statistical analysis

The Active Roster
photo shows Billy Garver smiling

Clients, 2020 changed work life for many, but some changes in our office had been in the works even without a pandemic on top!

I say “in our office,” but the truth is we’ve been getting more flexible in our approach to work. The roster has grown again as of December 1, with the addition of Billy Garver as our new full-time Data Analyst. For now, Billy joins the team working from afar.

Here are a few things we’re excited about:

  • This role will grow along with Billy, who is a statistician and teacher by training. His skills will bring a fresh perspective to the research that happens behind the scenes in our firm.
  • Having another teammate means greater sustainability. You know my intent to work to age 92: our practice requires we “build a deeper bench,” an endeavor that can thrive across the decades.
  • The more we work from our collective strengths, the stronger the firm will be. Billy’s experience with documentation for academic research frees me up to spend more time doing what I love the most—talking with you!

I’m grateful to have a talent like Billy on board, and we’re excited to see how this group continues to exceed the sum of its parts!

Clients, if you would like to talk about this, or anything else, please email us or call.

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No Free Lunch

© Can Stock Photo / 279photo

From time to time, we meet people who are devoted to avoiding the worst selloffs in the market. When there are so many simple statistical tools available to keep track of the trend, they say, it makes no sense to stay in the market when the trend is against you.

For example, by selling out when the major stock market indices dip below their 200 day moving averages, and buying back only when they climb back above, one could have avoided significant damage in the worst downturns.

The problem is, one could also have avoided some really sharp recoveries from low levels. And in any lengthy test of these mechanical rules, generally they would have cost money to implement.

The key question is, what fraction of your total returns would you be willing to give up in order to get a smoother ride along the way? Would it be OK to have 30% less money after twenty years? 20% less? 40% less?

Our point is, there is a cost to the human preference for stability. There is no free lunch. The trend-following systems that save you from damage also tend to water down your results over the long term.

We believe we get paid to endure volatility. Living with the ups and downs when so few are willing to do it…that’s what we do. We seek to understand what fraction of your money can be invested for the long term, without regard to volatility—and invest for you on that basis.

The markets have had volatile spells, but year by year results have been positive since 2009 in the major averages1. We know that sooner or later, unpleasant times are going to come around.

Our principles may hope to offer some cover from overvalued markets. Avoiding stampedes and seeking the best bargains may or may not limit the damage—we have a mixed record, and no guarantees. With the uncertainties of the markets, and the impossibility of knowing the future, it is comforting to have principles by which to operate.

Clients, if you would like to talk about this or anything else, please email us or call.

1Standard & Poor’s 500 Index, S&P Dow Jones Indices. Retrieved May 21st, 2018.

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. All performance referenced is historical and is no guarantee of future results. All indices are unmanaged and may not be invested into directly.

The economic forecasts set forth in this material may not develop as predicted and there can be no guarantee that strategies promoted will be successful.

All investing involves risk including loss of principal.