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The Importance of Investment Discipline

Remember Greece? As in: "the nation that can't pay the interest on its government bonds, and will almost certainly default and take down the entire European Union banking system with it?" Or: "the nation that all the 'experts' predict will exit the Eurozone and print enough Drachmas to pay off its crushing debt burden?" While we do not invest in the Greek bond market, the investment experience of Greek bonds is a great example of how risk and return are connected.

Last week, Greece returned to the bond market for the first time in four years, selling all $4 billion worth of 10-year government bonds at a surprisingly low aggregate interest rate of 4.75%.

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Black Magic on Wall Street – Trades Quicker Than the Eye

Is the stock market rigged? You may have heard about the 60 Minutes interview with author Michael Lewis, a former Wall Street broker, author of "Liar's Poker" and "The Big Short," who has just come out with a new book entitled "Flash Boys." Lewis is an eloquent and astute critic of Wall Street's creative and predatory practices, and in his new book (and in the 60 Minutes interview) he offers evidence that the stock market is "rigged" by a faction of high-frequency traders, abetted by stock exchanges and Wall Street firms.

The charge is entirely true. However, the impact is less relevant to you and anyone else who practices patient investing.

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Prehistoric Human Brain Guiding Financial Decisions

You've probably read about behavioral finance research. The conclusion is generally the same, no matter what aspect of our decision-making is being probed the human mind is hard-wired to process information in certain ways; these can be partially explained as behavioral biases. These behaviors/instincts would be extremely helpful when the environment contained gazelles (timid) and saber-toothed tigers (dangerous), but are not so helpful when we're navigating the unfamiliar terrain of the investment markets. Instincts may help in certain areas of our lives today but have no place when considering investing. Case in point, people shop looking for bargain prices, rather than flocking to stores where the price tags have been constantly revised upwards for the past 12 months. But for some reason, they do the opposite when they're shopping for investments, why the disconnect?

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The Federal Reserve Moves Markets -- Yet Again



There used to be a day when the investment markets and the U.S. economy were not controlled, rigged or otherwise directly manipulated by the U.S. central bank. But we are far from that today, as evidenced by yesterday's market reaction to Federal Reserve Board Chairperson Janet Yellen's press conference, and the release of the minutes of the Fed's most recent Federal Open Market Committee (FOMC) meeting. By the end of the day, the Standard & Poor's 500 index had dropped 0.61 percent, the Nasdaq Composite slipped 0.59 percent, and there was an immediate sell-off in US Treasury notes.

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Thoughts On the Current Ukrainian Crisis

The current events in Ukraine can evoke thoughts to the Cold War. Whenever we see troop movements and fires raging in the streets of a capitol city the size of Chicago, our instinct is to assume the worst and move our money to the sidelines. But is this really the best strategy?

I want to keep this simple. Many of the portfolios we manage at Private Wealth have exposure to emerging markets. A typical portfolio with 60% in growth/equity and 40% safety/fixed income will have 5% in the emerging markets. Of the 5% about 4.5% has exposure to Russia, Ukraine if represented would be extremely insignificant from an investment perspective.

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