New Blog (again)

When I was a teen, I started a Blogger site so I could talk with impunity. When I became a professional, I changed my blog to be more professional and click-bait-y. During this time I also started sending emails to a list every week — emails that I now consider spam-y. I stopped the emails because I realized I don’t read weekly email updates from anyone else. Now, I find myself reading and following a specific type of online author. So specific, in fact, that there is a bit of a community to their websites (see below). I want to join that club. So for the second time, I’m changing my blog. New WordPress theme, new writing theme. The latter is undecided, but is sure to be eclectic.

Cf. and

Why can’t I get ahead?

Reading Atlas Shrugged, by Ayn Rand, I’m so torn. Half of me wants to burn it, the other half wants to give a copy to everyone I know. I guess that makes it a well-devised novel. Below is a small excerpt that started to change my life, but first some background. I was not working with passion. My hours were spent finding busy-work-to-do which resulted in nothing getting done. I did not understand what would make me a better worker with an Entrepreneur’s mentality, even though I had been told the answer so many times. That is, until I read the paragraphs below. Dagney Taggart is VP of Operations for a railroad, and Hank Reardon is the owner of a steel mill.

“‘That’s the story, Hank. I had worked out an almost impossible schedule to complete the Rio Norte Line in twelve months. Now I’ll have to do it in nine. You were to give us the rail over a period of one year. Can you give it to us within nine months? If there’s any human way to do it , do it. If not, I’ll have to find some other means to finish it’

‘I’ll do it.’

Dagney leaned back in her chair. The short sentence was a shock. It was not merely relief: it was the sudden realization that nothing else was necessary to guarantee that it would be done; she needed no proofs, no questions, no explanations; a complex problem could rest safely on three syllables pronounced by a man who knew what he was saying.”

What does your word mean to the people with whom you work? To my colleagues and prospects, my word has not always meant that no other proof was necessary—that if I said something would happen, it would. Now it is increasingly true that if I say something, it will get done.

This is what I was always told and never had it stick in my head. The people who get stuff done are the people who say they will do something, then do it. It happens this way: you say you will complete an action or deliver a value, and (here’s the kicker) you also say by when you will do it. You build the skill of your word by doing this with everything. You wake up at 7:00 AM every day, because you say you will. You arrive at meetings on time, because you said you would be there. You clear your inbox everyday, because by having an email address available for people to send to, you are taking on an expectation that you will respond within 24 hours.

If you’re anything like me, you can’t get ahead because you cannot be trusted: you don’t even trust yourself. So build your word. Write it down, then do it.

Why people panic about Corona Virus

It seems investors have made a sudden and drastic shift into one commodity: toilet paper. This seems irrational. Yet there are enough people doing it that we cannot help but notice the impact. So what is really going on?

Actually, people are neither rational nor irrational, they are human. So are you and I. We use a series of heuristics in decision-making, especially when under pressure. Two of them are wants and cognitive errors.

Wants come in three dimensions: utilitarian, expressive, and emotional. Utilitarian wants are for things that have practical uses. Expressive wants are for things that display who we are or what we have accomplished. Emotional wants are for things that give us emotional rewards: usually pride or joy. All three wants can also be satisfied by avoiding the loss or perceived loss of what we want. In a perfectly balanced human, these three dimensions would be perfectly balanced. In a normal human, they get off-kilter depending on the situation. In this case, all three are on display in the ways people are responding to current events, including you and me.

Cognitive errors come in many flavors. I will only mention two: confirmation bias and shortcuts. Confirmation bias is ignoring non-confirming information when investigating a conclusion you have already reached. We do this so much that it’s almost impossible to self-diagnose. Shortcuts are best understood in example. A stock trader tends to think of trading like playing tennis against a wall, when it is actually more like playing tennis against Roger Federer. We tend to think of government-level finances as a bigger version of our household finances when it is actually more like moving tens of thousands of financial pieces at once.

With these human traits, it is difficult to invest prudently and with purpose. This creates pain and cultivates fear of the future. My stand for you and your family is that you remain disciplined and prudent investors over a lifetime, that you shift your personal experience of money from scarcity to abundance.

Someday I will change.

Someday, when our problems are gone, then we’ll be happy.

We tell ourselves some version of this over and over: in our investing, in our jobs, in our families. You could find it in your thinking almost every day. Here are four truths:

  1. Aim for the right things, do the right things, and you will achieve the right outcomes.
  2. You have control over some things, or you could have control if you were to take it.
  3. If you change none of the things you could control, you can expect that the future will look like the present. If you drastically change all of them, you can expect to have drastically changed your future.
  4. There is nothing over the next hill that you don’t have available right where you are.

Simon Joshua is a licensed investment advisor representative at Cornerstone Wealth Partners in Michigan. He has structured his practice around investor coaching and committed himself to leading communities in establishing a legacy of fulfillment.

Invested by Danielle Town

Invested is a primer on investing methodology and personal financial philosophy that attempts to teach the reader how to integrate Rule#1 (value) investing into a middle-class American lifestyle.

This was an emotionally challenging read. Frequently, Town delves into personal history and struggles with a vulnerability and brutal honesty that is difficult to stomach. It is also a beautiful look at what is possible when a person of fortitude puts her mind to something. The narrative is well-written and well-structured. Below is my favorite line.

Achieving freedom, it turns out, was about way more than what was in my bank account.

Danielle Town

Download the full summary and review below.

How does this occur to you?

When I talk to friends and family about being an Investor Coach, they often ask what that means. My short answer is that behavior affects returns. They often follow up by asking what that means.

Investing behavior is the result of three things: your perceptions, your instincts, and your emotions. A longer answer is that you take investing action based on your interpretations of what you observe, your reactions to those observations, and the way you feel about those observations and those reactions. Your investing actions can differ greatly based on history (other people’s investing and your own), your character, personality, fears, and hopes. All of this sits on the foundation of how the world occurs to you and how you occur to yourself.

Ironically, I do not need to take note of any of that information in order to coach you. Most of it is very personal, and all of it is unique to you as an individual. What I do as a coach is to cause you to be uncomfortable with your life as you are living it now—not in a covetous way (comparing your possessions, relationships, etc.), but in a grateful way (making the best of your life). I cause you to think that there is a better way to live the life you have been given.

I do that by teaching you to unearth those places in your life that cause you pain: your past mistakes, other’s reactions to those mistakes, ongoing struggles, broken relationships. Once you do, you can change the way the world occurs to you and the way you occur to yourself. Then, and only then, your behavior begins to change. In the right context, it changes to your advantage.

I only know this because I have been through it before. I have been coached. And my life will never be the same. All it takes is an investor who is coachable.

Market returns wait for no one. Are you ready?

Coaching happens here.

Simon Joshua is a licensed investment advisor representative at Cornerstone Wealth Partners in Michigan. He has structured his practice around investor coaching and committed himself to leading communities in establishing a legacy of fulfillment.

Is passive investing a bubble?

Absolutely not. Before I tell you why not, skip to response number 5. Then, if you want to know more, come back and read the whole thing.

Earlier this year, in an email interview with Bloomberg News, Michael Burry wrote that he thought index funds were a pricing bubble, just like CDOs in the early 2000s. As a fund manager, Michael Burry shorted the CDO market in 2007. In hindsight, a brilliant play. Having spent the last three days reading articles written about his comments, I have become frustrated with the conspicuous absence of clear thinking and direct quotes. So, without further introduction, here are Burry’s words, copied from *

“Central banks and Basel III have more or less removed price discovery from the credit markets, meaning risk does not have an accurate pricing mechanism in interest rates anymore. And now passive investing has removed price discovery from the equity markets. The simple theses and the models that get people into sectors, factors, indexes, or ETFs and mutual funds mimicking those strategies—these do not require the security-level analysis that is required for true price discovery.

“This is very much like the bubble in synthetic asset-backed CDOs before the Great Financial Crisis in that price-setting in that market was not done by fundamental security-level analysis, but by massive capital flows based on Nobel-approved models of risk that proved to be untrue.

“The dirty secret of passive index funds—whether open-end, closed-end, or ETF—is the distribution of daily dollar value traded among the securities within the indexes they mimic.

“In the Russell 2000 Index, for instance, the vast majority of stocks are lower volume, lower value-traded stocks. Today I counted 1,049 stocks that traded less than $5 million in value during the day. That is over half, and almost half of those—456 stocks—traded less than $1 million during the day. Yet through indexation and passive investing, hundreds of billions are linked to stocks like this. The S&P 500 is no different—the index contains the world’s largest stocks, but still, 266 stocks—over half—traded under $150 million today. That sounds like a lot, but trillions of dollars in assets globally are indexed to these stocks. The theater keeps getting more crowded, but the exit door is the same as it always was. All this gets worse as you get into even less liquid equity and bond markets globally.

“This structured asset play is the same story again and again—so easy to sell, such a self-fulfilling prophecy as the technical machinery kicks in. All those money managers market lower fees for indexed, passive products, but they are not fools—they make up for it in scale.

“Potentially making it worse will be the impossibility of unwinding the derivatives and naked buy/sell strategies used to help so many of these funds pseudo-match flows and prices each and every day. This fundamental concept is the same one that resulted in the market meltdowns in 2008. However, I just don’t know what the timeline will be. Like most bubbles, the longer it goes on, the worse the crash will be.”

*Accessed 10/11/19.

In summary, Burry makes 4 claims:

  1. That price discovery has been removed by a passive approach,
  2. That liquidity in underlying stocks does not support the dollars invested through index funds,
  3. That the industry is capitalizing on available technology for profit, despite the potential danger to the retail investor (you), and
  4. That passive funds use derivatives to match index prices and manage daily fund flows.

These claims, if true, would indeed amount to a pricing bubble.

What follows are my responses and a conclusion.

Response number 1. Price discovery might be eliminated at a passive investing market share of 100%, but anything less renders this claim untrue. It takes only a few independent traders per stock making daily judgements on new information to price that information into the market. In an imaginary world where none of those traders are actively seeking new information and betting on it, the market might be inefficient (prices might not reflect all available information). However, to reach that imaginary world, 100% of global stock market assets would have to be invested through passive funds. This is not currently the case. We are not even close; and frankly, I think we will never get there.

Response number 2. The specific liquidity risk pointed out by Burry is both uninformed and illogical. It is true that if a mutual fund is in a state of net redemptions from their investors, they have to liquidate underlying assets to fund the redeemed shares. It is also true that if the sell-off overwhelms the trading volume of each of those underlying stocks it could impact each of their prices. Burry claims that, with the amount of assets tied up in index funds, a mass exodus from passive will more than overwhelm the trading volume and push down the share price of many perfectly legitimate stocks—an irrational market crash. My counterclaim is that the move away from passive would have to be a shift on a global scale over the course of one trading day in order to have such a tragic impact. That sell-off could conceivably occur over the course of a week at the shortest. Legally, mutual funds can take up to seven days to fund redeemed shares. Further, the move to passive investing has come as the result of the information revolution and cultural change of the past half-century. What are the chances that foundation will disappear in one single day? It is so highly unlikely as to render this whole scenario impossible.

Response number 3. Burry is right about one thing: the majority of this industry exists to make money, not to deliver market returns to their clients. This results in a lot of words and promises being marketed without increasing returns efficiently or doing the best for clients. As an example, common passive strategies tend to allocate whole portfolios according to market capitalization. This fails to take advantage of the size premium or the value premium, and heavily weights portfolios toward large US growth stocks. Yet companies supplying these cap-weighted products claim an academic basis for their strategies, simply because they do not employ active trading—pretty clever. Burry’s criticism of the Wall Street indexing approach is well-earned.

As an aside, it seems to me that Michael Burry is wholly dedicated to his clients. That is refreshing.

Response number 4. Burry’s fourth claim is theoretically true. Index funds could use derivatives, such as futures or calls and puts, to track their chosen index more closely. At this point, I have not been able to obtain data for the whole industry. But as far as I can tell, major index funds allocate less than 5% to derivatives.

The passive funds that we advise our clients to own are not index funds. They are factor funds—academically structured to obtain market returns, not to track an index. That eliminates the need for calls and puts.

Response number 5. What is a bubble, anyway? A bubble is an overpricing of securities or assets in a market. So-called because, eventually, they pop and the whole market responds with a crash. This is a theory, of course. Because if everyone really knew that these assets were so severely overpriced, they would sell off to adjust the price down, which is exactly what happens when bubbles pop. Bubbles are not a counterexample of the Efficient Market Hypothesis; they are an example of it. The very moment new information is available, it gets priced into the market. The very moment that a security or asset is surely known to be worth less than its current price, it gets sold—and not a moment sooner. Professor Eugene Fama has long said that it is impossible to predict or identify bubbles. Yes, the market crashes every few years, and you need to make sure you are prepared for that. But no matter what we think they are, or who thinks we are facing one, bubble fear-mongering should not affect your portfolio decisions.

When Michael Burry shorted CDOs in 2007, he had come to a personal conclusion that the mortgage industry would eventually crash. He made a bet and stuck with it. That bet paid off.

As for Cornerstone Wealth Partners, we do not gamble with our clients’ money.

There may come a day when the public loses its infatuation with passive investing. At that time, I will stand for what I know is right, just as I do now.

Own Equities. Diversify Globally. Rebalance.

Remain Disciplined. Live Life on Purpose.

Simon Joshua is a licensed investment advisor representative at Cornerstone Wealth Partners in Michigan. He has structured his practice around investor coaching and committed himself to leading communities in establishing a legacy of fulfillment.


In 1928, the first TV channel began broadcasting. It was a solution to having to pay money to view screen entertainment (i.e. movie theatres). “We made entertainment free,” they said. “Put a TV in your living room.”

In the 1970s, premium cable television became more popular all through the US, with a boost when satellite or dish programming was available. “Watch what you want whenever you want,” they said. “Get cable.”

In late 2006 and early ’07, both Amazon and Netflix opened their internet streaming services, and we flooded in. “Watch shows, movies, documentaries, and more with no ads,” they said. “Subscribe.”

My friend and I watched a fantastic bit of cinema on Prime last week. However, our emotional experience was somewhat stunted by the ad we had to watch before the movie started. Now we find ourselves in a place where we have to pay every month for the privilege of selection, but we also have to sit through ads.

Two questions:

  1. What is coming next that will paint itself as the choice of the discerning masses, and internet streaming as the grasping bourgeois?
  2. When will we ever learn that we cannot watch to our heart’s content?

Ugly truth: there will always be more entertainment, you can never consume all of it.

Beautiful truth: you don’t have to. You can read instead of watch, and you’ll have much more to show for it afterward.

Simon Joshua is a licensed investment advisor representative at Cornerstone Wealth Partners in Michigan. He has structured his practice around investor coaching and committed himself to leading communities in establishing a legacy of fulfillment.

What is the best investment? Part Seven: Bonds

This is the last installment in the series.

There are two risks associated with bonds: default and price volatility. There are two metrics for evaluating bonds: quality and maturity.

The price of a bond (what we could sell it for) is partially determined by how its interest rate, or yield, compares to newly available bonds. If yields are dropping, the price of a bond I already hold will go up. If yields are rising, the price will drop. Default is simple: when a corporation declares bankruptcy, debts are paid from senior to junior. Publicly traded corporate bonds are classified as junior debt.

The two metrics are best understood when we analogize bond investing as renting. If dollars are the property that is being rented, and if interest is the rent being paid for the use of those dollars, it follows that:

The riskier a borrower, the higher their cost of capital (interest rate). And that the longer the borrowing timeline, the higher the interest rate. Lower quality and longer maturity will both result in higher interest rates. Long maturity also increases the risk of price drop.

What is the purpose of debt securities (fixed income) in an investment portfolio? The most well-informed answer is: stability. Rebalancing is a crucial task in any long-term investment approach. When stock markets crash, usually they all crash together. We need something to rebalance against that will not be crashing at the same time. What fixed income is not for is to produce returns. That is what our stock exposure is for.

We use only short-term, high-quality debt securities in all fixed income portions of client’s portfolios. This is the most straightforward method for achieving stability sufficient to rebalance against. These rules do not change over time.

Ugly truth: (you’ve seen this before) you cannot achieve stock market returns in the bond market or in Real Estate with lower volatility.

Beautiful truth: you do not need to trade stocks in order to invest prudently. You need coaching.

Simon Joshua is a licensed investment advisor representative at Cornerstone Wealth Partners in Michigan. He has structured his practice around investor coaching and committed himself to leading communities in establishing a legacy of fulfillment.


Taking a break from our series on the best investment, here is a primer on how stock market pricing works.

You have a box spring you want to sell, so you advertise for $150 dollars. Your neighbor offers you $90. You accept because you just want it gone. (This is not biographical in any way.)

The market is similar. Below are four components of the pricing system, but the exact system is a little more complex.


  1. Bid-Ask

Here is one person who stands ready to buy a stock at a particular price: the bid price. Conversely, here is another person who stands ready to buy that same stock, but only at their particular price: the ask price. The price listed on market reports and on Google are an average of the bid and ask prices.

  1. Spread

Interestingly, there is always a difference between the bid and ask price: the spread. The person selling will not sell below their ask price, and the person buying will not buy above their bid price. New buyers and new sellers have to accept the available bid or ask price if they want to trade.

  1. Volume

Volume is the number of trades on a stock per day, sometimes reported as per week. Volume affects the spread. The higher the volume, the narrower the spread. This will make better sense in the scenarios below.

  1. Orders

When a person wants to buy or sell, they put in a buy or sell order. That order has a lot of information on it. Simply though, it has: the name of the stock they want to trade, the operation (buy or sell) and the price at which they desire that trade, if applicable. In fact, it is usually the case that people selling will sell at the highest available price. The converse is true for buyers. Orders come in several flavors, but stop orders are crucial. This is where bid and ask prices originate. One person will sell, but not below $10. They put in a sell stop order, which states their intentions. The lowest price at which someone is willing to sell is: the ask price! Again, the converse is true for buy stop orders.


A. One trade

A person wants to buy a stock at any price. They will buy it from the person who is willing to sell it at the lowest price. That was the ask price, remember? After that transaction, there is a new ask price. This comes from someone who stood ready to sell all along, but not as low as the last guy. Every trade in either direction exposes the next layer of bid or ask prices.

B. Market sell-off

This stock is not doing well. The company represented by that stock (a factory) has just discovered radioactive substances under their building. In the market that morning, the panic sets in. Many people who own that stock put in sell orders (sell at any price). The first bid price available is $9.42. For every sell completed, a new bid price is uncovered, so the bid price keeps dropping precipitously. As it drops, the ask price also drops because traders who put in sell stop orders are now retracting them and putting in new, lower sell stop orders. Thus, both bid and ask prices drop.

C. Market buy-up

It turns out that the company Geiger counter was broken. There is no radioactive substance, just oil. Oil! The market that morning responds with a buy up. The first ask price is taken, then the next available ask price, then the next and so on, raising the listed ask price. The bid price rises similarly as buy stop orders are retracted and resubmitted.

D. Small cap to big cap

If a stock has one million shares outstanding and every shareholder owns one hundred shares, what is the highest number of traders that can act on new information? Answer: 20,000. Each trader (10,000) has a counterpart from the market (another 10,000). Every company is limited in trading by the number of shares available. The larger the company, the more they are worth, the more shares issued, the larger the potential volume. As more people own the stock, and as more information is broadcast (larger companies get more attention), the more traders will want to trade it. As more people react to smaller bits of information, the more trades will occur (the volume will rise) and the spread will narrow.

Ugly truth: no one person can understand the impact of every trader on the market price.

Beautiful truth: you do not need to understand any of that. You just need coaching.

Simon Joshua is a licensed investment advisor representative at Cornerstone Wealth Partners in Michigan. He has structured his practice around investor coaching and committed himself to leading communities in establishing a legacy of fulfillment.