The strategy made sense decades ago, and still makes sense today — Here’s what the world’s largest asset manager, BlackRock, had to say recently about the “traditional 60/40 portfolio” which had faced criticism in 2022 for its negative performance: “The foundational 60/40 portfolio, where 60 percent is invested in stocks and 40 percent in bonds, is the initial starting point for many…

Meme stocks have pitted heroes against villains over good and bad companies — I was recently asked by a student if I could review a short essay she wrote. It was for a first-round interview for a summer internship at an investment firm. I was intrigued by one of the questions: “Is XYZ a good or bad company? Why?” I’m not a philosopher…

GenAI basics, investing opportunities and risks, valuation, and lessons from previous tech revolutions — We’re in the early stages of an exciting technology revolution. In the fall of 2022 OpenAI introduced an artificial intelligence (AI) chatbot, known as ChatGPT, to the masses. ChatGPT follows an instruction in a prompt and provides a fluent answer, seemingly as if a human were responding. The prompt can…

The personal side of the man who shaped the investments industry: Harry Markowitz, 1927–2023 — Imagine a little league baseball player who suddenly found himself in a game of pick-up with Joe DiMaggio, hanging-out for hours together, hitting a few balls, making some catches, chatting, listening, and gaining the occasional nugget into how to improve his game. Well, that’s how I felt in May 2012…

Understanding the past highlights the importance of trust in the dollar — For decades I’ve been telling thousands of business school students that U.S. Treasury bills and notes are risk-free. Well, that’s arguably not quite true. For example, in 1979, Mrs. Claire Barton, a small investor from Enrico, California tried to signal to the world that the U.S. Treasury had stiffed her…

Basic banking explained: It’s all about trust — In the Christmas classic, It’s a Wonderful Life, George Bailey, played by Jimmy Stewart, is about to embark on his honeymoon when he notices a run on his bank, Bailey Brothers Building and Loan. He rushes to the bank where he is greeted by a mob of customers, frantically looking…

Common Sense Investing Practices Could Have Prevented SVB’s Failure — In Ernest Hemingway’s classic 1926 novel, The Sun Also Rises, Bill Gorton asks Mike Campbell, “How did you go bankrupt?” Campbell replies, “Two ways. Gradually, then suddenly.” That’s what happened recently with Silicon Valley Bank (SVB), and its parent SVB Financial Group. With over $200 billion in assets, it was…

Stocks are much cheaper, tend to bounce back after a bad year, and ‘year 3’ of the presidential cycle is overwhelmingly positive — High inflation. Increasing interest rates. Recession fears. These are all good reasons why one should be cautious when investing in stocks during the upcoming year. Last year I predicted why 2022 was probably going to be a bad year for stocks. That turned out to be a good call, with…

It Pays to Be a Healthy Sceptic — He was well-respected in the industry, as head of a major exchange. He was able to attract billions of dollars in investments. He was known for his major philanthropic initiatives. And then his world suddenly collapsed, wiping out billions for his investors. This portrayal aptly describes Sam Bankman-Fried (also known…