Disqus - Latest Comments for Paul_Meloan

Re: Dan Loeb’s Investment Process

Paul_Meloan — Thu, 11 Apr 2013 12:22:24 -0000

A nice win for Dan Loeb. Looking forward to his post-mortem the next time he screws the pooch.

Re: I Shouldn’t Want to Be Liked So Much

Paul_Meloan — Mon, 27 Jun 2011 07:15:53 -0000

Horrible selection bias in your audience. You had it pegged when you called them the "masters of the universe" (does anyone get that Tom Wolfe reference any more?). They played the game, and they won, so of course they like the game. It doesn't matter to them if the game was fair or not, just that they won.

Re: 82 Years Is Not Enough

Paul_Meloan — Wed, 02 Sep 2009 12:20:04 -0000

All gambling is based in denial. What makes it enticing is that the negative expected return is offset by huge variance, thus even the suckers can win some of the time. The recreational gambler on a weekend in Vegas accepts this as the charge for his entertainment. The degenerate gambler has a pathological need for the action.

Wall Street is equipped to accommodate them both, but unlike Vegas offers an alternative course for those who are patient and disciplined enough to accept market returns over any given period of time. As is discussed quite well here, there is no guarantee it is going to work for you, for me, or anyone else. But the potential is real and the chances are favorable because capitalism, for all its problems, really tends to work out over time. Enterprises that create wealth through the provision of valuable goods and services offer a positive expected return on their capital.

Just as the last decade of zero risk premium should not convince anyone that equities are a sure thing over long periods, it also does not convince me that the premium is gone forever (now that's a LONG time!).

Cheers, Paul Meloan

Re: 82 Years Is Not Enough

Paul_Meloan — Tue, 01 Sep 2009 15:24:23 -0000

All the more reason that we as advisors spend more time thinking about investors instead of investments.

It is beyond dispute that the moment-to-moment movements of investments are unpredictable, sometimes wildly so (think "A Drunken Stagger Down Wall Street" would make a good book title?), but the movements of investors can be frighteningly predictable. A sound plan allows investors the confidence to deal with markets like 2008-09 with resolve instead of panic, and compared to their fellow citizens that is about the best anyone has a right to demand.

For the real investments (versus speculation, versus gambling) the question remains does this investment have a positive real expected return? I think for the major asset classes we have answered "yes" but to a degree of precision that remains troubling. Better get used to it!

The real data problem is not so much that n=82, which is bad enough, but really n=1 for each of us, as we only have one opportunity to live and experience what the world has to offer us.

Re: Cover to Cover: Ford

Paul_Meloan — Mon, 01 Jun 2009 16:42:08 -0000

I wonder how many ads we would have to buy before Business Week would re-run their infamous "Death Of Equities" cover, which managed to precede the great 25 year bull market which began in 1982 by only a couple of years? ;-) Seriously though, the reason the Sports Illustrated "cover jinx" is funny is because it's about sports, ie, nothing that important. I like to think that most people now have thicker hides and take their information sources a bit more skeptically. If nothing else it's part of the education they have received for all of the "tuition" they have paid in the last couple of years.

best,
Paul Meloan

Re: Pulling Back the Curtain

Paul_Meloan — Thu, 23 Apr 2009 17:10:39 -0000

It's funny that you allude to Penn & Teller in the article. I first saw them over 20 years ago and most recently a couple years back in Las Vegas. They often state that the reason you can trust them is that they tell you flat out that they are going to lie to you! (If you play along, the lies are all harmless anyway, at least in their hands).

Were that it were true in finance. True professionals (fiduciaries) tell everyone right out there is no secret formula. Bernie Madoff really could not make your money levitate. P&T have proven over decades that audiences can handle the truth. Real financial advisors know that also.

Paul Meloan

Re: Behavior Gap Round Up, 2.27.2009

Paul_Meloan — Sat, 28 Feb 2009 13:20:50 -0000

The words and deeds of Goldman Sachs used to carry much more weight when they were a partnership (the last one on Wall Street) and the capital of the partners was always at risk. Now they, like the other former Wall Street firms, have learned the effects on behavior when their actions are rewarded or punished by a third party (the stock market) over a breathtakingly short measuring period. In other words, quarterly earnings rise, stock goes up (reward) earnings do not rise, stock goes down (punishment). Goldman used to think in terms of years or decades, and now they think pretty much like all the rest. It's funny how thinking changes when the results are "heads I win, tails you lose."

Re: The Next Bubble

Paul_Meloan — Wed, 25 Feb 2009 17:30:24 -0000

I seem to recall this has happened before. When was that? Oh yeah, 1979 I believe. As a purely speculative play buying and selling gold is pretty much the pinnacle of hubris, as the gold itself possesses no real intrinsic value beyond what some other (hopefully larger) fool will part with in order to possess it. Since it creates no real wealth, its real, expected return must be zero. Adjusted for overall CPI, has gold even come close to where it was in 1979? Me thinks not.

Re: The Volatile Housing Market

Paul_Meloan — Mon, 23 Feb 2009 14:55:52 -0000

As an investment, the appreciation in residential real estate lags far behind the growth in stocks over long periods of time (even in the wake of the current, ugly downturn). Instead, good residential real estate gives your family a nice place to live whose cost is heavily subsidized (thank you, Internal Revenue Code) and gives you the freedom from rent increases while appreciating a bit more than overall inflation. That's it. Expecting any more from your home is an invitation to folly. Sure, some may time their entry and exit from the market well and profit from the experience, but isn't it always better to be lucky than smart? Fast forward ten to twenty years from now and everyone who stayed away from the gaming tables will be fine, even if perhaps they overpaid a bit for their home when they bought.