June 20, 2007

Economics

a rising tax and regulatory burden (Government has never proven that it could solve economic problems efficiently or satisfactorily.) Comments on the Baucus-Grassley Bill:

http://www.redstate.com/stories/featured_stories/a_bad_bill_that_will_raise_taxes

Politics

Domestic

More on the immigration dance going in Congress from Mickey Kaus:

http://www.slate.com/id/2168675/

International War Against Radical Islam

Victor Hanson on the chaos and hypocrisy in the Middle East:

http://www.realclearpolitics.com/articles/2007/06/civilization.html

A view of the world from a moderate Muslim:

http://www.washingtontimes.com/article/20070620/EDITORIAL01/106200002

The Market

Technical

Fundamental

We read an interesting article on the behavioral biases of individual traders by Terrance Odean, a professor of finance at the University of California in a CFA publication last weekend; we can’t find a link on the internet so we thought that a summary would be helpful and that it would probably behoove all of us to think about our own individual trading tendencies in light of this study.

We are not going to get into the mathematics of Professor Odean’s studies, but he performed extensive research [documented in the article] and concludes that individual traders (1) are overconfident, that is, they assume their information is more accurate and their investment ability more expert than they have reason to and as a result they trade more frequently than is in their best interest, (2) inadequately manage the emotions of investing and consequently, hold on to losers and sell winners, (3) focus on ‘attention-grabbing’ stocks which means that generally they are late arrivals to an investment trend and (4) they chase trends. Professor Odean estimates that these shortcomings lower the average individual investor’s annual return by 2%.

News on Stocks in Our Portfolios

Market Analysis

More Cash in Investors’ Hands

Family Dollar Stores is buying back 5 million shares (about $170 million).

Home Depot is buying back $22.5 billion in stock.

Expedia is buying back $3.5 billion in stock.