Robert Seawright is the chief investment officer for San Diego-based Madison Avenue Securities LLC and prolific writer on finance. In the recent essay First-Rate Intelligence, Mr. Seawright draws an effective line between the idea that investors are all immature morons guaranteed to lose money over time and the academic conceit of homo economicus that argues all people are entirely rational decision makers all the time.
Mr. Seawright first refers to the famous ‘Gorillas in our midst’ psychological test (readers can use the video within the article to see the test themselves) to support Daniel Kahneman’s contention that not only do we frequently miss the obvious, but that we are also blind to our ignorance.
In Mr. Seawright’s words, “We think we’re smart and that we’ll know if we’re wrong. But we don’t. The research is damningly clear on that.” He goes on to list numerous examples of cruel, blind, and misguided behaviour.
So far, so horrible, as far as the human condition goes. But, the author then pivots to an important, far more optimistic thought. People can be ignorant and mean, but not all the time. “All day, every day, we are observers of the world around us. We interpret what we perceive and make decisions based upon those interpretations. It is axiomatic that the more accurate our observations and the better our interpretations of them – the closer they comport with objective reality – the better our decisions will be. Fundamentally, we aren’t nearly as stupid and ridiculous as often portrayed within behavioural finance. “
Assessing investor behaviour in aggregate is very much a ‘glass half full/half empty’ proposition. Those looking for negative traits will find plenty of ammunition, but trends like the move from active to passive investing strategies shows that over time, rational investment decisions prevail.
-- Scott Barlow, Globe and Mail market strategist
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Stocks to ponder
goeasy Ltd. Record revenue and double-digit top line growth are expected to continue in the upcoming years for this financial stock. Management’s return on equity targets are 24 per cent or higher in 2019, and 26 per cent or more in 2020 and 2021. Meanwhile, the stock is trading at a forward price-to-earnings multiple of just over 8 times. The stock has a unanimous buy recommendation from the seven analysts actively covering the company. Jennifer Dowty profiles the stock (for subscribers)
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The polite spin on the exchange-traded funds offered by Toronto-Dominion Bank is that they have had an underwhelming impact on the marketplace so far. The cold, hard truth is that TD Asset Management’s family of ETFs ranked 20th out of 35 firms as of the end of September with $240-million in assets, which is puny for a bank with TD’s big profile. This would be more of an issue if TD didn’t have something better than ETFs for a lot of investors. Rob Carrick looks at what they are (for subscribers)
Keeping tabs on millennials - equity index style
Want to invest in the habits of thirtysomethings? You’ve now got an index to track. Index provider MSCI has launched a new set of thematic indexes for investors looking to focus their exposure on major trends, such as millennials or disruptive technology, that it expects to shape society and the economy for decades to come. Read more from Karin Strohecker from Reuters (for subscribers)
Defensive stocks are getting pricey. Four ideas where investors can now search for shelter and not overpay
As the global economy slows, investors are scurrying to find stocks that can thrive in tougher times. The problem they face is that many defensive stocks have now soared to levels that undercut their appeal as havens. Ian McGugan looks at four defensive options that may not be so overpriced. (for subscribers)
A ‘lower-risk’ defensive play on the volatile gold sector
Although gold – a safe haven during uncertain times – and mining stocks can be volatile investments, owning shares of precious metals royalty and streaming companies can be a more defensive bet. Some pay dividends, too. Shirley Won takes a look at some of the options. (for everyone)
Others (for subscribers)
Tuesday’s Insider Report: With its share price up 174% in 2019, the CEO trims his holdings
Others (for everyone)
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Ask Globe Investor
Question: A year or so ago, I purchased the Horizons Enhanced Energy ETF (HEE-T) to stay in the oil game. I thought it was a little bit better than being in an individual stock, however it has been a source of frustration. Now, other than shooting my foot off, should I hold on, or opt out now in favour of Tesla shares. I realize a loss is a loss, but this thing is deadly to watch.
Answer: This is not a fund that I have recommended and not one I am actively considering because of the current weakness in the energy market. But the performance this year hasn’t been terrible – it’s off about 3.1 per cent year to date, as of Sept. 27. As for Tesla, it seems like you want to jump from the frying pan into the fire. The stock is down about 27 per cent this year.
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What’s up in the days ahead
REITs have had a stellar year so far, but can the good times continue? David Berman will take a close look.
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Compiled by Globe Investor Staff