Investing In a Post-Covid World, as Viewed by Icons and Newcomers

To the Editor:
Lauren R. Rublin did a wonderful job in assembling a truly diverse group of opinions from both icons and newcomers (“Imagining the Post-Covid World,” Cover Story, Dec. 4). And yes, while in her words I did “vehemently disagree” with some of them, it was still stimulating to see how people are viewing the post-Covid-19 world.

It would seem that CDC, which normally refers to the Centers for Disease Control and Prevention, should be redefined as Covid, Debt, China. Due to many of the innovations stimulated in reaction to Covid-19, the new normal will definitely be different from the pre-Covid-19 normal. Debt is a four-letter word. The enormous amounts of debt taken on by governments and corporations, if not dealt with, will strangle economic growth when interest rates rise and debt-service costs increase. As for China, the threats that it poses on so many levels give new meaning to the old Chinese saying, May you live in interesting times.

Arthur M. Shatz, Oakland Gardens, N.Y.

To the Editor:
The cover of your Dec. 4 edition about the post-Covid world imagined various risks that a mind should consider. These risks were recent ones of which all investors are aware, but surprisingly missing were risks that are not well known and even unimagined.

Hasn’t recent experience from 9/11 to Covid, not to mention the popularizing of behavioral finance, taught us that we are unaware of some of the worst risks ahead? There needs to be space in the brain depicted on your cover to discover those currently unimagined risks if we are to be successful in the long term, both as investors and as a species.

Eugene Lipitz, Houston

To the Editor:
After reading Karen Karniol-Tambour’s assessment of the economy and markets after Covid-19, I am very concerned. Her reasoning that investors can invest both in China and Western democracies and “have a stake in both sides” is very troubling. It is clear that the Communist Party will not give in to freedom and democracy, and that China will do whatever it can to continue to steal Western technology and intellectual property.

I think that Americans have to decide whether we are going to take a stand against communism or continue to finance China so that it can continue its march towards domination. I intend to keep my stake on the side of the U.S.

Matt Watson, Orchard Park, N.Y.

To the Editor:
It was a great delight to get to hear the insights of so many distinguished individuals from a broad array of diverse fields. However, I fundamentally disagree with the assertion made by Richard Thaler. I am a retail investor who has trounced the market. This is not a matter of luck or overconfidence. As a retail investor, I have advantages over the professionals. I can sit around and wait for the deals to come to me. I do not have to answer to anybody in regard to my portfolio, and thus I can buy stocks that are currently out of favor or buy stocks during downturns that are priced as if they’re going out of business.

Chris Bentsen, Albany, N.Y.

How to Sell Shares

To the Editor:
Jack Hough highlights a fascinating conclusion from the study he reviewed on selling performance: Returns were particularly bad when portfolio managers sold extreme performers, both good and bad, with small weightings (“Even the Best Investors Stink at Selling Stocks,” Streetwise, Dec. 4).

The researchers’ explanation here is that smaller weightings are by definition those held with lower conviction than large weightings. If so, this is probably the outcome of the “conviction mistake” among portfolio managers. Instead, weightings are better determined by potential risk characteristics than by conviction about potential reward.

Separately, work by Essentia Analytics and others shows that equal-weighted portfolios perform better than otherwise, and of course they are implicitly better diversified. Therefore, so much for “conviction.”

The other cause of this phenomenon of cleaning up the extreme performers in the tail of a portfolio is that, irrespective of the conviction level of initial positions, managers understandably stay on top of larger positions over smaller one—which only goes to reinforce the conviction loop.

In addition to aggressively selling what one has a good new reason to sell, the better way to raise cash is simple: across the board on a routine basis. Then, managers always have cash to do what they are best at: buying stocks (without having to decide what to sell first), including potentially increasing positions at the tail of the portfolio before they become too insignificant to hold.

Any small-cap value portfolio manager can tell you that most of their best purchases are from underinformed larger portfolio managers clearing out insignificant positions.

I.P. Ellis, Westport, Conn.

Hedging With Gold

To the Editor:
Besides the pandemic and out-of-control fiscal and monetary policy, another reason to own gold and gold shares is the excellent volatility control that gold investments offer (“Gold Prices Have Soared. Expect More of That in 2021,” Commodities, Dec. 4). I own several gold-based exchange-traded funds, and quite often they move contrary to the day’s market action.

Also, because the ETFs are diversified between gold bars, gold common stocks, and precious metals (which include some nongold companies), their daily price action will quite often differ among themselves. In other words, a “hedge within a hedge.”

Mike Meehan, Bradenton, Fla.

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