Peter Lynch Principle #8

When yields on government bonds exceed the dividend yield of the S&P 500 by 6% or more, sell your stocks and buy bonds.

The 10 year is at 3.39% and the S&P 500 yield is 1.73%.- 4/28/2011

3.39-1.73 = 1.66.

1.66/1.73 = 96%

The yield on Govt. bonds is 96 percent higher.

Steinhardt's Track Record

Steinhardt Partners achieved a performance track record that still stands out on Wall Street: 24% compound average annual returns – more than double the S&P 500 – over a 28-year period. What's more amazing is that Steinhardt accomplished this record with stocks, bonds, long and short options, currencies and time horizons ranging from 30 minutes to 30 days. There were few investment instruments over which Michael Steinhardt did not wield some mastery.

Soros Investing Philosophy:

His basic theory of investing is that financial markets are chaotic. The prices of stocks, bonds and currencies depend on the human beings who buy and sell them, and those traders often act out of highly emotional reactions rather than coolly logical calculations. Opportunities can be found by carefully studying the value and the market prices of assets. He focuses on a theory of "reflexivity," which is based on the premise that individual investor biases affect market transactions and the economy.

People Smarter than George Soros

A mere $1000 invested in 1969 when Soros established the Quantum Fund would have been worth $4 million by the year 2000. During that time he achieved a cumulative 32% annual return.

It is only logical on a planet with almost 7 billion people that there are "many" investors smarter than Soros. You can start with small businessmen and entrepreneurs.

Rational Decision Making

"But Prof Cochrane correctly identifies consistency as the most prized virtue in economic reasoning. If I am faced with the same menu of options, I will always make the same choice. This is the premise on which rational choice models are based. Such models not only dominate economics but have been widely used across the social sciences."- John Kay

But people are incapable of making rational choices if important information is withheld. In most cases paradigms have no relation to reality; this is because most people claiming to be financial advisors are salesmen.

Simple Supply and Demand

Knight often despaired at the general public’s inability to understand even simple economic truths. In his 1950 presidential address to the American Economic Association, Knight said:

Of late I have a new and depressing example of popular economic thinking, in the policy of arbitrary price-fixing. Can there be any use in explaining, if it is needful to explain, that fixing a price below the free-market level will create a shortage and one above it a surplus? But the public oh’s and ah’s and yips and yaps at the shortage of residential housing and surpluses of eggs and potatoes as if these things presented problems any more than getting one’s footgear soiled by deliberately walking in the mud.

The Great Information Hairball: Why U.S. Productivity fell under Alan Greenspan's Fed

Unpublished Ideas backed by data that led to high returns for the prescient in an era of Incompetent American leadership.

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Economy Tweets IPhone Test

The Internet creates incredible opportunities for creative people.

This blog is being updated from my pocket computer. I would like to thank the people at iPocketComputer.com for their training!

It is interesting that the yield on high-grade corporate bonds was 4.4% in 1962! Wall Street is incredibly cynical these days. Rates are too high. Inflation is not an issue in the U.S. Economy.

Everyone keeps talking about food and oil. The problem is speculators are pushing up those prices while real estate is in a free fall. Decreases in personal income and government spending are also deflationary.