Readers respond

It is incredible the kind of responses this less-than-a-week old blog is generating. It is so overwhelming as to be humbling.

My objective was to attract a maximum of 20 people to the blog before the week runs out but we have managed to pull 115 people in two days!; and from across multiple geographies-Nigeria, USA, UK, Japan, The Philippines, Bangladesh, Jordan, Uganda and India.

The results more than convince me that this is a project whose time has come.

I am driven to put this message out to say thank you for your encouragement which came from multiple platforms including facebook, twitter and Google plus.

Let me also use the opportunity to highlight a very important question asked by one of our readers.

Please see his question below and my response.

Robert Shiller, Nobel Prize Winning  Economist

Jeff: Kirk, I am sure you charge like $1000 per hour! This is crisp stuff, man. Investor education in times of panic is key. I totally agree. Although, you do not want to make so many promises, such as what the company is doing to weather the storm. Share prices tend to react to news that are beyond the companies. Here is my question: What would you tell a worried shareholder who wants to know when the storm will end just he/she knows if there is a need to cash out (an investor who does not want to hear anything to do with investing for the long term is a better option? 

Me: Hello Jeff, thanks for your kind words. A thousand bucks an hour is going to do my whole village a world of good.

We must note that stocks as an investment class have historically outperformed other assets-Bonds, T-Bills and Small Caps. The Ibbotson analysis of the University of Chicago spanning 75 years establishes this.

This is a study that is widely quoted by academics and investment professionals (Professor Robert Shiller referred to the study in his Coursera course on Financial Markets. Brealy, Myers and Allen did same in their immensely popular book, Principles of Corporate Finance; so did Jordan and Corrado in Fundamentals of Investments).

I recently listened to Professor John H. Cochrane of the University of Chicago who pulled out a couple of graphs on the Ibbotson study. On first glance, especially after the great depression and other crisis periods, the dips in stock prices made it look like a looser but, in the LONG RUN, stocks still did better than other financial market assets.

Point: despite the news effect, it would do investors no good to dump stocks as an investment class. We are not ruling out the fact that they may want to rebalance their portfolios (and short less than inspiring stocks). As a matter of fact, it is the right time to rejig their basket of investments to reflect the correlation (the extent to which stocks move up and down with each, other on the one hand, and how stocks move up and down with other asset classes).

The IR Pro unfortunately may not have come across this powerful idea and we can’t blame him because it is gleaned from the world of finance/portfolio management.

It is the reason I am very excited you asked the question. Now they know!