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The Intelligent Investor
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Good morning, and welcome to December.
Winter is only three weeks away, and it's already in the air. Here in the northeastern U.S., I've been out in two little snow squalls since Thanksgiving Day.
Did you know that December is the traditional time when hogs were butchered in Europe and the early U.S.? That isn't only because Christmas falls in that month. It's because, throughout the autumn, pigs gorged on seasonally available acorns, chestnuts and other rich fodder, so they reached maximum weight naturally at year end. It's also because meat freshly cut in the cold month of December was much less likely to spoil before it could be salted or smoked — a vital consideration when refrigeration didn't yet exist.
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December calendar page: slaughtering a pig, French illuminated manuscript (ca. 1480-85), the J. Paul Getty Museum
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In medieval European calendars, the motif of pigs being slaughtered is visually synonymous with the month of December. (I will spare you the goriest images, which are often upsettingly graphic for modern viewers, even if you aren't a vegetarian or vegan.)
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Antonio Tempesta, "December" (engraving by Jan Sadeler, ca. 1574-1600), British Museum
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Until recent decades, villages in Spain celebrated el día de la matanza, the Day of the Pigs' Slaughter, early each December with singing, dancing and recitations of poetry. Similar festivals were common elsewhere.
All this puts me in mind of an old Wall Street proverb: "Bulls make money, bears make money, but pigs get slaughtered."
Versions of the saying have been circulating since 1905, according to lexicographer Barry Popik. The general idea — you can make money being optimistic, you can make money being pessimistic, but you'll be wiped out if you get too greedy — has probably been around for millennia.
My favorite modern version of the saying comes from the financier André Kostolany: "I can’t tell you how to get rich quickly. I can only tell you how to get poor quickly: by trying to get rich quickly."
It can pay to be a bull, and it can pay to be a bear. But it's always dangerous to be a pig, and there's no better time to remember that than December.
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Simon Bening, "December," from the Da Costa Hours (ca. 1515), the Morgan Library
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A quarter-century ago this week, then-Federal Reserve Chairman Alan Greenspan introduced the phrase "irrational exuberance" into the popular investing lexicon. In a speech, he fretted that the stock market might have risen too far, too fast.
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The Wall Street Journal, Dec. 6, 1996, p. A3.
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https://www.federalreserve.gov/boarddocs/speeches/1996/19961205.htm
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The day after Mr. Greenspan's evening speech, stocks stumbled as the words "irrational exuberance" spooked some investors who had already been worried about how high and how fast stocks had risen. The Dow Jones Industrial Average sagged 1% on no other significant news.
Did Mr. Greenspan intend to signal unambiguously that stocks were overvalued? Of course not! Central bankers are the grand panjandrums of obfuscation.
As Mr. Greenspan had admitted almost a decade earlier:
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The Wall Street Journal, Sept. 22, 1987, p. 3.
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Over the three years after the "irrational exuberance" speech, U.S. stocks compounded at 27% annually, more than doubling investors' money.
So "how do we know when irrational exuberance has unduly escalated asset values"?
As I've written, spotting a market bubble seems easy and obvious. With hindsight, we know. With foresight, we can only guess.
It's hard to imagine a less satisfying answer. And impossible to have a more accurate one.
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Some Insights You Shouldn't Miss
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Claude Raguet Hirst, "Still Life with Bowl" (1922), Museum of Art and Archaeology, University of Missouri
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Here are some of the best things I found over the past week outside The Wall Street Journal:
Here are some of the best things I found recently in The Wall Street Journal:
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What’s the worst financial advice you’ve ever gotten? Did you take it or ignore it? Why or why not?
To share your thoughts, just hit reply to this email. Answers may be lightly edited for space or clarity. Please include your name and city, thanks!
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In our Nov. 16 newsletter, I asked:
As Thanksgiving approaches, what are you most thankful for as an investor?
(I shared my own gratitude a few years ago, in a column titled "Some of the Wisest Words Ever Spoken About Investing.")
Following Elon Musk’s Twitter poll...to “determine” whether he should sell 10% of his Tesla stock, it occurs to me that I should be grateful that the CEO of my largest investment, Berkshire Hathaway, last used Twitter in 2016 and is highly unlikely to tweet material information this weekend, or to tweet anything at all!
—Ravi Nagarajan, Arlington, Va.
Compound interest. Especially that it also applies to our knowledge about investing.
—Jakub Gmurczyk
I have two things I am most thankful for as an investor: tax-deferred accounts and index funds. I would be willing to put money down that behind the secondary mortgage market...these are the greatest wealth-creating instruments in history.
—Tom Raycroft, Alexandria, Va.
The ability to invest in wonderful companies at the click of a button and let founders and CEO work for you and your money.
—Jaimin Shah
I am most financially grateful this Thanksgiving to Jason Zweig for not recommending the ETF TQQQ...due to the high volatility of this triple-leveraged QQQ index. I had been searching for a high-volatility index to trade and Mr. Zweig alerted me to TQQQ...I made a ton of money using an old and well-established [trading] strategy. Let us say that the IRS will be receiving a very high income tax from me for this year, but I will not expect any thank-you card from my Uncle Sam!
—David, Farmington, Conn.
(Editor's note: In "This Fund Is Up 7,298% in 10 Years. You Don’t Want It," I warned that the TQQQ ETF could — according to its own manager! — lose up to 95% in a year when its underlying index is flat. I'm happy for David, but I still think such funds are only for people who, both financially and psychologically, can withstand losing all their money.)
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Mary Cassatt, "The Letter" (ca. 1890), Art Institute of Chicago
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Have a question you'd like me to answer?
Want to weigh in on what you just read? Got a tip on something that I or my colleagues should investigate? Itching to tell me I'm wrong about something?
Just reply to this email and I'll see your note. Don't forget to include your name and city.
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Be well and invest well,
Jason
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The pig as king for a day, advertising card (ca. 1878), Boston Public Library
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He that hasteth to be rich hath an evil eye, and considereth not that poverty shall come upon him.
—Proverbs 28: 22
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