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April 9, 2014

Jonathan Tobin: Why Did Kerry Lie About Israeli Blame?

Samuel G. Freedman: A resolution 70 years later for a father's unsettling legacy of ashes from Dachau

Jessica Ivins: A resolution 70 years later for a father's unsettling legacy of ashes from Dachau

Kim Giles: Asking for help is not weakness

Kathy Kristof and Barbara Hoch Marcus: 7 Great Growth Israeli Stocks

Matthew Mientka: How Beans, Peas, And Chickpeas Cleanse Bad Cholesterol and Lowers Risk of Heart Disease

Sabrina Bachai: 5 At-Home Treatments For Headaches

The Kosher Gourmet by Daniel Neman Have yourself a matzo ball: The secrets bubby never told you and recipes she could have never imagined

April 8, 2014

Lori Nawyn: At Your Wit's End and Back: Finding Peace

Susan B. Garland and Rachel L. Sheedy: Strategies Married Couples Can Use to Boost Benefits

David Muhlbaum: Smart Tax Deductions Non-Itemizers Can Claim

Jill Weisenberger, M.S., R.D.N., C.D.E : Before You Lose Your Mental Edge

Dana Dovey: Coffee Drinkers Rejoice! Your Cup Of Joe Can Prevent Death From Liver Disease

Chris Weller: Electric 'Thinking Cap' Puts Your Brain Power Into High Gear

The Kosher Gourmet by Marlene Parrish A gift of hazelnuts keeps giving --- for a variety of nutty recipes: Entree, side, soup, dessert

April 4, 2014

Rabbi David Gutterman: The Word for Nothing Means Everything

Charles Krauthammer: Kerry's folly, Chapter 3

Amy Peterson: A life of love: How to build lasting relationships with your children

John Ericson: Older Women: Save Your Heart, Prevent Stroke Don't Drink Diet

John Ericson: Why 50 million Americans will still have spring allergies after taking meds

Cameron Huddleston: Best and Worst Buys of April 2014

Stacy Rapacon: Great Mutual Funds for Young Investors

Sarah Boesveld: Teacher keeps promise to mail thousands of former students letters written by their past selves

The Kosher Gourmet by Sharon Thompson Anyone can make a salad, you say. But can they make a great salad? (SECRETS, TESTED TECHNIQUES + 4 RECIPES, INCLUDING DRESSINGS)

April 2, 2014

Paul Greenberg: Death and joy in the spring

Dan Barry: Should South Carolina Jews be forced to maintain this chimney built by Germans serving the Nazis?

Mayra Bitsko: Save me! An alien took over my child's personality

Frank Clayton: Get happy: 20 scientifically proven happiness activities

Susan Scutti: It's Genetic! Obesity and the 'Carb Breakdown' Gene

Lecia Bushak: Why Hand Sanitizer May Actually Harm Your Health

Stacy Rapacon: Great Funds You Can Own for $500 or Less

Cameron Huddleston: 7 Ways to Save on Home Decor

The Kosher Gourmet by Steve Petusevsky Exploring ingredients as edible-stuffed containers (TWO RECIPES + TIPS & TECHINQUES)

Jewish World Review

The secret to financial success: Use ignorance to your advantage

By Morgan Housel


Idea Man from Bigstock




To become a better investor, think more like a scientist


JewishWorldReview.com | In his excellent book, "Ignorance: How It Drives Science," Stuart Firestein writes:

"Scientists don't concentrate on what they know, which is considerable but also minuscule, but rather on what they don't know ... Forget the answers, work on the questions ...

"Being a scientist requires having faith in uncertainty, finding pleasure in mystery, and learning to cultivate doubt. There is no surer way to screw up an experiment than to be certain of its outcome."

The theme of Firestein's book is that ignorance in science is a virtue. What scientists don't know sparks questions, fuels imagination and leads to experiments that ultimately expand the universe of what we do know. The center of attention is what you don't know but are trying to figure out.

Many investors, I feel, take the opposite approach. They focus relentlessly on what they do know, and treat suggestions that they don't know everything as an attack on their existing beliefs (anyone familiar with the comment section of articles knows what I mean). They have their answers, and find no need for questions.

Three years ago, the S&P 500 was at 1,000 and had a cyclically adjusted P/E ratio of 23, which some noted was 60 percent above its long-term average. Stocks, therefore, were bound to fall. Many were sure of it. They had their answer, and no need to ask further questions.



Three years later, the market is up more than 60 percent, and the P/E ratio has barely budged.

The huge body of what we didn't know -- how much earnings would rise, how much the economy would recover -- turned out to be much more important than what we did know, the P/E ratio in 2010. Investors' experiment of not owning stocks for the last three years was "screwed up," in Firestein's words, because they started off certain of its outcome.

Apple is likely the most innovative company of modern history. A year ago, investors were rigidly convinced that a combination of superior products, fast growth and what looked like a cheap stock meant Apple shares could only go one way: up. Analysts had an average price target of nearly $900 a share. They had their answers and no need to ask further questions.

But shares are down 29 percent in the last year, and they trade at less than half analysts' average price target. The stuff we didn't know a year ago -- the dynamics of competition, investor appetite for other assets, etc. -- became much more important than what we did know back then.

Both of these observations are possible only with the advantage of hindsight. But that's precisely the point. Some of the most important variables that will determine where stocks go are things we just don't know today. But many investors don't think like that. They take what they know and assume it's what counts.

Blogger Shane Parrish borrows the term "fragilista" from Nassim Taleb to describe this type of thinking, and writes:

"Fragilistas are naive rationalists. They think that the reasons for things are, by default, accessible to them. They know the cause and effect of everything, or at least that's what they think.


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"Because they mistake what they don't know for the nonexistent, they exhibit a strong -- if mistaken -- regard for the powers of reason. They lack humility and respect for the first law of ecology: we can never do merely one thing.

"Any action we take, and in this case inaction is a course of action, results in some unwanted consequences."

Food for thought.

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Morgan Housel, a columnist at The Motley Fool, is a two-time winner, Best in Business award, Society of American Business Editors and Writers and Best in Business 2012, Columbia Journalism Review.


Previously:


How to effectively fight investors' greatest enemy

Four mistakes that make everyone a bad investor

Learning from the past, and the Next Big Tren

What newspapers were saying when you should have been buying

Why you never learn from your investment mistakes

The curse of success, and why most mutual funds fail miserably

If you know only five things about investing, make it these

Why spotting bubbles is so much harder than you think

When smart investors do stupid things

The deep downside of home ownership

The biggest retirement myth ever told

He's rich, smart and old: Listen to him

Admit it: No one has any idea what's going on

Gold collapse: The start of something big?

BAD NEWS: EVERYONE IS RIGHT!

Twitter: The carnival barker of investing

Warning: Don't waste your capital being fooled by profit prophets

25 important things to remember as an investor

New paradigm for both drivers and car companies

Biases that make you a bad investor

Nine financial rules you should never forget

Gaining from financial destruction

How to read financial news

Housing: Partying like it's 1925

A rebuttal to student loan horror stories

CONGRATULATIONS: We just saved half a trillion dollars

End this crazy tax: It will boost the economy

Medicare: A dangerously good deal

Economic future looks bright

The Biggest Threat to Your Portfolio (It's Not What You Think)

Bond Market Bull Run dead at 30



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