In my recent commentary, I showed that if an investor couldn’t handle a 12% drawdown in stocks then they really have no business investing heavily in stocks at all since 12% is quite unremarkable and common for stocks. That was essentially scratching the surface of what I mean by emotional capacity for risk.
I also mentioned that we don’t often know our true risk tolerance until it is tested, which is why I also make sure to identify clients’ financial capacity for risk using stress tests within their financial projections.
So, I wanted to briefly provide a real-world example of this exercise. Continue reading “How Your Financial Plan Drives Investment Strategy”
I admit it. I’m not perfect. It’s possible I possess a quality or two that occasionally drive my wife crazy (not in a good way). I’m really curious to hear her response upon reading this, btw.
One of those qualities is that I’m annoyingly, obsessively rational. Sometimes this may make me come off as “cold” or blunt, which isn’t always ideal, but it does make me extremely well-suited to manage money.
The reason this quality is an advantage in investing is because markets are not always rational precisely because market participants aren’t always rational. In fact, people become quite emotional when it comes to their money…understandably so. But that means people who can leave emotions out of it and remain objective have an advantage over time. Continue reading “This Quality Drives My Wife Nuts”
As just one illustration of what’s taking place in this market, Tesla stock gained over $115 billion today (yes, billion with a “B”) on the news that Hertz has placed an order for 100,000 vehicles over the next 14 months totaling about $4 billion in revenue. That’s almost 30x the one-time sale! Not earnings but SALES!
Put another way, Tesla added two entire Ford Motor Company’s in a single day (based on $60+ billion market cap)! Ford sells over 4 million vehicles worldwide each year and, yet, Tesla stock increased by two Ford Motor Company’s (equivalent to 8 million cars annually) in a single day on the news of a 100,000 one-time fleet sale over 14 months.
Christopher Bloomstran points out, “As of today, $TSLA is valued above the entire global auto industry, PLUS Uber, Lyft, Progressive, GEICO (if public), Allstate, Duke Energy & Dominion Energy.”
To put that in perspective, understand that there are about 74 – 78 million cars sold globally and Tesla sells about 1 million of those yet Tesla is valued more than the rest of the entire global auto industry combined. Continue reading “Unstoppable Tesla”
I just wanted to share a few charts that do a great job putting the current market environment in perspective.
First, this is the price-to-sales ratio of U.S. tech stocks from Jeff Weniger rivaling that of the Dot-Com Bubble mania.
Continue reading “Divergence: A Few Charts”
Please forgive another one of my brief digressions from markets and economics. However, I believe it’s important to exercise conscious gratitude. It is so easy to get caught up in the things we are chasing (e.g. the things we want or things we want to do) that we forget to be grateful for the things we have.
Looking at the big picture, there’s probably never been a better time to be alive. Continue reading “Big Picture: Never A Greater Time To Be Alive”