Fama, Thaler and Gladwell Walk Into A Bar

The new Stock Exchange is out, and this week we ponder whether The Tax Cuts and Jobs Act is already correctly reflected in market prices. Specifically, has the market already rallied enough, too much, or not enough?

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Whether you realize it or not, your answer to that question probably depends on which Nobel Prize winner you like more: Eugene Fama and his Efficient Market Hypothesis (which says all information is immediately reflected in stock prices) or Richard Thaler’s Behavioral Finance (which says the market is not necessarily always efficient). We also throw in a few very quick “blink” opinions on specific securities (e.g. Valeant (VRX), Inverse Volatility (XIV)) in Malcom Gladwell fashion (Gladwell is the NYT best-selling author that says the human brain has evolved to make smart decisions in the “Blink” of an eye).

For those of you who don’t know, we edit the weekly “Stock Exchange” series for top blogger Jeff Miller at Dash of Insight (Jeff is also the founder and CEO at NewArc Investments—a highly successful investment management firm). Every week, Jeff supplies us with a series of stock market trading ideas generated by his various trading models, and we quickly review them (in Malcom Gladwell “Blink” fashion) from a fundamental standpoint.

And just to be clear, the correct level for the S&P 500 is determined by far more factors than just the latest tax reforms out of Washington DC. However, despite overall macroeconomic and political conditions, we know bottom-up company-specific research and stock selection is one well-proven strategy for long-term success when implemented correctly via a low-cost reasonably diversified investment portfolio structured to meet your own individual needs.

For the complete, unabridged, highly-informative version of this week’s Stock Exchange, click here…

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