Three Longs & Three Shorts

Opposite of Conventional Wisdom

Author: Michael Batnick
Source: Irrelevant Investor (

The Ritholz machine keeps providing us good material to read and learn from. In this piece, they list five pieces of wisdom which are supposed to be the gospel truth but are actually bad for your financial health.

  1. Stocks are riskier than bonds: “One-month U.S. Treasury bills, often put in the risk-free bucket, went 68 years with a negative real return. Sure stocks can kill you fast, but bonds can kill you slowly.”

2. Gold is a good hedge against inflation: “This makes sense in theory, but it is not always the case in reality. If gold did provide a hedge against inflation, you would expect the two to be at least somewhat correlated…starting in 1980, a decade after rampant inflation and amazing returns for gold, but still, over the last 40 years, this conventional wisdom has not held up well.”
3. If you can time the economy, you can time the stockmarket: “…it turns out that knowing when a recession starts is a great signal to get out of stocks. Problem is you can never know in real time when a where you are in the business cycle, but that’s another story for another day.”
4. Stocks crash from all-time highs: “Since 1927, there have been 202 monthly closing highs in the S&P 500. There have been 4 market crashes. That’s a lot of time spent worrying about something that happens 2% of the time. All-time highs are generally more of a green light than a red one.”
5. Your house is a good investment: “According to Shiller’s data, this simply isn’t true. Real home prices went nowhere for 100 years. I am not suggesting home ownership is bad in any way, but there is this idea that you buy a house, sell it after thirty years, take your gains and retire to a beach. The truth is closer to what my friend Morgan Housel once said: “A house is a large liability masquerading as a safe asset.’”