Graham And Doddsville

A few weeks ago, I noticed a sudden increase in the number of people who follow me on Twitter.  The reason, I soon discovered, was an article titled “Read ‘Em and Reap” by Jason Zweig that was posted on the Wall Street Journal’s Total Return Blog.  For those of you who have never heard of Jason Zweig (I doubt that includes most readers of this blog), he is a columnist for the Wall Street Journal and writes the weekly “Intelligent Investor” column.  In fact, Jason Zweig edited one of the most widely read editions of “The Intelligent Investor” by Benjamin Graham.   Jason’s post was a follow-up to another article he wrote, “Can Peers Burn Holes In Your Portfolio?”

My “Intelligent Investor” column this weekend discusses new research on what psychologists call “shared attention”—the state of paying heed to an object or event at the same time your peers are also focusing on it. Believing that other people like you are paying attention to the same thing you are can make you more likely to remember it, to take action on it and to experience more intense emotions about it, the research finds.

In my column, I encouraged investors to socialize “only with investors who are calm and methodical.” Here’s a small selection of websites, blogs and Twitter feeds that I think pass that test.  It is far from complete; there are other sites I like for other reasons, but the sources I’ve listed here all encourage investors to ignore the markets’ momentary twitches and spasms and, instead, to focus on the long term.

GrahamAndDoddsville.net was one of the websites on Jason’s list.  To say it is an honor to appear on Jason’s list, alongside some of my favorite websites, would be a major understatement.

When the proverbial apple fell on my head and I discovered value investing (a term I now believe to be a proxy for all intelligent investing), I wanted to read and learn as much as I could.  There were several websites and blogs that helped me navigate the vast number of available resources.  While many of the websites that were helpful to me no longer exist, these resources were invaluable to my own investing journey.  Over time, however, I realized that many aspiring analysts / investors, including myself, fell into the pitfall of spending too much time reading about investors and not enough time investing.  Once you have covered the basics (and it is my opinion that studying The Intelligent Investor, Warren Buffett’s Letters to Berkshire Shareholders, and Joel Greenblatt’s You Can Be a Stock Market Genius will get you 99.9% of the way there), there is no better way to learn how to invest than by taking your hard earned money and investing it.  I have often heard people reply, “I don’t have enough money to invest in stocks on my own.”  Hogwash!  I may have accepted that reply prior to the turn of the century, but in 2014, anyone can open an online brokerage account with almost no minimum account balance.  In most cases, this ease of access proves to be very bad for investors.  But if you are truly learning how to be an intelligent investor, it is wonderful!

This brings me to the dilemma.  At a certain point, my recommendation to aspiring analysts and investors is to spend their non-investing time delving into case studies and hunting for undervalued securities.  Some of my favorite places to do both are on your left – right there in the margin – or on the Valuable Investing Resources page.

I am amazed how many visitors the GrahamAndDoddsville blog receives, especially in light of how infrequently it is updated.  I am humbled by number of analysts and investors who have told me that they used this site as a lunching point for their own journey to become an intelligent investor.  My original motive for starting the site was to have a place where I could store all of the resources I have found.

With all of this in mind, I plan for the site to become a bit more active.  A reboot, if you will.  The number of posts may not dramatically increase, but in the coming days, weeks and months, you will start to see fixed links, updates to the hunting grounds, research essentials and top blogs, and additions to the SuperInvestor Resources.  Hopefully this will serve as a compromise.  By not dramatically increasing the number of posts, my hope is that I will not draw aspiring analysts / intelligent investors away from the sites where they should be spending most of their non-investing time – websites and blogs filled with case studies and discussions of current investment ideas.  At the same time, GrahamAndDoddsville.net will hopefully become an even better tool for those who continue to use the site as either a starting point or as an ongoing resource in the never-ending journey to become a more intelligent investor.

I receive many e-mails want to sincerely apologize to those who have received a reply.  I do enjoy hearing from likeminded investors and can be reached at admin@grahamanddoddsville.net.  I will do my best to respond.

See: “Read ‘Em and Reap: Smart People for Investors to Follow” (WSJ Total Return Blog, 9/6/2014)

On October 29, 2012 The New York Times published an article titled “That Guy Won? Why We Knew It All Along.”

Amid the many uncertainties of next Tuesday’s presidential election lies one sure thing: Many people will feel in their gut that they knew the result all along. Not only felt it coming, but swear they predicted it beforehand — remember? — and probably more than once…

Most will also have a ready-made argument for why it was inevitable that Mitt Romney, or Barack Obama, won — displaying the sort of false, after-the-fact “foresight” that psychologists call hindsight bias.

Political pundits aren’t the only ones to suffer from hindsight bias.

“The important thing to know about hindsight bias is that it not only changes how you see the world, but also how you see yourself in it,” said Neal Roese, a professor of marketing at the Kellogg School of Management at Northwestern University, who just published a review paper on the bias with Kathleen D. Vohs of the University of Minnesota. “You begin to think: ‘Hey, I’m good. I’m really good at figuring out what’s going to happen.’ You begin to see outcomes as inevitable that were not.”

Investors must be extra careful to remain aware of how hindsight bias might affect their decisions.

Once they know an outcome, people tend to inflate their initial predictions by an average of 15 to 20 percent, Dr. Roese said — ample wiggle room to retrospectively alter almost any prediction from “it’s going to happen” to “it probably won’t,” be it a tennis match, a legal decision or a presidential race.

It’s only natural.

One reason it’s hard to avoid this bias is that it mirrors how the brain operates biologically. The brain cannot possibly make sense of incoming sensory information instantaneously; it continually reconstructs, inserting meaning and making judgments very quickly, but post hoc.

Can we change human behavior?

The solution is contained in the psychological processes that underlie the bias itself, studies suggest. Take the presidential race. It’s a dead heat in the polls, and the fact that so many will argue after the vote that the winner was inevitable implies that they have front-loaded arguments to support both outcomes. One way to counteract the bias is to play out those possibilities before the final outcome.

[“That Guy Won? Why We Knew It All Along”, The New York Times 10/29/2012]