Black Monday

1987 CrashIt was on a Monday, almost exactly 32 years ago, that the stock market suffered its worst day ever. I was still practicing law then, and I was working in my firm office. As the news filtered out (somebody had been out and heard the news on a car radio), the attorneys began to talk about what was going on. As the day progressed and the news got worse, we talked less and less. A senior partner brought out a tiny black and white television to watch the network news coverage, which had broken in to the day’s typical programming of reruns, game shows, and soap operas. We huddled around it and watched.

It was Black Monday: October 19, 1987. Coverage by The Wall Street Journal the next day began simply and powerfully. “The stock market crashed yesterday.” Continue reading

Getting Better All the Time

The Slate advice columnist, Dear Prudence, received the following sad, poignant, and probably futile letter, desperately seeking help.

“I keep making terrible decisions and can’t seem to stop.

“Last year I left my home, my family, my friends, a 20-year secure (if uninspired) career, to move 2,000 miles away to be with my first love. I’m 50 and I was his first love as well. He’s married and his wife invited me to their home. We decided to share him, although his wife and I were not interested in one another like that.

“My job here fell through. My dog died. The romance flopped spectacularly. I still love him desperately. And when he told me that it was over and that he didn’t love me and never had, I begged him to reconsider, only to have his wife come in and start screaming at me to keep my f***ing hands off her f***ing husband.

“I snapped. I tried to kill myself. I ended up in a coma and then went to the psych ward. I have been out for only a week. I’m back at work. I’m freshly diagnosed as Bipolar I. I’m on new meds I don’t think are helping. Of course, I had to move out and I’m living a very lonely life. I do not feel stable and I cry for hours every night. The loneliness is killing me. I have psychiatric follow-up and intend to do what I can to survive and thrive.

“My former boyfriend is now making noises about wanting to be ‘friends with benefits’ with me once I am ‘well again,’ which sounds more like he wants a self-supporting mistress that he can come and have sex with and then leave at will. I still love him but I realize this is a gross affront to my worth as a human being. I just don’t trust myself to say ‘no.’ Counselling may help but I still don’t trust myself to make good, healthy decisions. Everything I do blows up in my face.

“Any advice?”

We humans are shockingly prone to bad ideas, ideas that escalate to terrible decisions, and then metastasize into actions that undermine, damage, or even ruin our lives and futures. We’d all like to think that we’re a lot better off than the letter-writer above, and most of us probably are (if not nearly so self-aware), but vanishingly few of us have a consistently good track record of decision-making and none of us is as good as we think we are. Even when we’re on the straight and narrow path to success, we are prone to wander. None of us is unbroken, unscathed, or unhurt.

The idea that we act in our own rational self-interest with any degree of regularity is, quite obviously, ludicrous and is falsified every single day by our choices and our lives. Worst of all, we readily recognize such self-destructive behavior in others – such as the above correspondent – but consistently and tragically lack the ability to see it in ourselves.

We can’t seem to help it.

The ever-practical Abraham Lincoln asked, “It is not ‘can any of us imagine better?’ but, ‘can we all do better?’”

I say we can. In fact, we are getting better, a little better all the time.

With the right outlook, approach, and effort, we can expand upon that success. Continue reading

Birthday Luck

I had been fitfully and uncomfortably sleeping, dreaming of a small dog licking my leg and stealing my snack. I awoke to find an escaped boxer with a cute face avoiding my eyes and licking her lips. Once the flight attendant found her rightful owner, who was not nearly as embarrassed as she should have been, I reassess my situation.

Fredonia House

My Childhood Home

I’m still more than an hour behind schedule and said to be losing even more ground on account of intense headwinds. I’m still scrunched into a long metal tube with the seat-back in front of me compressing my kneecaps into my hips while hurtling cross-country, still several hours from arrival home in San Diego. I’m still tired from lots of planes and being away from home for too long. I’m not in the most conducive spot I can imagine for counting my blessings.

But count them I shall, as part of this birthday reflection. “Birthday luck” describes a nuclear explosion of luck that is supposed to happen inside you on that day, giving you the ability to do anything. I don’t really have birthday luck, of course, but my luck is so good that it’s hard to tell the difference.  Continue reading

First-Rate Intelligence

I was introduced to behavioral finance by the classic “Gorillas in Our Midst” experiment. You have almost surely seen it. If not, have a look.

When I first saw the video, like roughly half of viewers busy counting passes, I never saw the gorilla and was dumbfounded by what I had missed. In his book, Thinking, Fast and Slow, the Nobel laureate Daniel Kahneman highlights this experiment and argues that it reveals that humans are “blind to the obvious, and that we also are blind to our blindness.” Some use this experiment, among others, to claim that we’re generally hopeless.

In that context, the arrogant moniker we have given ourselves – homo sapiens (Latin: wise man) – seems ironic at best. Traditional economic theory insists that we humans are rational actors making rational decisions amidst uncertainty in order to maximize our marginal utility. Yet the idea that we’re essentially rational creatures is a myth, and a very seductive one at that, especially as and when we relate the concept to ourselves. We tend to think that we’re almost superhuman in our ability to invoke reason to our advantage.


Despite our bluster about alleged rationality, we are biased through and through. There is an exceedingly long list of cognitive and behavioral biases to which we are prone that make it difficult for us to reason effectively. Here’s just one example from an exceedingly long list. Continue reading

Go for It

Based upon irrefutable mathematics, football teams should be much more aggressive on 4th down – they punt and kick field goals far too often. As far back as 2002, University of California Berkeley economist David Romer expressed his hope that coaches would begin maximizing their odds of victory when the related data became more widely available.

As if.

Football Outsiders introduced an Aggressiveness Index back in Pro Football Prospectus 2006. Over the years, the index has consistently found that “no NFL coach is as aggressive as the data suggests he should be.” Simply put, teams and coaches “don’t maximize.” Continue reading

Play the Hits

I am a huge fan of wonderful musical artists performing live, and I have been blessed to have seen many great ones. My first big concert was Jethro Tull in 1973 and I have tickets for Casting Crowns Sunday evening. The best was probably the Simon & Garfunkel reunion concert in New York City’s Central Park, exactly 38 years ago, on September 19, 1981.


I’ve seen Paul McCartney do a setlist of 36 Beatles songs. The Eagles. Linda Ronstadt. Frank Sinatra. Bonnie Raitt. Stephen Stills. Queen. The Doobie Brothers. Pentatonix. Jackson Browne. Sheryl Crowe. The Four Tops. John Fogarty. Frankie Valli. Rhiannon Giddens. Billy Joel. The Guess Who. Mary Chapin Carpenter. The Spinners. Sugarland. Maynard Ferguson. Manhattan Transfer. Needtobreathe. Journey. The Temptations. Alison Kraus. Chuck Mangione. Stan Kenton. Take Six. The Righteous Brothers. Barry Manilow. Switchfoot. Judy Collins. Chicago. Elton John. Ray Charles. Fleetwood Mac.*

The one constant among all these great events is that the artists played their hits. I’ve seen James Taylor a bunch of times – the first time was Nashville in August 1982, the most recent Las Vegas in May 2019. No matter what album he was promoting at the time, he always played Carolina in My Mind, Sweet Baby James, You’ve Got a Friend, and Fire and Rain.

The exception that proves the rule is the ever-enigmatic Bob Dylan. One of times I saw him he played three Sinatra covers and an Yves Montand (!) cover but no Like a Rolling Stone, A Hard Rain’s A-Gonna Fall, All Along the Watchtower, or Mr. Tambourine Man. Go figure. Some fans get really (and understandably) angry if their favorites aren’t played in concert.

In the worlds of investing and personal finance, it’s easy to focus on the controversial, the difficult, and the arcane. But we should take great care to keep showing fealty to our greatest hits – the tried and true principles that we can and should all agree on and return to routinely. Today, I’m going to circle back to the greatest hits of personal finance — a crisp thirteen-song set — and play them (at least) one more time. Continue reading

Best Investment Writing, Volume III

The third annual volume of The Best Investment Writing series has now been released. After books in 2016 and 2017, the publishers decided to make the entire 2018 volume available via audio format, with the authors reading their winning selections. I was honored that my “Dear Future Me” was selected for inclusion. The audio version lasts about 10 minutes and is available here.

Horrid Facts, Stubborn Facts


Note: This post is a much re-worked and expanded version of prior posts.

Exactly eighteen years ago, on another day that lives in infamy, at a little before 6:00 a.m., Pacific Time, I was sitting in front of my Bloomberg terminal in downtown San Diego when the first, cryptic hints of trouble at the World Trade Center crawled across the bottom of my screens (I think). As the day’s events unfolded, I recalled having been on the phone on the cavernous Merrill Lynch fixed income trading floor at the World Financial Center, connected to WTC by underground walkways, doing a STRIPS trade with a client (really, an institutional “account”) who was sitting high atop the World Trade Center (2WTC), when I heard and felt the February 26, 1993 World Trade Center bombing.

I had been scheduled to fly to New York on business on September 10, 2001 and had reservations for the week at the Marriott World Trade Center (3 WTC), which would be destroyed when the Twin Towers collapsed later that day. Instead, I decided to stay home and go to “Back to School Night” at my kids’ school.

I am really glad I didn’t get on that plane to New York.

My little story is insignificant within the context of the tragic losses, terrible evil, and timeless heroism of the “American epic” to which that day bore inexorable witness. But it is what happened to me. It was my story. It provides context and a framing device to help me remember, think about what transpired, and what it means. It is emotional to think about still. But many other stories are far more important.

The image reproduced above is central to several converging stories from that dreadful, terrible day. Continue reading

That was Then, This is Now

We humans, assuming our basic physical needs are met, want meaning most of all. We want our lives, our choices, and our ideas to matter. And we want them to matter today. We want the relentless now to be crucial, to be vital, to overturn the evils of the past, to be a lynchpin of history. Even when it’s none of those things.1

After half a century of intermittent debate and protest (because, after all, it’s San Francisco), the San Francisco Board of Education voted unanimously in June to spend at least $600,000 to whitewash away “The Life of Washington,” 13 muralsof the first president that adorn the halls of a local high school named for him. One of the frescoes depicts Washington’s slaves, hunched over, working in the fields of Mount Vernon. In another, Washington points westward over the dead body of a Native American. The art was deemed ripe for destruction because it was said to traumatize students. Continue reading

Happy Blogiversary to Me (and a prize too)

blogiversaryI have been writing Above the Market for eight years. Wow. That’s hard to write and harder to believe.

I began in August of 2011. I started and still write largely to clarify my own thinking and to force and enforce commitment on my part. Actual readers are a lovely bonus I didn’t expect when I started and that I never take for granted. After many hundreds of thousands of visitors from nearly 200 countries, I remain astonished at the level of interest Above the Market has received — it is far beyond anything I thought possible, much less likely. I appreciate every reader. Anyone who writes wants to be read most of all.

A few people deserve special mention and thanks.

Tom Brakke (his terrific blog is The Research Puzzle) generously offered outstanding help and guidance before I even had any readers to speak of and continues to offer wise advice whenever I ask. Tadas Viskanta provided my first distribution (exactly one month in) to the expert community he serves via his crucial blog, Abnormal Returns, which remains the standard for its type. I have now appeared there approaching 300 times, and am extremely grateful for having done so. Joe Calhoun upped my exposure tremendously via Real Clear Markets, in which I have appeared almost as often. I am grateful and humbled to be featured often at these and other excellent sites, including Cullen Roche’s outstanding Pragmatic Capitalism, the indispensable The Big Picture from Barry Ritholtz, Bill Zimmer’s The Prudent Trader, Charles Kirk’s The Kirk Report and Josh Brown’s wonderful The Reformed Broker. Other regular linkers include the CFA Institute, Ben Carlson’s fantastic A Wealth of Common SenseMichael Kitces (the authority on financial planning), Wade Pfau (the authority on retirement income planning) and the previously mentioned Mr. Brakke. Jason Zweig and Morgan Housel — giants in financial journalism — have provided much help and inspiration. Brian Portnoy, Nir Kaissar, Corey Hoffstein, Jack Vogel, Peter Huminski, Rick Ferri, and “Jake” have offered friendship and much very good counsel. My apologies in advance for those I have foolishly omitted.

Thank you all.

I think the following five are my best posts. I list them in no particular order. I would love for you to read them again or read them for the first time.

Horrid Facts, Stubborn Facts
Underestimating the Density of the Fog
The Apocalypse is (Always) Nigh (especially appropriate this week)
Complexity, Chaos and Chance
Chris Rock Explains Bias Blindness

I had a blast writing this recent post and love it even though almost nobody read it: Behavioral Finance: a (Mostly) Musical Revue.

In order to celebrate this blogiversary and as a way of expressing my gratitude to readers, everyone who comments on one of my posts linked above in the comments below or on Twitter will be entered into a drawing for a new Kindle. Good luck.

To everyone who has read, supported and helped me with this effort: Thank You! I hope eight years leads to many more.