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There's 4,000-plus stocks out there, and sometimes it gets a little confusing. And we like them to start with the portfolio grader, but if they'd like to see how I use the system and pick stocks - we offer that as well.
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Our system is dynamic, always shifting gears. What I do is I build models to beat the market.
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Now quantitatively we rank things on something called alpha over standard deviation, which is the return independent of the market divided by volatility. Usually, to get a high ranking, you need some buying pressure.
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Optimization tells us precisely how to diversify the portfolio, whether I should have 12% in semiconductors or 4% in biotech, etc., and it literally tells me how to diversify not only the industry groups but the stocks.
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I had Dell for four and a half years, and its sales are still phenomenal, but their operating margins started to contract, so I sold it in early 1999. There's nothing wrong with Dell! It's a fine company. It's just the business risk they took.
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We really believe in the earnings. We're very proud that often we do well in the down market. But you know, there are some markets where they just lose liquidity, like 2001, 2008.
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I'm from Berkeley, California, so I'm fully trained in socialism and all, but basically what they teach you there is markets are efficient and we can't beat them, so we might as well index.
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My advice to the average investor in 1988 is to be patient and think long-term. It will take 18 months for confidence to get better and, in the meantime, this is absolutely no place for short-term money.
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Don't punish small businesses with over-regulation.
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Zeroing in on the best sectors or the best regions of the world is great, but zeroing in on the very best individual stocks is the key to making truly impressive profits.
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As a rule, bond funds will not double your money overnight.
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Social Security was designed to give a few years of modest benefits to people whose bodies were worn out through coal mining, factory work and other physically demanding labor.
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In college, I was told the market can't be beat.
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If you go back to 2001, the market had two violent short covering rallies then, although I know the market didn't officially get going until March 2003.
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One of our big challenges with the newsletter is that everyone thinks big stocks are safe. That's not true at all. They're only safe if the money is flowing there.
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I almost always recommend investors get fully invested, since it's better to put your money to work than to let it simply track the rate of inflation.
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Large-caps were safe in 1996, '97, '98. Everybody was buying index funds and Nifty Fifty funds. As long as money was pouring in, it was great.
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After the Versailles treaty, the U.S. could have chosen to become a global economic loan shark, but we didn't, and let a lot of the tab slide. So not all lending and borrowing is bad.
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I grade my stocks. I'm what they call a quant, one of the geeks of the stock market.
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When volume drops off, prices settle down. Volume is the force that turns stocks higher.
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We test everything on a one- and a three-year cycle. And you want to stress-test a model, and the three-year test usually does that because you have a growth and value bias. You have different interest rate environments.
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All I'm trying to do is manage money and take care of my shareholders.
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There's something we calculate called an alpha, and that's the stock's return that's independent, uncorrelated to the market. And the only way you really get a high alpha is for something to zig when the market zags.
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I sell these intermediate bond portfolios for people that can't go to stocks.