EppsNet Archive: Stock Market

Today Would Have Been a Good Day

10 Jul 2017 /

I’ve always been tempted to short Abercrombie & Fitch stock based on the abysmal quality of people I see wearing their merchandise.

Today would have been a good day to actually do it, as a deal to sell the company fell through

(If you’re not familiar with stock charts, today’s activity is reflected in the vertical purple bar plummeting toward the bottom right of the chart.)


Could Donald Trump Have Made More Money in an Index Fund?

28 Oct 2015 /
Trump blurb

Click to enlarge

I’ve seen this theory advanced by multiple sources, including the attached clipping, which I saw on Facebook. I don’t know the original source, but the finger-painting reference is a clue that the author has an anti-Trump agenda, hasn’t done the math and is just repeating something that may or may not be true for the benefit of anyone predisposed to believe it.

The actual National Journal article, which is targeted at readers who don’t know much about history, math or the Trump family, says this:

By putting his inheritance into the stock market back in the 1970s, [Donald] Trump might have been “really rich” without all the drama. . . . Had the celebrity businessman and Republican presidential candidate invested his eventual share of his father’s real-estate company into a mutual fund of S&P 500 stocks in 1974, it would be worth nearly $3 billion today, thanks to the market’s performance over the past four decades.

One big problem with that analysis: Donald Trump didn’t have an inheritance in the 1970s. His father, Fred Trump, was alive until 1999. When the author talks about Donald Trump investing his “eventual share,” what is he talking about? You can’t in 1974 invest an inheritance that you’re not going to have until 1999.

Donald and Fred Trump

Donald and Fred Trump

How much money exactly did Trump inherit? I couldn’t tell you, but working backward from the National Journal analysis, in order to have $3 billion today, you would have had to invest about $35 million in the S&P 500 in 1974.

Fred Trump died in 1999 with a net worth of $250-300 million. He had five children, one of whom predeceased him, so after estate tax and perhaps some charitable bequests, $35 million per child should at least be in the ballpark.

Had Donald Trump invested that amount in the S&P 500 when he actually received it in 1999, it would be worth about $70 million today, which is not bad, it’s more than I’ve got, but it wouldn’t make him a billionaire.

If he’d invested the $200 million that Forbes magazine determined he was worth in 1982 into that index fund, it would have grown to more than $8 billion today.

The math is right . . . the S&P 500 has increased about 4,000% since 1982. But why 1982? The author selected 1982 for a reason, although he doesn’t say what the reason is.

He tosses off 1982 like one date is as good as another so let’s go with 1982, and relies on readers not knowing or caring what he’s up to.

In 1982, the stock market had been flat for almost 15 years, after which it took off on the greatest bull market in history. Today, in 2015, anyone can tell you that you should have invested your entire net worth in the stock market in 1982. Even a modest $25,000 investment in 1982 would have allowed you to take up finger-painting and still be a millionaire today.

Making great investment decisions retroactively is very easy, like taking a test when you already know the answers.

The author dishonestly uses the S&P 500 as a proxy for average economic performance but picks a starting point, 1982, from which stock market performance was not only not average, it was historically unprecedented. It was the optimal investment point in American history.

Same objection applies to his previous example of a hypothetical S&P 500 investment in 1974. Why 1974? Because in 1974, the stock market was lower than any point since the early 1960s, and in hindsight can be identified as an optimal investment point for maximum return.


Illusions of Patterns and Patterns of Illusion

26 May 2012 /

In 1978, [Leonard] Koppett revealed a system that he claimed could determine, by the end of January every year, whether the stock market would go up or down in that calendar year. [Koppett’s system] worked for eleven straight years, from 1979 through 1989, got it wrong in 1990, and was correct again every year until 1998. But although Koppett’s predictions were correct for a streak of eighteen out of nineteen years, I feel confident in asserting that his streak involved no skill whatsoever. Why? Because Leonard Koppett was a columnist for Sporting News, and his system was based on the results of the Super Bowl, the championship game of professional football. Whenever the team from the (original) National Football League won, the stock market, he predicted, would rise. Whenever the team from the (original) American Football League won, he predicted the market would go down. Given that information, few people would argue that Koppett was anything but lucky. Yet had he had different credentials — and not revealed his method — he could have been hailed as the most clever analyst since Charles H. Dow.


Drink Recipe

9 Aug 2011 /

This is a great drink to beat the heat and smooth out market volatility.

Pour some rum over ice and top it off with cola. Garnish with a lime wedge (optional).

I need to think of a name for this . . .


There is No Such Thing as Information Overload

9 Feb 2010 /
Edward Tufte 'Presenting Data and Information Lecture'

Looking over my notes from an Edward Tufte course . . .

There is no such thing as information overload, just bad design.

  • Example: Google News presents hundreds of links on a single page and no one complains about information overload.
  • Example: The financial section of the newspaper presents thousands of numbers and no one complains about information overload.

Obama the Entertainer

2 Mar 2009 /

The Dow Jones Industrial Average dropped by 300 points to end below the 6800 mark for the first time in nearly 12 years, as a broad-based selloff seized the markets, sending shares lower in every sector. The S&P 500 briefly dropped below 700 for the first time since October 1996 before ending just at that level amid across-the-board declines, including drops of more than 6% in basic materials, energy, financial and industrial sectors. The Nasdaq Composite Index fell 4%.

WSJ.com, March 2, 2009

CONGA!


Let’s Get Fiscal

17 Oct 2008 /
Lightning on the Balcony

A simple rule dictates my buying: Be fearful when others are greedy, and be greedy when others are fearful.

BIG DEAL! I said the same thing last week!

Who needs Warren Buffett when you have a good dog?

Talking about Warren Buffett is making me hungry because his name looks like “buffet.” I wish someone would open an all-you-can-eat buffet restaurant for dogs.

I would invest in that . . .

— Lightning paw


Dog Investors

9 Oct 2008 /

Hi Everybody —

I saw this headline today on an Associated Press story:

Stocks Fluctuate as Economic Worries Dog Investors

Lightning on the Balcony

As a dog investor myself, I just wanted to assure you that I am not worried. In fact, I’m sleeping like a puppy . . .

The key to investing is taking a long-term view of the market. Stocks are down? It’s a buying opportunity!

Among the stocks I’m currently recommending are

  • PetSmart (PETM) – Woof woof!
  • Volcom (VLCM), Under Armour (UA) – I see lots of young humans wearing these brands.
  • BJ’s Restaurants (BJRI) – I’ve never been but my owner says it’s really good and always crowded!
  • Sonic Corporation (SONC) – I love the commercials with the two people talking in the car! So funny!

— Lightning paw


Good News, Bad News

8 Oct 2008 /

First the bad news: ARE YOU KIDDING ME?! THERE’S NOTHING BUT BAD NEWS! THE HOUSING MARKET HAS COLLAPSED! GLOBAL MARKETS ARE IMPLODING! EVERYTHING IS SPINNING OUT OF CONTROL! THE FALCON CANNOT HEAR THE FALCONER! THE CEREMONY OF INNOCENCE IS DROWNED! THE BEST LACK ALL CONVICTION WHILE THE WORST ARE FULL OF PASSIONATE INTENSITY! EVERYBODY PANIC!

OK, now the good news: Hmmm . . . well . . . as long as I have a job, I can make enough to live on . . . I think . . .


Depression 2.0

19 Jul 2008 /

Mr. Obama is proposing to raise taxes on capital gains and dividends by a staggering two-thirds, moving the rate up 10 percentage points to 25%, which could curtail investment and business on Wall Street, a backbone of the city’s and state’s economy.

OK, let me get this straight . . . the stock market’s dropping, banks are failing from lack of liquidity, no one wants to invest in American companies, and Obama’s solution is to raise the capital gains tax?!

In the event of an Obama presidency, I will taking a long position in blankets, canned goods and shotgun shells . . .


This Doesn’t Look Good, Indy

10 Jul 2008 /

IndyMac, my former employer, laid off another 3,800 people this week, more than half the remaining work force. I got the axe myself almost exactly a year ago.

Prediction — at job interviews, these people will hear something I heard a lot during my own interviews: “We’re seeing a lot of applicants from the mortgage industry.”

Yeah . . . tell me something I didn’t know.

The Elite Mortgage Daily Blog has helpfully provided a brief history of IndyMac stock:

A Brief History of IndyMac Stock


Warren Buffett Gets the Last Laugh

10 Mar 2004 /

Warren Buffett published his annual letter to Berkshire Hathaway shareholders this week:

Our gain in net worth during 2003 was $13.6 billion, which increased the per-share book value of both our Class A and Class B stock by 21%. Over the last 39 years (that is, since present management took over) per-share book value has grown from $19 to $50,498, a rate of 22.2% compounded annually.

Continue reading Warren Buffett Gets the Last Laugh