Author: Richard Smith

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Dr. Richard Smith, the founder and CEO of TradeStops, earned a PhD in Math and Systems Science, and even he had to learn the hard way that it takes more than intelligence to win in the game of investing. He has spent the last 10 years researching and developing algorithms and services that give individual investors the tools they need to succeed. With his background in mathematical theories of uncertainty combined with his own investing and trading experience, Dr. Smith understands risk management and how to use it as a self-directed investor to master the market.

Big Tech is Square in the Antitrust Crosshairs

September 13, 2019 / by

The states are coming hard for “big tech,” the nickname for Facebook, Amazon, Apple, and Google. On Friday, Sept. 6, the attorneys general (AGs) for multiple states and Washington, D.C., announced an antitrust investigation of Facebook. On Monday, Sept. 9, more states did the same for Google. The effort is impressively bipartisan. A Democrat AG … Continued

What Wall Street Analysts Can Teach Investors About Trading

September 11, 2019 / by

Wall Street analysts are known more for being cheerleaders than having real trading skills. This is demonstrated in the cynical investor saying: “Analysts — don’t need ’em in a bull market, can’t use ’em in a bear market.” But a July 2019 research paper from Ohio State University’s Fisher College of Business could change that … Continued

August 2019 was one of the most fear-driven months in stock market history

September 6, 2019 / by

August 2019 was one of the most fear-driven months in stock market history. Not in terms of post-crash panic, like what happened after the financial crisis, but rather “early anxiety” type of fear — the sense of foreboding before the storm, when the barometric pressure is dropping and emergency supply kits are being prepped. One … Continued

This Bedrock Assumption of Modern Portfolio Theory is Wrong

September 4, 2019 / by

One of the strongest pillars of modern finance, and modern portfolio theory as taught to MBA students everywhere, is the belief that “return is directly correlated to risk.” The argument is that, in order to get higher investment returns, you must always take on higher levels of risk. To put it another way: For an … Continued

Is The Dow Jones Transportation Average Becoming Obsolete?

August 30, 2019 / by

The Dow Jones Transportation Average, often referred to as the Dow Transports or just “the Transports,” is the oldest known stock index, conceived by Dow Jones & Co. co-founder Charles Dow in 1884. The Transports are also a critical piece of Dow Theory, a longstanding price observation methodology for gauging the health of the U.S. … Continued

Identifying Bubbles and Anti-Bubbles in Your Retirement Portfolio

August 28, 2019 / by

The two main jobs of a retirement portfolio are protecting wealth and growing wealth. While both jobs are important, the first is more important than the second. A sudden bout of wealth destruction is a real danger for retirement portfolios. To that end, it makes sense to think about bubble assets and anti-bubble assets in … Continued

The WeWork IPO Sums Up Everything Bad About the Silicon Valley Unicorn Bubble

August 23, 2019 / by

As a general rule, you want to avoid cash-burning companies when they go public. The initial public offerings (IPOs) for Lyft and Uber were an example of this. We pointed out the danger in early April, writing that “The Profitless IPO Boom Has Parallels to 1999.” Since then, both Lyft and Uber (symbols LYFT and … Continued

Forget Black Swans — Gray Rhinos are the Real Danger

August 21, 2019 / by

Over the past decade, the term “black swan” has gotten heavy play in the financial press. The term comes from a book called “The Black Swan: The Impact of the Highly Improbable” by Nassim Taleb. As Taleb defines it in his book, a black swan is a rare and extreme event that can’t be predicted … Continued

Safety Deposit Boxes Aren’t Safe — and Neither are Treasury Bonds

August 16, 2019 / by

What is the safest place you can think of to store precious valuables? Many would suggest a safety deposit box at the bank. There is usually a double-key entry system and a foot-thick steel door, not to mention the reputation of the bank itself. The “safety” aspect seems ironclad. And yet, imagine this scenario: You … Continued

How to Counteract First Impression Bias

August 14, 2019 / by

Human beings are naturally wired to make quick judgments. Studies have shown that, when meeting someone new, a first impression can form in as little as a tenth of a second — and the impact can last for the life of the relationship. “First impression bias” is a problem on Wall Street, too. It impacts … Continued