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December 2, 2014

Jonathan Tobin: Defending the Right to a Jewish State

Heather Hale: Compliment your kids without giving them big heads

Megan Shauri: 10 ways you are ruining your own happiness

Carolyn Bigda: 8 Best Dividend Stocks for 2015

Kiplinger's Personal Finance editors: 7 Things You Didn't Know About Paying Off Student Loans

Samantha Olson: The Crucial Mistake 55% Of Parents Are Making At Their Baby's Bedtime

Densie Well, Ph.D., R.D. Open your eyes to yellow vegetables

The Kosher Gourmet by Megan Gordon With its colorful cache of purples and oranges and reds, COLLARD GREEN SLAW is a marvelous mood booster --- not to mention just downright delish
April 18, 2014

Rabbi Yonason Goldson: Clarifying one of the greatest philosophical conundrums in theology

Caroline B. Glick: The disappearance of US will

Megan Wallgren: 10 things I've learned from my teenagers

Lizette Borreli: Green Tea Boosts Brain Power, May Help Treat Dementia

John Ericson: Trying hard to be 'positive' but never succeeding? Blame Your Brain

The Kosher Gourmet by Julie Rothman Almondy, flourless torta del re (Italian king's cake), has royal roots, is simple to make, . . . but devour it because it's simply delicious

April 14, 2014

Rabbi Dr Naftali Brawer: Passover frees us from the tyranny of time

Greg Crosby: Passing Over Religion

Eric Schulzke: First degree: How America really recovered from a murder epidemic

Georgia Lee: When love is not enough: Teaching your kids about the realities of adult relationships

Cameron Huddleston: Freebies for Your Lawn and Garden

Gordon Pape: How you can tell if your financial adviser is setting you up for potential ruin

Dana Dovey: Up to 500,000 people die each year from hepatitis C-related liver disease. New Treatment Has Over 90% Success Rate

Justin Caba: Eating Watermelon Can Help Control High Blood Pressure

The Kosher Gourmet by Joshua E. London and Lou Marmon Don't dare pass over these Pesach picks for Manischewitz!

April 11, 2014

Rabbi Hillel Goldberg: Silence is much more than golden

Caroline B. Glick: Forgetting freedom at Passover

Susan Swann: How to value a child for who he is, not just what he does

Cameron Huddleston: 7 Financial Tasks You Should Tackle Right Now

Sandra Block and Lisa Gerstner: How to Profit From Your Passion

Susan Scutti: A Simple Blood Test Might Soon Diagnose Cancer

Chris Weller: Have A Slow Metabolism? Let Science Speed It Up For You

The Kosher Gourmet by Diane Rossen Worthington Whitefish Terrine: A French take on gefilte fish

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

What drives me absolutely crazy about finance

By Morgan Housel





With investing still more art than science, what you need to know


JewishWorldReview.com | I was in Orlando this weekend at the American Association of Individual Investors annual conference. Investor James O'Shaughnessy, whom I greatly admire, gave a wonderful talk called "What Works on Wall Street." It got me thinking about something important.

It's actually one of the things that drives me crazy about finance.

O'Shaughnessy began noting that in Benjamin Graham's day, the first half of the 20th century, good financial data was extremely hard to come by and good historical data going back more than a few years was nonexistent. This made studying finance close to impossible. Graham (Warren Buffett's early mentor) once said that until more data was available, investors couldn't dare call their trade a profession. It was an art, but not a profession.

Fast-forward almost a century, and now we're drowning in financial data. Anyone with a $100 cellphone and Internet access can peruse historical market data going back decades for free on Yahoo! Finance. Ben Graham couldn't dream up such an incredible resource if he tried.



When computers took off in the mid-1990s, O'Shaughnessy gathered reams of historical market data to figure out what kind of investing techniques have actually outperformed over the long run. He spent years crunching the data and came to some smart conclusions, which I'll oversimplify as:


  • Buy cheap stocks, ranked on various metrics like price to earnings and price to sales.

  • Make sure they're financially sound stocks. Avoid highly levered companies.

  • Buy a basket of them.

  • Rebalance your portfolio once a year, selling what's expensive and buying what's cheap.

Doing this over time works. You can beat the market. The data on it is persuasive.

So, why doesn't everyone do it?

According to O'Shaughnessy, it's partly because few have the discipline to follow a formulaic approach. Investors like to tell stories about their stocks. They invest in what's flashy or companies they know and love. And those companies, O'Shaughnessy says, tend to be expensive. Twitter. Facebook. Tesla. People are crazy about these companies, and their shares are pricey. So as a group, they tend to underperform over time.

The cheap companies -- whose stocks do well over time -- tend to be companies you're embarrassed to hold, or haven't heard of. O'Shaughnessy mentions DirecTV, which currently comes up on his list of cheap stocks. "People hate the company," he said. "Every time they send someone out to my home, they look like ex-cons. My wife doesn't want them in the house. They show up and they look like they just got out of Folsom prison." It's not a sexy company. But it's a cheap stock. And cheapness is what could make it do well over time.

The crux of the investor's problem, O'Shaughnessy says, is that most people think of a stock's name, not its underlying characteristics. "A great company is not always a great stock, and a great stock is not always a great company."

I tend to agree with this.

But it also kind of drives me nuts.

Why?

Because other equally smart and equally successful investors could give the exact opposite presentation and be just as convincing.

When Warren Buffett once talked about why he bought Coca-Cola stock, he said, "Forget about share of market, I'm talking about share of mind." People love Coke. It's the company's most valuable asset. And that intangible, warm-fuzzy moat explains why Coke stock has done so well over time.

The central thesis of Buffett's investing approach over the last 30 or 40 years is buying good businesses. Ideally, you want to buy them at a bargain price, but Buffett clearly states that quality can trump value. He wrote to shareholders in 1989:

"Shortly after purchasing Berkshire, I acquired a Baltimore department store, Hochschild Kohn, buying through a company called Diversified Retailing that later merged with Berkshire. I bought at a substantial discount from book value ... How could I miss? So-o-o -- three years later I was lucky to sell the business for about what I had paid. ...


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"I could give you other personal examples of 'bargain-purchase' folly but I'm sure you get the picture: It's far better to buy a wonderful company at a fair price than a fair company at a wonderful price. Charlie understood this early; I was a slow learner. But now, when buying companies or common stocks, we look for first-class businesses accompanied by first-class managements."

Philip Fisher, another of Buffett's early idols, emphasized the "scuttlebutt" approach to investing, studying a company's intangibles that don't show up on financial statements -- things like management integrity, openness to change, supplier relations and customer awareness. He, too, wanted good businesses as opposed to just cheap businesses. Peter Lynch followed a similar approach when jumping on the beds at LaQuinta Inn and drinking the coffee at Dunkin' Donuts before investing. There's even long-term data showing the most admired companies outperform the market over the long run.

If any one of these investors gave a presentation about how warm-fuzzy business factors can trump numeric value, I guarantee they'd be just as persuasive as O'Shaughnessy.

Even though we have more financial data than ever, investing is just as much an art as it was when Ben Graham criticized it almost a century ago. Investing is not a hard science like chemistry or physics. There are no laws or unbreakable rules. Equally smart people can have opposite views and, oddly, be equally successful. Keep this in mind when determining what works.

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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:


Now is not the time to do anything stupid

Sometimes, things really are different this time

The things you shouldn't pay attention to

Putting a gap between you and stupid

8 fascinating financial insights from latest Nobel Prize-winner

Investing like a psychopath

Why you're so bad with your money

8 questions you might have about the debt ceiling

An open letter to everyone under age 30

15 biases that make you do dumb things with your money

If this scares you, you shouldn't be investing

What I plan to do when the market crashes

The three most important words in investing

Monkeys and investing

Two types of risk, two types of bubbles

The secret to financial success: Use ignorance to your advantage

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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