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Casey Clarke

Investor or Speculator – Part II

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If you think about the last time we had widespread social strife and turmoil in the United States in tandem with expensive financial markets, your recollection will probably take you back to the sixties. Between anti-war protests, the civil rights movement, entitlement reform, and a re-tooling of criminal justice policies and laws, there was plenty of fodder for calm, dispassionate chats with friends and family. It’s probably no coincidence that this swell of activity came toward the end of a post-World War II economic expansion that brought economic comfort to many and stock markets to rather lofty heights. What followed,…

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Investor or Speculator – Which Are You?

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Speculative manias are incredibly difficult to navigate without injury. For every millionaire produced by the technology bubble of the late 1990’s, there are countless stories of people losing their life savings or worse. Fast-moving markets that are well beyond any reasonable assessment of fair value can reverse course without warning, reason, or sympathy for the investors who don’t have the good fortune to exit the game before the music stops. This is the problem with speculation: because, like moths to a flame, we’re attracted to those assets that are rapidly going up in price and garnering enthusiastic praise, there is…

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The “Risk-Free” Domino

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We’ve long scoffed at the term “risk-free” when referring to U.S. government bonds as there have been countless times when they’ve fluctuated in value well beyond what most would consider “risk-free”. Volatility tends to show up in anything that’s traded freely, in markets, by humans. However, the greater than 40% decline in long-dated U.S. government bond prices since the summer of 2020 has completely obliterated any remaining notion of U.S. sovereign debt being devoid of risk. There are really important lessons and implications to this bond implosion. First, the lessons: Lesson #1 No investment is risk-free. Anything that trades on…

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Smart People Thinking the Same Way

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The only thing worse than a group of nitwits sharing silly ideas is a group of smart people all thinking the same way. The dullards are quickly discovered as such, but the smart people tend to command an undiscerning following. What’s also evident is that individual thinking tends to be more intelligent than intelligent people thinking together. The reason for this is groupthink. The assumption that because someone is intelligent, their thinking is sound and it’s this assumption that short-circuits others’ thinking. In this way, groups of highly intelligent people can give village idiots a good run for their money,…

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Sea Change

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It’s hard to grasp the significance of a situation that plays out one day at a time over years. Little changes happen periodically and intermittently that get us to a place that eventually looks and feels very different. But, because we were part of those changes along the way, we have to work to shake off the familiarity of the world around us and remember the one that existed before. And, if we reach the edges of our lived experiences, we may lean on historical record to paint an even broader, more objective picture. There are only a limited number…

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Markets, Jobs, and AI, Oh My!

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Key Points: Economic growth is still slowing despite the talk of a “soft landing”. Given that inflation will likely pick up in the coming months, this creates an environment where the Fed and government can’t rescue markets like they have in the past (due to the risk of exacerbating inflation). The labor force is likely significantly weaker than the low unemployment rate would imply as evidenced by the dramatic rise in the number of disabled workers since 2021 and the negative productivity that exists within the economy. The end result is that economic output per unit of input is weak…

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Market Update – Still a Bear Market!

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There are two environments where it’s most difficult for us as investors to keep our emotions in check and stick to our gameplan. First, when markets are falling and we’re fighting the urge to sell out at the worst possible time, and second, like right now, when markets seem to be moving relentlessly higher and we’re compelled to chase them. Of course, the important question is whether we’re in an environment that’s friend or foe to those markets we’re tempted to chase since the former would justify the risk-taking while the latter would eventually punish it. As always, the best…

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Exiting Financial Repression

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A few months back, we wrote about the Bendy Road, which highlighted how the most prudent path forward for investors, in our opinion, wouldn’t be without some excitement along the way. After all, any worthwhile road trip must have its fair share of changing scenery and moments of exhilaration. There is rarely a straight, perilless path to anywhere worth going. After a fantastic start to the year for more economically defensive asset categories such as treasury bonds and precious metals, the month of May brought an inevitable pullback in prices that, although deeper than one would like, isn’t at all…

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Little Victories

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One of the human impulses that’s most destructive to long-term investment success is the desire to maximize returns regardless of the risk in doing so. Whether this manifests in buying the popular stock of the day hoping for similar results in the future or buying a seemingly more diversified stock market index after a historically stellar run, the allure of good returns can distract us from what matters most – avoiding large losses. Although investing in “the market” via an index fund may not feel like it, at the wrong point in time it can be akin to swinging for…

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A Bendy Road

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The experience one expects to have in financial markets comes down largely to whether he or she believes market forces are more natural or artificial in nature. By natural, I’m referring to more free-flowing, random, and at times chaotic, whereas artificial represents controlled, planned, and efficient. An investor couldn’t be blamed for thinking the latter given the tremendous efforts monetary authorities and governments generally have made in recent years to steer favorable market outcomes. This effort to control markets, to create a straighter path, has led many to believe that positive investment results are assured and risks of meaningful losses…

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