As you mull over different investment choices, no doubt the market collapse of 2008-2009 is still fairly fresh in your mind. An event like that can create a long lasting bias to stay away from investments that burned us. We then often look for reasons to support our position. If you are looking for a reason to avoid investing in the stock market, I can give you a few that come to mind quickly. Continue Reading…
Don’t Say You Weren’t Warned About Small Company Stocks
Last year was a good year in the stock market. For example, the S&P 500 returned 15 percent in 2010. The long run average for that index is about 10 percent. Foreign markets didn’t fare quite as well. An index of foreign stocks in developed economies returned only about 8 percent. That’s because investors were worried about Europe. Several countries had overspent their budgets and were threatening default. We saw young people rioting in the streets as authorities wrestled with whether to raise the retirement age from 60 to 62. That sort of news scares investors and the returns in Europe reflected that. Continue Reading…
Mad Advice from Mad Money’s Jim Cramer!
When markets are down we tend to start looking for solutions. Maybe somebody out there has the stock market all figured out and can get us through tough times. I’ve come to believe you can sell just about anything if you put it in the right package, including investment advice. A sizable audience tunes into Jim Cramer’s Mad Money program shown nightly on CNBC. Whether they are there for advice or entertainment, I’m not sure. Perhaps a little bit of both. I should say at the outset that I don’t watch the show, but I’ve seen brief clips of it while surfing channels. Jim Cramer screams and yells, touting various stocks while flailing around like a rabid dog (my apologies to Ole Yeller). It’s a unique way of delivering investment recommendations and at times has been one of CNBC’s largest watched programs. Continue Reading…
Economics 101: People Behave Rationally?
In the basic economics course, a first principle we teach students is the theory of rational behavior. Stated simply, individuals make rational decisions about how to spend their time and money to bring them maximum satisfaction. If I buy a hamburger for $3, it’s because I think the hamburger will bring me more satisfaction than the $3 in my pocket or any other available choices at the time. Given that most of us have limited budgets and virtually unlimited wants, we often buy more of something if it goes on sale or less if the price goes up. We go about life everyday constantly making these decisions, even though on a somewhat subconscious level. Continue Reading…
In Spite of Triple Play, Chicken Little is Still Wrong!
I began writing this column last Monday, a memorable day to say the least. I got to the office early to prepare for a 9:00 a.m. class and to begin work on this article. As I logged on to the Internet, I first saw the news of Lehman filing bankruptcy. Then, powerhouse Merrill Lynch was being sold to Bank of America. Finally, the world’s largest insurance company, AIG, was in desperate need of capital due to mounting losses, not from paying off hurricane claims mind you, but rather from portfolio investments going sour. Continue Reading…