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March 11, 2016
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How to lose money in 2016, part 1

Happy new years! Today we’re going to find bad stocks. That may not seem hard in today’s market: everything is going down, seemingly.

The little numbers are how each slice of each pie did over the last month, from Dec 1 through the end of the year. Notice that energy took a 14% bath.  Now look carefully, and find the segment that went up. Just stop reading and do it. Hint: they won’t be easy to find. So, losing money seems to be easy. But we’re going to make it easier. Today we’re going to show you what happens if you buy stocks in bad industries.

Weak industries seem to stay weak over time, especially when the market is spongy overall. These pratfalls can more than overwhelm for bits of good performance over the long haul.

Notice that when we take all the trades (we rebalance quarterly), we get lots of green dots, but lots of white and red dots.  The white dots are trades that went nowhere, and the red dots are obvious — losers. So, what happens if we buy weak stocks in these weak industries? Now we’ll look at the worst 20% of the stocks performance in these bad industries.

For variety, we give you the results in a tablular format — though it’s not looking so good. Are those results due to a few losers, or a general tendency for loss?

Looks like a general tendency towards lackluster results.  Notice that the average stock in this screen lost money. When we compare that to two screens, below, we’ll see the difference.
First the true screen, that matches everything.

Looking up, you’ll notice that the median buy and hold position lost money! But the ginormous (technical term 🙂 gains on the best stocks helped counter the worst stocks.
Now for the best stocks of the best industries:

I leave it as an exercise for the reader to guess what the returns of the three screens are:
1. The worst stocks in the worst industries.
2. All stocks.

Henry Crutcher is an avid family guy, board gamer (think Settlers of Catan, Puerto Rico, etc), computer nut, and all around geek. Hailing from Louisville, KY, he has noticed that the weather in Louisville is remarkably similar to the weather in Atlanta, GA despite the 407 miles that separate them. He has two daughters, one cat, and lots of trees. He loves the Miles Vorkosigan series from Lois McMaster Bujold, for its mix of SF, comedy and insight into how people work. He also comsumes more than his fair share of cheesy business/economics books, such as The Ascent of Money by Niall Ferguson, or Farewell to Alms, by Gregory Clark.

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