Article Category: Psychology

The Key to Predicting Inflation

If there's one overarching theme that's accompanied the Trump rally, it's the idea of reflation. In fact, if you look at the price action across nearly all asset classes, it reflects the anticipation of inflationary forces.

But are we truly seeing the whites of inflation's eyes? Or is this a temporary reprieve before deflationary forces again spoil the fun? The answer may be morecomplicated than you think.

To begin, let's check in on where inflation currently sits. Using the Fed's preferred measure, Personal Consumptions Expenditures (PCE), we can see that both headline and core (excluding food and energy) inflation levels are trending higher. And for the first time in over two years, headline inflation is actually higher than core.

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Posted in: Economy Federal Reserve Inflation Interest Rates Oil Psychology

Investing vs. Speculating

Benjamin Graham, who is sometimes referred to as the "father of value investing," is a legend in the investment community. Author of Security Analysis (and The Intelligent Investor ( his work has helped shape the entire securities analysis profession.

Perhaps best known as Warren Buffett's mentor (Buffett actually named one of his sons after Graham), Graham conveyed many key insights about investing. One of his more famous quotes is the following: "The individual investor should act consistently as an investor and not as a speculator."

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Posted in: Bonds Dividends Interest Rates Psychology Volatility

Richard’s Wisdom On Psychology of the Crowd

Mary Anne and Pamela Aden's Comments

As long-term subscribers know, Richard often quoted the greats in this business. His favorites were William Hamilton, Robert Rhea and E. George Schaefer.

Each of these analysts added something to and developed the Dow Theory. They were Richard's mentors and he followed their work closely. In fact, Richard took over Schaefer's work and built on it, all of which has improved Dow Theory for more than 100 years.

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Posted in: Dow Theory Federal Reserve Gold Interest Rates Psychology

Stay Long Term Focused

Watching the markets on a daily basis can be harrowing, to say the least. By paying attention to the day to day noise, we quickly become engrossed in storylines and market moves that often don't matter much in the long run.

Fed watching is a classic example of this, where the market becomes frenzied and sucked into a "will they or won't they" mindset. As our focus shifts to short term events, such as whether a rate hike will be announced, we often lose sight of the broader landscape.

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Posted in: Federal Reserve Inflation Interest Rates Psychology Volatility

Wandering into the Stratosphere

A year and a half ago, if you knew that corporate earnings were going to decline for the next 5 quarters, would you have expected stock prices to go up, or down?

I think almost unanimously, anyone asked that question would've said down. That includes myself. Yet now, with the S&P 500 about to lock in its 5th straight quarter of year-over-year earnings declines, the stock market is firing on all cylinders.

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Posted in: Dividends Federal Reserve Inflation Interest Rates Psychology

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