ActiveInvestorMag
About

Teresa Lo

Been there. Done it. Every crash since 1987.

Watercolour landscape whose skyline traces the S&P 500, 1927 to 2026, on a log scale.
S&P 500, 1927 to 2026

As a teenager, I bought my first mutual fund. It was 1984, two years after the secular bottom in stocks. I joined the investment industry in 1986 straight out of college, and the Crash of 1987 was my first real test. There have been plenty since, and I survived them all.

Wherever I go, people ask me one of two questions. The first comes whenever the market starts to wobble: should I sell? They worry both ways: sell now and leave money on the table, or hold on and sell too late. They see only two choices: all in or all out. Both feel wrong, and the situation gives them stress. Some people deal with it by declaring they are in it for the long run and refuse to ever “time the market.” Others scour the internet for answers, because they’ve endured big drawdowns before. I have watched how this ends. Many find the decision too overwhelming and do nothing. Some sell too early and live to regret it, and those who stay too late often sell at the panic bottom.

The second comes after a long rally: is it too late to buy? It usually comes from people who didn’t buy when prices were lower. They watched the market climb a wall of worry, because bad news is hard to buy, even when the price is going up. Now a dip has arrived, and they are just as afraid to buy it. Others have the opposite habit: good news is easy to buy, even when the price has started to slip. That is “buy the dip”, and it works until the day a dip fails to make a new high. What looked like a dip turns out to be the bend at the end of the trend.

There are old traders and there are bold traders, but there are very few old, bold traders.

There is another way. It’s called risk management, and it’s what successful investors and traders have always done. I quantify volatility. It is my proxy for risk, and I use it to decide when to act, how big a position to hold, and how much to keep in cash. Most investors can’t do that calculation on their own, so few ever do it.

On the record

In the press

In books

  • The Guts and Glory of Day Trading, Mark Ingebretsen; a chapter: “Teresa Lo: The Intelligent Speculator”
  • When Supertraders Meet Kryptonite, Art Collins; interview
  • Day Trading on the Edge, Leslie N. Masonson

Calls I made

When 60/40 Stopped Working

Watercolour landscape whose skyline traces tLT, the long Treasury bond fund, 2018 to 2026.
TLT, 2018 to 2026

In 2018 I concluded that the bond bull market, which began in 1981, was ending, and not for the usual reasons. Washington was running a budget deficit and a trade deficit at once, and the tariffs aimed at one were choking off the foreign money that paid for the other. In late 2018, bonds led stocks down. I called it unpriceable risk: the day stocks and bonds fall together, and cash is the only defence.

So we acted. In 2019 the model portfolios swapped their Treasury funds, IEF or TLT, for ZROZ, a fund of 25-year zero-coupon Treasurys. ZROZ swings far harder than an ordinary bond fund, so a smaller position kept the same protection in a stock-market crash, and the money it freed went to gold. Less exposure to bonds, the same insurance. By 2021 the Endgame models had gone further and held no US Treasurys at all. With two dozen models across three generations, every member could move at their own pace. When bonds crashed in 2022, the Endgame models had already stepped aside.

How the Bond Market Ends Redux (2020, archived)

How to Know a Bottom When You Don’t See One

Watercolour landscape whose skyline traces the S&P 500 from 2007 to 2010: the 2007 peak, the March 2009 low and the recovery.
S&P 500, 2007 to 2010

By Thursday, March 5, 2009, the S&P 500 had already fallen 56% from its 2007 peak. That evening, Barron’s quoted Louise Yamada, the doyenne of market technicians: “You never know how low is the low.” She saw downside risk to 4,000 to 6,000 on the Dow and 400 to 600 on the S&P 500, as much as another 41% lower. After a long move in one direction, the sign that it is ending is when people extrapolate it and start projecting huge percentage moves. At a top the question is “How much higher can it go?” At a bottom it is “How low is the low?” The question is the sign.

The next afternoon, March 6, the S&P 500 touched its bear-market low of 666.79, and I posted a sentiment alert. Five days later, Jason Kelly published my piece mapping the decline onto Justin Mamis’s eight points of a major bottom, and Seeking Alpha made it an Editor’s Pick. The replies were so hostile that Kelly added a line at the top making clear that I had written it, not he. That is what a bottom sounds like. That September, Stocks & Commodities printed the whole record in my column “At The Close”, including the line that still runs this business: “appropriate position sizing was implemented to manage risk.”

Barron’s, “Getting There?” (5 March 2009)My alert (6 March 2009, archived)Jason Kelly (11 March 2009, archived)Seeking Alpha Editor’s Pick (11 March 2009)At The Close (Stocks & Commodities, September 2009)

AiM Weekly

Every week, I pick one thing investors are worrying about out loud and give it some thought in writing. Every Saturday, the free Lazy Portfolios Snapshot keeps score on eleven classic portfolios, cash and all. Leave your email, and both come to you. If something is on your mind, reply and tell me; it may be what I write about next. You do the fun part, whether that’s picking stocks or simply not having to worry about your investments. Leave the number-crunching to me.

Teresa Lo

How the daily newsfeed is made

The news is something else: a story. No one can know for certain why the market moved, but people need a story to explain it. Twice a day, Edwin, my AI assistant, reads the several hundred RSS feeds curated by me and sums up the stories that move markets, each one numbered back to its sources, so we can see what moved and the story people are telling about it.

Edwin is named after Edwin Lefèvre, who wrote Reminiscences of a Stock Operator, and is powered by Claude, an AI made by Anthropic. It works only from the excerpts each outlet publishes.

No human writes or checks an article before it appears. A set of automated checks does: an article is rejected if a story rests on a single outlet, if a citation points nowhere, if it is too short or too long, or if it contains a number that does not appear in a cited source. What was rejected, and why, is on the log.

The sections

The sections follow the frameworks I use in my own research, not a newspaper’s.

What this is not

It is not advice, and it is not a substitute for reading the sources.