The Steve Pomeranz Show

Weird Oil Prices And The Search For High Dividends By now you’ve heard that in some places in the world, interest rates have turned negative. When interest rates are negative, it means you can borrow money and receive interest payments from the bank instead of paying interest. I know it sounds crazy and it is crazy—a crazy, messed-up thing. But now because of Covid-19, something crazier just happened. It’s called negative oil prices. That’s right, the price of oil went below $0. Essentially, it means that a seller of oil, like the US or Saudi Arabia, Russia and others, could actually pay the buyer to take possession of the oil. It’s like filling up your tank at the gas station and getting paid to do it. Crazy! How could this happen? Oil Surplus Meets Covid-19 Well, it seems the world is running out of places to store all the excess oil that continues to build up. The excess continues to rise because production has remained strong just at the time demand has fallen off a cliff. All the storage tankers are filling up, all of the ships with tanks to hold oil are filling up, and even though Russia and Saudi Arabia have come to an agreement to start reducing their output in May, demand is so incredibly weak right now that it has created this whopping excess. It’s another example of the unexpected effects brought on by an unprecedented viral calamity. One trader, writing in Forbes Magazine blamed the sharp drop on an exchange-traded fund with the symbol USO that holds oil futures in its portfolio. His reasoning had to do with an anomaly in the way the monthly contracts traded. So, oil has become incredibly volatile, just like the stock market. In early March, oil prices had fallen 75% since the beginning of the year, and as I just mentioned, even went negative for a brief period of time. Last Thursday though, oil rebounded by 20%, but it did little to erase the losses since the beginning of the year. The two most important issues going forward will be the reduction in production in an attempt to balance the supply with demand, and also to see demand rise to meet supply. Both are very far apart right now, and it will take dramatic cuts in production to bring them in line. There is movement, however, because according to some reports, we are starting to see major cutbacks in production right now. Let’s keep an eye on this one. Re-Thinking Dividends Another theme I want to examine today is the question of dividends. Dividends are a very important source of income for investors and also represent a good percentage of the stock market’s historic rate of return. As companies experience significantly lower profits though, the portion of those profits that come to us as dividends may be affected. It makes sense that companies losing billions of dollars are going to drastically reduce, suspend, or eliminate their dividends. And that’s exactly what is happening in some industries. Some companies that have already suspended dividend payments are Ford, Delta, Carnival Cruise Lines, Las Vegas Sands, Marriott, Macy’s, just to name just a few. According to Goldman Sachs, the money paid to shareholders as dividends will likely be reduced by 25% in 2020—and that’s an average of the S&P 500. So which industries do you think will cut their dividends? 1. Energy, for one, based on oil at $20/ barrel. 2. Entertainment—which, with the exception of streaming, has basically disappeared. 3. Travel—there is none. 4. Restaurants—all closed. 5. Retailers with stores—I don’t have to explain that. Choosing those were pretty obvious. We can see that all around us. But what about bank stocks with the possibility of tons of bad loans? What about real estate with people deferring their rent or working from home? Will they ever go back to offices? Nursing home stocks with coronavirus protection issues?

Weird Oil Prices And The Search For High Dividends By now you’ve heard that in some places in the world, interest rates have turned negative. When interest rates are negative, it means you can borrow money and receive interest payments from the bank instead of paying interest. I know it sounds crazy and it is crazy—a crazy, messed-up thing. But now because of Covid-19, something crazier just happened. It’s called negative oil prices. That’s right, the price of oil went below $0. Essentially, it means that a seller of oil, like the US or Saudi Arabia, Russia and others, could actually pay the buyer to take possession of the oil. It’s like filling up your tank at the gas station and getting paid to do it. Crazy! How could this happen? Oil Surplus Meets Covid-19 Well, it seems the world is running out of places to store all the excess oil that continues to build up. The excess continues to rise because production has remained strong just at the time demand has fallen off a cliff. All the storage tankers are filling up, all of the ships with tanks to hold oil are filling up, and even though Russia and Saudi Arabia have come to an agreement to start reducing their output in May, demand is so incredibly weak right now that it has created this whopping excess. It’s another example of the unexpected effects brought on by an unprecedented viral calamity. One trader, writing in Forbes Magazine blamed the sharp drop on an exchange-traded fund with the symbol USO that holds oil futures in its portfolio. His reasoning had to do with an anomaly in the way the monthly contracts traded. So, oil has become incredibly volatile, just like the stock market. In early March, oil prices had fallen 75% since the beginning of the year, and as I just mentioned, even went negative for a brief period of time. Last Thursday though, oil rebounded by 20%, but it did little to erase the losses since the beginning of the year. The two most important issues going forward will be the reduction in production in an attempt to balance the supply with demand, and also to see demand rise to meet supply. Both are very far apart right now, and it will take dramatic cuts in production to bring them in line. There is movement, however, because according to some reports, we are starting to see major cutbacks in production right now. Let’s keep an eye on this one. Re-Thinking Dividends Another theme I want to examine today is the question of dividends. Dividends are a very important source of income for investors and also represent a good percentage of the stock market’s historic rate of return. As companies experience significantly lower profits though, the portion of those profits that come to us as dividends may be affected. It makes sense that companies losing billions of dollars are going to drastically reduce, suspend, or eliminate their dividends. And that’s exactly what is happening in some industries. Some companies that have already suspended dividend payments are Ford, Delta, Carnival Cruise Lines, Las Vegas Sands, Marriott, Macy’s, just to name just a few. According to Goldman Sachs, the money paid to shareholders as dividends will likely be reduced by 25% in 2020—and that’s an average of the S&P 500. So which industries do you think will cut their dividends? 1. Energy, for one, based on oil at $20/ barrel. 2. Entertainment—which, with the exception of streaming, has basically disappeared. 3. Travel—there is none. 4. Restaurants—all closed. 5. Retailers with stores—I don’t have to explain that. Choosing those were pretty obvious. We can see that all around us. But what about bank stocks with the possibility of tons of bad loans? What about real estate with people deferring their rent or working from home? Will they ever go back to offices? Nursing home stocks with coronavirus protection issues?

It’s wise to work hard and save money, but is denied gratification always necessary? Discover how you can “live rich” without the money!

It’s wise to work hard and save money, but is denied gratification always necessary? Discover how you can “live rich” without the money!

The latest on vaccines, cures, and treatments for COVID-19.

The latest on vaccines, cures, and treatments for COVID-19.

With Terry Story, a 31-year veteran with Keller Williams located in Boca Raton, FL During this week’s Real Estate Roundup, Steve spoke with Terry Story, 31-year veteran at Keller Williams, about how the real estate industry is adapting to the coronavirus environment. The Real Estate Industry Keeps on Keeping On In response to Steve asking about the current real estate market, Terry reported some recent real estate numbers from her neck of the woods—Palm Beach County in Florida: “Over the past 12 days, we’ve brought in 425 new pending sales contracts and a little over 700 new listings. So, basically, there are still new listings coming onto the market, and buyers and sellers are still coming together and bringing homes under contract.” How the Coronavirus Has Changed the Business However, Terry freely admits that the real estate market and everything around and interconnected with it has been significantly impacted by the coronavirus pandemic. “Everything is different, due mainly to social distancing and other health safety requirements. We are wearing masks, gloves, and sometimes booties. We cannot be in the home at the same time as the prospective buyer. Zoom and other social media conferencing programs are the new norm,” Terry said. “I’ve gone out and videotaped all my properties so that I can offer buyers virtual walking tours. You kind of just have to develop a new level of comfort with operating almost entirely online and through social media.” She also mentioned how the pandemic has changed bank policies regarding handling mortgage loans, making banks a bit more cautious because of so many people’s employment status being in jeopardy. As Terry explained, “The day before closing, the banks are re-verifying that the borrower is still gainfully employed, that their income is still the same, and that they don’t foresee any changes in their employment status.” But the state of the business overall is that Terry and other real estate agents nationwide are proving that when compassionate, creative, and goal-oriented approaches are used, even a worldwide pandemic can’t stop the industry. There are, of course, some hang-ups. Steve asked about sellers possibly being reluctant to have people traipsing through their homes. Terry said that the level of reluctance varies, mostly according to how motivated the seller is. She explained, “Obviously, the more motivated a seller is, the more willing they are to allow people into their home. It’s a two-way street of consideration: the seller allows us into their home and, in return, we’re taking extra precautions to make sure the home remains clean and safe for everyone.” Price Point Matters The pandemic, of course, is hitting every industry across the world, as evident by the millions of individuals filing for unemployment in the United States. Both buyers and sellers are likely to grow concerned about picking up or getting rid of a home during this time. Still, Terry emphasized that when things are done right—like sellers properly pricing their homes—good deals are getting done. She related the story of one property she handled recently that was put on the market on Good Friday and that had more than 30 showings over the Easter weekend. In the end, the seller got five offers and ended up selling the home for $28,000 more than their asking price. The moral of the story, according to Terry, is that “If the properties are priced right, especially if they’re vacant properties, then they’re moving.” If the house is vacant, then that helps as far as removing concerns sellers might have about a bunch of buyers invading their home and possibly exposing them to the virus. If you’d like to learn more about buying or selling a home, you can find plenty of help at Keller Williams’ website. Disclosure: The opinions expressed are those of t...

With Terry Story, a 31-year veteran with Keller Williams located in Boca Raton, FL During this week’s Real Estate Roundup, Steve spoke with Terry Story, 31-year veteran at Keller Williams, about how the real estate industry is adapting to the coronavirus environment. The Real Estate Industry Keeps on Keeping On In response to Steve asking about the current real estate market, Terry reported some recent real estate numbers from her neck of the woods—Palm Beach County in Florida: “Over the past 12 days, we’ve brought in 425 new pending sales contracts and a little over 700 new listings. So, basically, there are still new listings coming onto the market, and buyers and sellers are still coming together and bringing homes under contract.” How the Coronavirus Has Changed the Business However, Terry freely admits that the real estate market and everything around and interconnected with it has been significantly impacted by the coronavirus pandemic. “Everything is different, due mainly to social distancing and other health safety requirements. We are wearing masks, gloves, and sometimes booties. We cannot be in the home at the same time as the prospective buyer. Zoom and other social media conferencing programs are the new norm,” Terry said. “I’ve gone out and videotaped all my properties so that I can offer buyers virtual walking tours. You kind of just have to develop a new level of comfort with operating almost entirely online and through social media.” She also mentioned how the pandemic has changed bank policies regarding handling mortgage loans, making banks a bit more cautious because of so many people’s employment status being in jeopardy. As Terry explained, “The day before closing, the banks are re-verifying that the borrower is still gainfully employed, that their income is still the same, and that they don’t foresee any changes in their employment status.” But the state of the business overall is that Terry and other real estate agents nationwide are proving that when compassionate, creative, and goal-oriented approaches are used, even a worldwide pandemic can’t stop the industry. There are, of course, some hang-ups. Steve asked about sellers possibly being reluctant to have people traipsing through their homes. Terry said that the level of reluctance varies, mostly according to how motivated the seller is. She explained, “Obviously, the more motivated a seller is, the more willing they are to allow people into their home. It’s a two-way street of consideration: the seller allows us into their home and, in return, we’re taking extra precautions to make sure the home remains clean and safe for everyone.” Price Point Matters The pandemic, of course, is hitting every industry across the world, as evident by the millions of individuals filing for unemployment in the United States. Both buyers and sellers are likely to grow concerned about picking up or getting rid of a home during this time. Still, Terry emphasized that when things are done right—like sellers properly pricing their homes—good deals are getting done. She related the story of one property she handled recently that was put on the market on Good Friday and that had more than 30 showings over the Easter weekend. In the end, the seller got five offers and ended up selling the home for $28,000 more than their asking price. The moral of the story, according to Terry, is that “If the properties are priced right, especially if they’re vacant properties, then they’re moving.” If the house is vacant, then that helps as far as removing concerns sellers might have about a bunch of buyers invading their home and possibly exposing them to the virus. If you’d like to learn more about buying or selling a home, you can find plenty of help at Keller Williams’ website. Disclosure: The opinions expressed are those of t...

With Meg Tirrell, Senior Health and Science Reporter for CNBC To get a good idea of what drug companies are doing to create tests, treatments, and vaccines for the coronavirus, Steve spoke with Meg Tirrell, the Senior Health and Science reporter at CNBC. Meg has tracked public health emergencies from Ebola to Zika, so she has plenty of experience with pandemics. Testing For The Coronavirus Steve and Meg first talked about where we are on testing for the coronavirus. Meg reported that “testing capacity has ramped up dramatically in the United States from where it was. Now commercial companies have come in and the US is running something like more than a hundred thousand new tests per day. That’s still not enough. What everybody says is we need to have a much greater testing capacity if we’re going to be starting the economy back up again. We need to be able to know who’s infected, where the outbreaks are.” But there are still problems with the testing infrastructure, such as shortages of supplies needed to do the tests, things like swabs and protective equipment for people doing the testing. There’s a lot of variation in how well different states are doing as far as testing (Meg noted that Florida has done an excellent job so far on testing and on reporting test results) and, in Meg’s opinion, there needs to be more national coordination and guidance from the top. Steve noted he had read one of the problems was hospitals’ reluctance to switch testing platforms. Meg agreed that that is one of the problems. Roche tests were available in the early stage to the hospitals, so when Abbott came out later with a large supply, many facilities were slow or reluctant to make the change. Steve also pointed out that getting the economy open and running again is probably going to be heavily dependent on increased and better testing abilities, including the ability to do multiple tests and get fast results. According to Meg, “One of the new areas of technology that’s emerging is antibody tests—that’s a test to determine if you’ve been infected in the past and have developed antibodies that make you immune to the virus. But it still needs to be proven that you can’t be re-infected right away with this virus. Abbott just announced that it’s going to be launching an antibody test and that it’ll be supplying millions of tests in the U.S. by June. A lot of people are very hopeful that that will be kind of a passport showing you have immunity, so you can be back out in the world.” Steve had the idea that people could possibly have something like a QR code on their cell phone showing that they’re clear of infection. Coronavirus Treatments Steve asked Meg to do a quick recap of an earlier conversation they had about a possible treatment or vaccine drug being developed by the biotech company, Regeneron. Here’s the latest on Regeneron’s efforts from Meg: “Regeneron has a couple of different approaches and they’re moving incredibly quickly. The first is an antibody approach where they’re actually developing a brand-new drug for COVID-19. The way they’re doing that is with these mice that they’ve genetically engineered to have human immune systems. They essentially expose these mice to the novel coronavirus to get them to develop an immune response. They’re taking those antibodies that the mice generate and sifting through them to find the best ones that could be a potential medicine. This is an approach that they used successfully for Ebola and there is a lot of hope they’ll be able to do it again here. And they’ve accelerated their timelines on being able to get into doing human trials by early summer.

With Meg Tirrell, Senior Health and Science Reporter for CNBC To get a good idea of what drug companies are doing to create tests, treatments, and vaccines for the coronavirus, Steve spoke with Meg Tirrell, the Senior Health and Science reporter at CNBC. Meg has tracked public health emergencies from Ebola to Zika, so she has plenty of experience with pandemics. Testing For The Coronavirus Steve and Meg first talked about where we are on testing for the coronavirus. Meg reported that “testing capacity has ramped up dramatically in the United States from where it was. Now commercial companies have come in and the US is running something like more than a hundred thousand new tests per day. That’s still not enough. What everybody says is we need to have a much greater testing capacity if we’re going to be starting the economy back up again. We need to be able to know who’s infected, where the outbreaks are.” But there are still problems with the testing infrastructure, such as shortages of supplies needed to do the tests, things like swabs and protective equipment for people doing the testing. There’s a lot of variation in how well different states are doing as far as testing (Meg noted that Florida has done an excellent job so far on testing and on reporting test results) and, in Meg’s opinion, there needs to be more national coordination and guidance from the top. Steve noted he had read one of the problems was hospitals’ reluctance to switch testing platforms. Meg agreed that that is one of the problems. Roche tests were available in the early stage to the hospitals, so when Abbott came out later with a large supply, many facilities were slow or reluctant to make the change. Steve also pointed out that getting the economy open and running again is probably going to be heavily dependent on increased and better testing abilities, including the ability to do multiple tests and get fast results. According to Meg, “One of the new areas of technology that’s emerging is antibody tests—that’s a test to determine if you’ve been infected in the past and have developed antibodies that make you immune to the virus. But it still needs to be proven that you can’t be re-infected right away with this virus. Abbott just announced that it’s going to be launching an antibody test and that it’ll be supplying millions of tests in the U.S. by June. A lot of people are very hopeful that that will be kind of a passport showing you have immunity, so you can be back out in the world.” Steve had the idea that people could possibly have something like a QR code on their cell phone showing that they’re clear of infection. Coronavirus Treatments Steve asked Meg to do a quick recap of an earlier conversation they had about a possible treatment or vaccine drug being developed by the biotech company, Regeneron. Here’s the latest on Regeneron’s efforts from Meg: “Regeneron has a couple of different approaches and they’re moving incredibly quickly. The first is an antibody approach where they’re actually developing a brand-new drug for COVID-19. The way they’re doing that is with these mice that they’ve genetically engineered to have human immune systems. They essentially expose these mice to the novel coronavirus to get them to develop an immune response. They’re taking those antibodies that the mice generate and sifting through them to find the best ones that could be a potential medicine. This is an approach that they used successfully for Ebola and there is a lot of hope they’ll be able to do it again here. And they’ve accelerated their timelines on being able to get into doing human trials by early summer.

I’m sure you all noticed the empty store shelves of toilet paper at the very beginning of this coronavirus crisis. My reaction at the time was astonishment. Why are people hoarding toilet paper? It’s not as if there’s a hurricane coming? I couldn’t understand the bottled water shortage either for the same exact reason. I wrote it off as a demonstration of those certain kinds of people who don’t think about what they do and just react emotionally to unexpected things in their lives. They have a herd mentality, doing whatever everyone else does. In the meantime, we “smart” people are thoughtful and rational in the way we live our lives. Right? Well, alas, I have been forced to rethink my conclusions after reading an article by Will Oremus from the online business magazine, Marker. So, getting back to the question: Were the empty shelves a product of hoarding or was there something else going on? And by the way, this phenomenon wasn’t just a U.S. thing; this was happening in Hong Kong, Australia, the United Kingdom, as well as in the United States Now I’m pretty sure there was some panic-buying. All you had to do was look at all of the pictures of empty shelves in your news feed and something got unleashed in your primitive brain, scattering your wits to the wind. I mean who doesn’t suffer from FOMO occasionally (FOMO is the fear of missing out, in this case having NO toilet paper). But maybe it’s not irrationality at hold here. Maybe it’s something entirely different—something entirely…..boring. Maybe it’s just a supply-chain issue. A couple of things we know for certain. A lot more of us are staying home so we are using more paper at home. Fine. And if we’re home, we are using less paper in the office and in restaurants which would normally take up the slack. It turns out that there are two separate markets for the toilet paper that is produced in the U.S. There’s the consumer market (our homes) and there is the commercial market (our offices, restaurants, and schools). I mean, think about it—if 75% of us are staying home, we are using our own facilities not someone else’s. Actually, according to Georgia-Pacific, maker of Quilted Northern, the average household will use 40% more toilet paper than usual.  That’s a huge jump in demand especially for an industry that is mostly boring and extremely stable. Toilet paper manufacturing is a stable, volume business with thin profit margins, and producers crank out rolls from factories that run 24/7. If there is a large change in one market over another, it creates disruption. So, why can’t they just shift production from the commercial side to the consumer side? That’s a natural question and it’s a good one. The problem—and this is the gist of the whole mystery—the two markets are very different. The commercial market is geared to make large rolls that fit on large special dispensers; the rolls are thinner and too big to fit in our houses. They’re delivered on big pallets quite different from the individually wrapped rolls of 6 or 12 we get at the supermarket. Also, the paper is not normally produced at the same paper mill. Some companies focus on the consumer, like Proctor and Gamble which makes Charmin, and some focus on commercial and some on both. But the markets are, in a sense, like oil and water and can’t really be mixed. In theory, if this virus turned into a long-term problem, the mills would try to retool to meet consumer demand, but at this point, they are probably thinking, like most of us,

I’m sure you all noticed the empty store shelves of toilet paper at the very beginning of this coronavirus crisis. My reaction at the time was astonishment. Why are people hoarding toilet paper? It’s not as if there’s a hurricane coming? I couldn’t understand the bottled water shortage either for the same exact reason. I wrote it off as a demonstration of those certain kinds of people who don’t think about what they do and just react emotionally to unexpected things in their lives. They have a herd mentality, doing whatever everyone else does. In the meantime, we “smart” people are thoughtful and rational in the way we live our lives. Right? Well, alas, I have been forced to rethink my conclusions after reading an article by Will Oremus from the online business magazine, Marker. So, getting back to the question: Were the empty shelves a product of hoarding or was there something else going on? And by the way, this phenomenon wasn’t just a U.S. thing; this was happening in Hong Kong, Australia, the United Kingdom, as well as in the United States Now I’m pretty sure there was some panic-buying. All you had to do was look at all of the pictures of empty shelves in your news feed and something got unleashed in your primitive brain, scattering your wits to the wind. I mean who doesn’t suffer from FOMO occasionally (FOMO is the fear of missing out, in this case having NO toilet paper). But maybe it’s not irrationality at hold here. Maybe it’s something entirely different—something entirely…..boring. Maybe it’s just a supply-chain issue. A couple of things we know for certain. A lot more of us are staying home so we are using more paper at home. Fine. And if we’re home, we are using less paper in the office and in restaurants which would normally take up the slack. It turns out that there are two separate markets for the toilet paper that is produced in the U.S. There’s the consumer market (our homes) and there is the commercial market (our offices, restaurants, and schools). I mean, think about it—if 75% of us are staying home, we are using our own facilities not someone else’s. Actually, according to Georgia-Pacific, maker of Quilted Northern, the average household will use 40% more toilet paper than usual.  That’s a huge jump in demand especially for an industry that is mostly boring and extremely stable. Toilet paper manufacturing is a stable, volume business with thin profit margins, and producers crank out rolls from factories that run 24/7. If there is a large change in one market over another, it creates disruption. So, why can’t they just shift production from the commercial side to the consumer side? That’s a natural question and it’s a good one. The problem—and this is the gist of the whole mystery—the two markets are very different. The commercial market is geared to make large rolls that fit on large special dispensers; the rolls are thinner and too big to fit in our houses. They’re delivered on big pallets quite different from the individually wrapped rolls of 6 or 12 we get at the supermarket. Also, the paper is not normally produced at the same paper mill. Some companies focus on the consumer, like Proctor and Gamble which makes Charmin, and some focus on commercial and some on both. But the markets are, in a sense, like oil and water and can’t really be mixed. In theory, if this virus turned into a long-term problem, the mills would try to retool to meet consumer demand, but at this point, they are probably thinking, like most of us,

You probably don’t want to talk about this right now after having seen your investments squiggle up and down 10% every week, but today I do want to share some thoughts on investing that could help you make the right decisions going forward. In times like these, when there are big market drops and increased volatility, you may think you need to suddenly change your investment strategy. This started me thinking about the many investment fads that come and go over an investor’s lifetime. And I have seen many of them. To paraphrase the famous Nobel Laureate, Eugene Fama, who once said something to the effect that, “There’s one significant new idea in finance maybe every 10 or 15 years, but there’s a new marketing idea every week.” So, a marketing idea as opposed to an investment idea? What do you think he’s saying? I think he’s saying that great investment ideas are normally evolutionary, taking years to perfect and bubble up through the noise. Ideas like value investing, the idea of mutual funds so many years ago, ETFs, quantitative investing, and modern portfolio theory took decades to develop and become part of the mainstream. And even with all those years, professionals still argue about their merits all the time. Marketing ideas, however, are borne out of the commercial need to drum up new business, and some American companies and many so-called investment advisors slickly specialize in this area. Is It Time To Change Your Investment Strategy? Should you be looking to make major changes to your portfolio, make sure you’re sticking to the tried and true and don’t jump into the latest investment fad of the day. And maybe don’t do anything at all, but if you must, realize that it’s a bit like locking the barn door after the horse is already gone. It would probably have served you better had you done that before the market dropped more than 10% in just a few days. Changing your investment strategy to try to fit an event that’s already occurred doesn’t usually work out well. The History Of Investment Fads Let me tell you about the history of various investment fads, so you can easily see how many of them have come and gone. In the 1960s and ‘70s, the great rage of the time was an investment in the “nifty fifty” stocks, a group of large-cap, blue chips, which were often described as “one-decision” stocks because they were viewed as extremely stable, even over long periods of time. Of course, that stability came at a high cost as most of them sold at sky-high PE ratios resulting in valuations that were far in excess of the true value of the businesses. Many survive to this day and many do not, but all in all, the returns were less than stellar. And if you missed just a few of the good ones, the returns were a complete disaster. The late 1990s and early 2000s saw a lot of focus on the “BRIC” markets (Brazil, Russia, India, and China), which did well for a while then lost a good deal of money. There was also the dot-com bubble fad, followed by the bubble burst when many investors threw money at any stock that was even remotely connected to the internet. The idea was kind of right, but the investments were awful. I remember the Biotechnology fad in the ‘80s when the potential of a new world of eradicating disease was the marketing promise of the day. As with all of these, the ideas have merit, but which companies succeed and when is always the great unknown. The 2008 financial crisis spawned plenty of new strategies, such as “Black Swan” strategies. (For those of you who may not know, the coronavirus is not, according to Nassim Taleb, the creator of the term, an example of a Black Swan event, meaning that it was an event that was predicted but could not be timed. A typical Black Swan episode is a totally unforeseen event. Now today, the current popular investing trends continue to be strat...

You probably don’t want to talk about this right now after having seen your investments squiggle up and down 10% every week, but today I do want to share some thoughts on investing that could help you make the right decisions going forward. In times like these, when there are big market drops and increased volatility, you may think you need to suddenly change your investment strategy. This started me thinking about the many investment fads that come and go over an investor’s lifetime. And I have seen many of them. To paraphrase the famous Nobel Laureate, Eugene Fama, who once said something to the effect that, “There’s one significant new idea in finance maybe every 10 or 15 years, but there’s a new marketing idea every week.” So, a marketing idea as opposed to an investment idea? What do you think he’s saying? I think he’s saying that great investment ideas are normally evolutionary, taking years to perfect and bubble up through the noise. Ideas like value investing, the idea of mutual funds so many years ago, ETFs, quantitative investing, and modern portfolio theory took decades to develop and become part of the mainstream. And even with all those years, professionals still argue about their merits all the time. Marketing ideas, however, are borne out of the commercial need to drum up new business, and some American companies and many so-called investment advisors slickly specialize in this area. Is It Time To Change Your Investment Strategy? Should you be looking to make major changes to your portfolio, make sure you’re sticking to the tried and true and don’t jump into the latest investment fad of the day. And maybe don’t do anything at all, but if you must, realize that it’s a bit like locking the barn door after the horse is already gone. It would probably have served you better had you done that before the market dropped more than 10% in just a few days. Changing your investment strategy to try to fit an event that’s already occurred doesn’t usually work out well. The History Of Investment Fads Let me tell you about the history of various investment fads, so you can easily see how many of them have come and gone. In the 1960s and ‘70s, the great rage of the time was an investment in the “nifty fifty” stocks, a group of large-cap, blue chips, which were often described as “one-decision” stocks because they were viewed as extremely stable, even over long periods of time. Of course, that stability came at a high cost as most of them sold at sky-high PE ratios resulting in valuations that were far in excess of the true value of the businesses. Many survive to this day and many do not, but all in all, the returns were less than stellar. And if you missed just a few of the good ones, the returns were a complete disaster. The late 1990s and early 2000s saw a lot of focus on the “BRIC” markets (Brazil, Russia, India, and China), which did well for a while then lost a good deal of money. There was also the dot-com bubble fad, followed by the bubble burst when many investors threw money at any stock that was even remotely connected to the internet. The idea was kind of right, but the investments were awful. I remember the Biotechnology fad in the ‘80s when the potential of a new world of eradicating disease was the marketing promise of the day. As with all of these, the ideas have merit, but which companies succeed and when is always the great unknown. The 2008 financial crisis spawned plenty of new strategies, such as “Black Swan” strategies. (For those of you who may not know, the coronavirus is not, according to Nassim Taleb, the creator of the term, an example of a Black Swan event, meaning that it was an event that was predicted but could not be timed. A typical Black Swan episode is a totally unforeseen event. Now today, the current popular investing trends continue to be strat...

The global communications we take for granted are the result of heroic and persistent attempts by determined entrepreneurs to lay the first transatlantic cable. Would we be as determined today?