CORRELATION: Diversification in Finance and Investments

Posted on June 17, 2025 by Dr. David Edward Marcinko MBA MEd CMP™

By Staff Reporters

SPONSOR: http://www.MarcinkoAssociates.com

DEFINITION

***

***

Correlation measures the relationship between two investments–the higher the correlation, the more likely they are to move in the same direction for a given set of economic or market events. Correlation, in the finance and investment industries, is a statistic that measures the degree to which two securities move in relation to each other. Correlations are used in advanced portfolio management, computed as the correlation coefficient which has a value that must fall between -1.0 and +1.0.

So if two securities are highly positively correlated, they will move in the same direction the vast majority of the time. Negatively correlated investments do the opposite–as one security rises, the other falls, and vice versa. No correlation means there is no relationship between the movement of two securities–the performance of one security has no bearing on the performance of the other.

CAUSATION: https://medicalexecutivepost.com/2024/06/05/correlation-is-not-causation/

Correlation is an important concept for portfolio diversification--combining assets with low or negative correlations can improve risk-adjusted performance over time by providing a diversity of payouts under the same financial conditions.

COMMENTS APPRECIATED

Thank You

***

***

Filed under: "Ask-an-Advisor", Experts Invited, Funding Basics, Glossary Terms, Healthcare Finance, iMBA, Inc., Investing, Marcinko Associates | Tagged: , , , , , , , , , , , , , , , | Leave a comment »

CURSE: Knowledge and Hindsight Bias

Posted on December 8, 2024 by Dr. David Edward Marcinko MBA MEd CMP™

By Staff Reporters

***

***

Similar to the availability heuristic (Tversky & Kahneman, 1974) and to some extent, the false consensus effect, once you really understand a new piece of information, that piece of information is now available to you and often becomes seemingly obvious. It might be easy to forget that there was ever a time you didn’t know this information and so, you assume that others, like yourself, also know this information: ie., the curse of knowledge.

However, it is often an unfair assumption that others share the same knowledge.

And so, the hindsight bias is similar to the curse of knowledge in that once we have information about an event, it then seems obvious that it was going to happen all along.

IOW: I should have seen it coming!

COMMENTS APPRECIATED

Thank You

***

***

Filed under: "Doctors Only", Ethics, Experts Invited, Glossary Terms, LifeStyle, mental health | Tagged: , , , , , , , , , | Leave a comment »

STOCK MARKET: Capitalization, Depth, Maker, Neutral and Order

Posted on December 8, 2024 by Dr. David Edward Marcinko MBA MEd CMP™

By Staff Reporters

SPONSOR: http://www.MarcinkoAssociates.com

***

***

Market Capitalization: Market capitalization is the market value of all the equity of a company’s common and preferred shares. It is usually estimated by multiplying the stock price by the number of shares for each share class and summing the results.

Market Depth: The degree to which a market can execute large market orders without impacting the price of a security. For example, a “deep” market for a stock will have a sufficient number of both bid and ask orders to keep a big order from significantly moving the security’s price.

Market Maker: A market maker exists to “create a market” for specific company securities by being willing to buy and sell those securities at a specified displayed price and quantity to broker-dealer firms that are members of the exchange. These firms help keep financial markets liquid by making it easier for investors to buy and sell securities–they ensure that there is always someone to buy and sell to at the time of trade.

Market Neutral: Equity market neutral strategies seek to eliminate the risks of the equity market by holding up to 100% of net assets in long equity positions and up to 100% of net assets in short equity positions. These strategies attempt to exploit differences in stock prices by being long and short in stocks within the same sector, industry, market capitalization, etc. If successful, these strategies should generate returns independent of the equity market. Equity market neutral portfolios have two key sources of return:

  • the Treasury Bill return (the interest on proceeds from short sales held in cash as collateral)
  • the difference (the “spread”) between the return on the long positions and the return on the short positions. Stock picking, rather than broad market moves, should drive most of a market-neutral strategy’s total return (save for any return from the 100% cash position).

It’s important to point out that here is the risk of theoretical unlimited amount of loss with short selling, (i.e. the price of the short-sold stocks increases; the long position can only go down to $0).

Market Order: An order placed with a bank or brokerage firm to immediately buy or sell a security at the best available current price. May also be referred to as an “unrestricted order.”

CITE: https://www.r2library.com/Resource/Title/0826102549

COMMENTS APPRECIATED

Thank You

FINANCIAL PLANNING: https://tinyurl.com/yc7bcy4u

***

Filed under: "Ask-an-Advisor", Financial Planning, Funding Basics, Glossary Terms, iMBA, iMBA, Inc., Investing, Marketing & Advertising | Tagged: , , , , , , , , , , , | Leave a comment »

BID/ASK SPREAD: Basis Points with Formulas

Posted on November 24, 2024 by Dr. David Edward Marcinko MBA MEd CMP™

By Staff Reporters

SPONSOR: http://www.MarcinkoAssociates.com

DEFINITIONS

***

***

Basis Points are used in financial literature to express values that are carried out to two decimal places (hundredths of a percentage point), particularly ratios, such as yields, fees, and returns. Basis points describe values that are typically on the right side of the decimal point–one basis point equals one one-hundredth of a percentage point (0.01%). So 25 basis points equals 0.25%, and 50 basis points equals 0.50%.

Only when basis points equal or exceed 100 does the value move to the left of the decimal point–100 basis points equals 1.00%, 500 basis points equals 5.00%, etc.

CITE: https://www.r2library.com/Resource/Title/0826102549

Bid/Ask Spread (also known as bid/offer spread) is the difference between the National Best Bid and the National Best Offer, which represents the implied cost to trade a security.

As compensation for the risk taken, the market maker (or dealer) earns the bid/offer spread in exchange for facilitating the trade. Wider spreads generally indicate higher costs associated with trading the underlying assets in the ETF, hedging costs, inventory management costs, and general market risk.

CITE: https://www.r2library.com/Resource/Title/0826102549

COMMENTS APPRECIATED

Thank You

Please Subscribe

***

***

Filed under: "Ask-an-Advisor", Financial Planning, Funding Basics, Glossary Terms, iMBA, iMBA, Inc., Investing, Marcinko Associates, Touring with Marcinko | Tagged: , , , , , , , , , , , , , | Leave a comment »

HINDSIGHT BIAS: The “Curse of Knowledge”

Posted on November 6, 2024 by Dr. David Edward Marcinko MBA MEd CMP™

By Staff Reporters

SPONSOR: http://www.MarcinkoAssociates.com

***

***

The Curse of Knowledge and Hindsight Bias

Similar in ways to the availability heuristic (Tversky & Kahneman, 1974) and to some extent, the false consensus effect, once you (truly) understand a new piece of information, that piece of information is now available to you and often becomes seemingly obvious. It might be easy to forget that there was ever a time you didn’t know this information and so, you assume that others, like yourself, also know this information: the curse of knowledge.

Cite: https://medicalexecutivepost.com/2022/11/18/what-is-the-dunning-kruger-effect/

However, according to colleague Dan Ariely PhD, it is often an unfair assumption that others share the same knowledge. The hindsight bias is similar to the curse of knowledge in that once we have information about an event, it then seems obvious that it was going to happen all along.

I should have seen it [divorce, stock market crash/soar my smoking & lung cancer, unemployment, etc] coming!

COMMENTS APPRECIATED

Please Subscribe!

***

***

Filed under: "Doctors Only", Ethics, Experts Invited, Financial Advisor Listings, Financial Planning, Glossary Terms, iMBA, iMBA, Inc., LifeStyle, Marcinko Associates, mental health | Tagged: , , , , , , , , , , , , , , , , | Leave a comment »

STRIPES: Separate Trading of Registered Interest and Principal of Securities)

Posted on November 2, 2024 by Dr. David Edward Marcinko MBA MEd CMP™

By Staff Reporters

SPONSOR: http://www.MarcinkoAssociates.com

DEFINITIONS

***

***

STRIPS (Separate Trading of Registered Interest and Principal of Securities) is an acronym that describes both a government bond issuance program and the securities issued by the program. STRIPS are a form of zero-coupon security (defined below) created under the U.S. Treasury’s STRIPS program.

Originally, zero-coupon securities were created by broker-dealers who bought Treasury bonds and deposited these securities with a custodian bank. The broker-dealers then sold receipts representing ownership interests in the coupons or principal portions of the bonds.

CITE: https://www.r2library.com/Resource/Title/0826102549

Some examples of zero-coupon securities sold through custodial receipt programs are CATS (Certificates of Accrual on Treasury Securities), TIGRs (Treasury Investment Growth Receipts) and generic TRs (Treasury Receipts). The U.S. Treasury subsequently introduced a program called Separate Trading of Registered Interest and Principal of Securities (STRIPS), through which it exchanges eligible securities for their component parts and then allows the component parts to trade in book-entry form.

STRIPS are direct obligations of the U.S. government and have the same credit risks as other U.S. Treasury securities. STRIPS are generally considered the most liquid (easily bought and sold) zero-coupon securities.

GOVERNMENT: https://www.treasurydirect.gov/marketable-securities/strips/

COMMENTS APPRECIATED

Thank You

***

***

Filed under: "Ask-an-Advisor", Funding Basics, Glossary Terms, iMBA, Inc., Investing, Marcinko Associates | Tagged: , , , , , , , , , , , , | Leave a comment »

DAILY UPDATE: Health-Care’s Future as Stocks Climb

Posted on October 29, 2024 by Dr. David Edward Marcinko MBA MEd CMP™

MEDICAL EXECUTIVE-POST – TODAY’S NEWSLETTER BRIEFING

***

Essays, Opinions and Curated News in Health Economics, Investing, Business, Management and Financial Planning for Physician Entrepreneurs and their Savvy Advisors and Consultants

“Serving Almost One Million Doctors, Financial Advisors and Medical Management Consultants Daily“

A Partner of the Institute of Medical Business Advisors , Inc.

http://www.MedicalBusinessAdvisors.com

SPONSORED BY: Marcinko & Associates, Inc.

***

http://www.MarcinkoAssociates.com

Daily Update Provided By Staff Reporters Since 2007.
How May We Serve You?
© Copyright Institute of Medical Business Advisors, Inc. All rights reserved. 2024

REFER A COLLEAGUE: MarcinkoAdvisors@msn.com

SPONSORSHIPS AVAILABLE: https://medicalexecutivepost.com/sponsors/

ADVERTISE ON THE ME-P: https://tinyurl.com/ytb5955z

Your Referral Count -0-

Healthcare’s future as HSBC Innovation Banking collaborated with LINUS and HLTH to help prepare the healthcare ecosystem for the future. The Health 2035 report goes in depth with discussions between visionaries in the ecosystem and studies of young physicians’ forecasts for what the state of care will be in the year 2035. Download the report.

CITE: https://www.r2library.com/Resource

Stocks Up

  • Trump Media & Technology Group soared 21.59% following a major rally at Madison Square Garden, an appearance on Joe Rogan’s podcast, and rising chances of winning the election. Fun fact: After this latest stock surge, Trump Media is now worth almost as much as social media network X.
  • Nio surged 10.46% thanks to an upgrade from Macquerie, whose analysts believe that the EV startup could see strong growth from new vehicle launches next year.
  • Spotify has earned a spot on Wells Fargo’s top pick playlist, with analysts confident the stock could rise over 20%. Shares rose 1.27%.
  • Lower oil prices hurt energy stock, but are a big boost for companies that spend a lot on fuel. Carnival Corp rose 4.83%, Royal Caribbean Cruises climbed 1.35%, and American Airlines popped 3.42%.

Stocks Down

  • Philips floundered 15.95% after the Dutch consumer goods manufacturer missed on earnings and lowered its full-year forecast.
  • Boeing continued to fall yet another 2.79%, this time on the news that it is raising $19 billion through a stock offering in the hopes that it fends off a credit rating downgrade.
  • Oil stocks took a beating thanks to a big decline for crude prices. Diamondback Energy fell 3.36%, APA Corp. dropped 4.51%, Exxon Mobil sank 0.49%, and BP lost 1.48%.

CITE: https://tinyurl.com/2h47urt5

Here’s where the major benchmarks ended:

  • The S&P 500® index (SPX)rose15.40points (0.27%) to 5,823.52; the Dow Jones Industrial Average® ($DJI) added 273.17 points (0.65%) to 42,387.57; and the NASDAQ Composite® ($COMP) gained 48.58 points (0.26%) to 18,567.19.
  • The 10-year Treasury note yield (TNX) climbed six basis points to 4.29%, the highest close since July 9.
  • The VIX fell to 19.53.

CITE: https://tinyurl.com/tj8smmes

Visualize: How private equity tangled banks in a web of debt, from the Financial Times.

COMMENTS APPRECIATED

PLEASE SUBSCRIBE: MarcinkoAdvisors@msn.com

Thank You

***

https://www.amazon.com/Comprehensive-Financial-Planning-Strategies-Advisors/dp/1482240289/ref=sr_1_1?ie=UTF8u0026amp;qid=1418580820u0026amp;sr=8-1u0026amp;keywords=david+marcinko

***

***

***

EDUCATIONAL TEXTBOOKS: https://tinyurl.com/4zdxuuwf

***

Filed under: Health Economics, Health Insurance, Health Law & Policy, Healthcare Finance, iMBA, Inc., Information Technology, Investing, Marcinko Associates, mental health, Quality Initiatives, Recommended Books, Sponsors | Tagged: , , , , , , , , , , , , , , , , , , , , , , | Leave a comment »

CORPORATE EARNINGS: Quarterly Reports

Posted on October 28, 2024 by Dr. David Edward Marcinko MBA MEd CMP™

By Staff Reporters

***

***

Peak earnings season: Five of the Magnificent Seven Stocks will be among the 181 companies reporting their earnings this week. Alphabet is in the Mag Seven lead-off spot on Tuesday, Microsoft and Meta step to the plate on Wednesday, and Apple and Amazon rounding out the lineup and this baseball metaphor on Thursday. These companies account for almost 25% of the S&P 500, which is up 40% over the past year and not far off its record closing number from earlier this month. But, the approaching election, it could be a volatile week in the stock markets.

***

  • Markets: Stocks are currently driving the narrative on Wall Street. Last week, bonds sold off in a big way (driving yields to their highest level since July) in a sign investors are dialing back expectations of more aggressive rate cuts from the Federal Reserve.
  • Stocks nevertheless handled the bond volatility with aplomb, and with help from Tesla’s 22% one-day rise, the NASDAQ is sitting within 2% of its record high.

CITE: https://www.r2library.com/Resource/Title/0826102549

COMMENTS APPRECIATED
Thank You

***

***

Filed under: "Ask-an-Advisor", Accounting, Breaking News, Funding Basics, Glossary Terms, iMBA, iMBA, Inc., Investing, Portfolio Management, Taxation | Tagged: , , , , , , , , , , , , , , , , , , | Leave a comment »

Challenging Investment Rules and Key Investor Traits

Posted on October 27, 2024 by Dr. David Edward Marcinko MBA MEd CMP™

By Vitaliy Katenselson CFA

***

***

Today, we’re diving into two thought-provoking questions:

1. What’s a famous investment rule I don’t agree with?
2. Which key characteristics should a good investor have?

1. A Famous Investment Rule I Don’t Agree With: “Buy and Hold”

Buy and hold becomes a religion during bull markets. Then, holding a stock because you bought it is often rewarded through higher and higher valuations. There’s a Pavlovian bull market reinforcement – every time you don’t sell (hold) a stock, it goes higher.

Buying is a decision. So is holding, but it should not be a religion but a decision. The value of any company is the present value of its cash flows. When the present value of cash flows (per share) is less than the price of the stock, the stock should not be “held” but sold.

Warren Buffett is looked upon as the deity of buy and hold.

Look at Coca Cola when it hit $40 in 1999. Its earnings power at the time was about $0.80. It was trading at 50 times earnings. It was significantly overvalued, considering that most of the growth for this company was in the past.

Fast-forward almost a quarter of a century – literally a generation. Today the stock is at $60. It took more than a decade to reclaim its 1999 high. Today, Coke’s earnings power is around $1.50–1.90. Earnings have stagnated for over a decade. If you did not sell the stock in 1999, you collected some dividends, not a lot but some. The stock is still trading at 30–40x earnings. Unless they discover that Coke cures diabetes (not causes it), its earnings will not move much. It’s a mature business with significant health headwinds against it.

“Long-term” and “buy-and-hold” investing are often confused.

People should not own stocks unless they have a long-term time horizon. Long-term investing is an attitude, an analytical approach. When you build a discounted cash flow model, you are looking decades ahead. However, this doesn’t mean that you should stop analyzing the company’s valuation and fundamentals after you buy the stock, as they may change and affect your expected return. After you put in a lot of analytical work and buy the stock, you should not simply switch off your brain and become a mindless buy-and-hold investor.

This doesn’t mean you shouldn’t be patient, which I’ll discuss next; but holding, not selling, a stock is a decision.

2. Key Characteristics of a Good Investor

I’m going to sound a bit more preachy than usual, but it’s very difficult to answer this question in any other way.

You need three Ps – passion, patience, process.

Passion

Investing is not a 9-to-5 job; it’s a 24/7 adventure. Unlike flipping burgers or processing insurance claims, where you can clock in at 9 AM, fall into a stupor, and then reawaken at 5 PM when you clock out.

This should be your test: If you catch yourself treating investing as a 9-to-5 job, then you have little passion for it.

If this is the case, don’t do it (this probably applies to any choice of a profession). You don’t stand a chance against people for whom investing is a never-ending puzzle to be solved on their life’s journey. All of my investment friends are dripping with passion for investing; they are obsessed with it. None of them are in it only for the money.

You won’t last long in this profession if you’re not passionate about stocks.

Patience

Investing is like real life – the connection between effort and result is nonlinear. It is very loose.

You may be making all of the right rational decisions: You are buying stocks that lie within your EQ/IQ spectrum, and they are significantly undervalued, but the market simply doesn’t care. It just keeps sending your stocks down. To make things even more frustrating, while your stocks are declining, speculators who treat the stock market as a craps table at Caesars Palace are killing it, making money hand over fist. It’s painful. It is excruciatingly painful if you have the wrong client base.

This is where patience comes in. My father told me this story, which happened right before I was born.

My family lived in Murmansk, a city 125 miles north of the Arctic Circle in northwest Russia. My mom went to give birth to my brothers and me in Saratov, a city in central Russia, about 1200 miles from Murmansk. She wanted to be closer to her parents. My father could not leave work, so he stayed in Murmansk.

A few weeks before I was born, he went to visit his best friend, Alexander. He told him that he was worried about my mom and the birth. His friend told him something that I remember to this day (with a chuckle): “Naum, you did your part; you cannot go back and correct what you did. Now you just have to wait.”

Investing is patience punctuated by decisions.

As the French mathematician Blaise Pascal said, “All of humanity’s problems stem from man’s inability to sit quietly in a room alone.”

One more thought here: I try to take the temperature of my emotions and the mental activity of my brain. When I find myself overheating, with the stock market occupying my entire brain, I forcibly disconnect and unplug myself from it. The quality of my thoughts and decisions when my brain is overheating is likely to be low. So, I go for a walk in the park, read a fiction book, go see a movie, or visit an art museum.

Process

Managing someone else’s money is an incredible responsibility, which you may not fully appreciate during bull markets. But sideways and bear markets will remind you quickly.

I don’t want to over-glorify what we do – we are not curing cancer or saving people from burning buildings. But IMA clients entrust us with their life savings and tell me, “Vitaliy, please don’t screw it up.”

My decisions may determine whether our clients get to retire, pay for their medical expenses, or help their kids buy houses.

Staying rational when the world around you is melting up with greed or melting down in fear isn’t a capacity that one accidentally stumbles upon. You engineer it through a series of small, repeatable decisions – your investment process.

COMMENTS APPRECIATED

Thank You

***

***

Filed under: "Ask-an-Advisor", Experts Invited, Financial Planning, iMBA, Inc., Investing | Tagged: , , , , , , , , , , , , | Leave a comment »