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This Week on The Compound
This Week on The Compound
This week on TCAF, Josh and Michael were joined by James Lebenthal, Partner and Chief Equity Strategist at Cerity Partners. They discussed life on a nuclear submarine, Nvidia's earnings reaction, Apple's investments in America, the effect of tariffs, and the prospects for reshoring. (Listen)
OUTSIDE THE COMPOUND
Spring Training is well underway, so it’s time to understand the ‘Babe Ruth effect.’ In ‘Probabilities and Payoffs: The Practicalities and Psychology of Expected Value’ Michael Mauboussin and Dan Callahan look at the math behind expected value, which affects all aspects of investing. They write:
One of the most challenging aspects of understanding expected value is that excess returns can be the product of high probability events with relatively low payoffs, or low probability events with relatively high payoffs. In other words, how often you are right is not all that matters. What is vital is how much money you make when you are right versus how much you lose when you are wrong. We have called this the “Babe Ruth effect.”
CHART OF THE WEEK
Like it or not, as measured by wealth, the top 10% of Americans control a big chunk of the American economy. As the sentiment of this slice of society goes, so goes the markets and economy. Ben Carlson at A Wealth of Common Sense writes:
The top 10% is spending more in part because their financial assets have increased in value substantially. Stocks are up. Housing prices are up. Equity in businesses is up.
The stock market is not the economy, but it seems like the two are now more intertwined than they were in the past.
MERCH
idontshop.com is back up! You can now order your favorite Compound merch like our Chart On! t-shirt.
COMING SOON
This week on TCAF, Josh and Michael will be joined by returning fan-favorite Tom Lee, Co-Founder and Head of Research, at FundStrat Global Advisors.
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