characterized by exceptionally low levels of loss and infrequency of bad years. That is one of the reasons why we have to think of great investing in terms of a long time span. Short-term performance is an imposter. The investment business is full of people who got famous for being right once in a row. If you read Fooled by Randomness by [Nassim] Taleb, you understand that being right once proves nothing. You can be right once through nothing but luck."
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