Fellow investors, 

The dog days — the period when Sirius (the Dog Star) is near its peak of brightness and the northern hemisphere is at its hottest — are upon us.

And the dogs of the stock market, especially smaller stocks, have been heating up. Small stocks took off around July 11th, although no one is exactly sure why.

This chart shows how, starting on July 11, when the U.S. inflation rate came in lower than expected, small stocks shot up and big stocks went flying in the opposite direction.

Specifically, it shows how small-cap value and large-cap growth stocks have diverged. Could this be the long-awaited beginning of a durable comeback for cheap "value" stocks and the eclipse of the "Magnificent Seven" tech giants that have dominated the stock market for the better part of a decade?

Could it mean that people have begun to care again not only about what they own, but about how much they have to pay for it?

While I hope this is the beginning of a long period in which value investing reasserts its historical advantage over growth stocks, I'm not counting on it. I don't think you should, either.

Yes, value investing outperformed everything else for decades -- some people would say centuries -- until growth stocks took off in more recent years.

But the revival of value investing has been predicted about as often as the end of the world.

And, yes, sooner or later, it has to happen. Stocks trading on high expectations of future growth can't go up forever.

But, as John Maynard Keynes didn't say and Gary Shilling did, the market can remain irrational longer than you can remain solvent.

In the long run, I fully believe value investing will prevail. In the short run, all we really know is that the dog days of summer are here — not that the dogs of the market are sure to be its brightest stars again.

I hope you're soon heading off to the beach or the mountains, where you can play and rest and catch up on your reading.

I have a backlog of books I was hoping to get through this summer, but things have been too hectic foi me to make much progress on this Jenga tower:

Even though I've barely made a dent in the pile, let me share a bit about each book so you'll know why I want to read them and whether you might, too.

In alphabetical order:

Richard Behar, Madoff: The Final Word Rich Behar is an old colleague of mine and one of the most dogged reporters I've ever met. He spent years exchanging emails, letters and phone calls with the late Ponzi schemer Bernie Madoff, along with three long interviews in prison. I've only dipped in a toe so far, but if you want a deep dive into an epic fraud, jump in.

Max Bennett, A Brief History of Intelligence: Evolution, AI, and the Five Breakthroughs That Made Our Brains
At a memorial for the great psychologist Daniel Kahneman earlier this year, attendees were buzzing about this book. It's beautifully written and full of startlingly original and creative insights -- but, shame on me, because I want to savor it by reading when I have no interruptions, I'm still on Chapter 1 😬.

Alex Edmans, May Contain Lies: How Stories, Statistics, and Studies Exploit Our Biases -- and What We Can Do About It
Edmans, a finance professor at London Business School, has written a practical handbook for analyzing and interpreting data in a world full of misinformation. Entertaining, thorough and full of current examples, it's a great companion to one of my favorite older books, Darrell Huff's How to Lie with Statistics. I'm about halfway through 😳, and it's excellent.

Jaime Lester, Pause to Think: Using Mental Models to Learn and Decide
The venture capitalist Josh Wolfe says this "might be the most useful book I've ever read." This short book by a veteran hedge-fund manager is about principles and frameworks that can help you clarify your thinking and improve your decisions. I haven't read it, but it looks good.

Michael Morris, Tribal: How the Cultural Instincts That Divide Us Can Help Bring Us Together
Wouldn't you like to judge ideas by their merit instead of by who else happens to believe them? Morris, a leading social psychologist, offers evidence that we can bridge the us-versus-them thinking that poisons our politics and muddies our minds. I've only read a little, but I'm excited to learn more.

Arnaud Orain, The Politics of Utopia: A New History of John Law's System, 1695-1795
I'm a sucker for any book about the history of financial bubbles, and the Mississippi Bubble of 1719-20 was the granddaddy of them all. This book argues that the first market mania was much bigger than John Law, who is traditionally portrayed as the sole creator and twisted genius behind it. For financial-history fans only.

Shane Parrish, Clear Thinking: Turning Ordinary Moments into Extraordinary Results
The founder of the great website Farnam Street contends that improving the quality of your decisions can improve the quality of your life. Most of us, argues Parrish, "live unconsciously rather than deliberately." Only by becoming more mindful about your choices can you realize how often you go astray. I've read the whole thing, and it's excellent.

Saul Perlmutter, John Campbell and Robert MacCoun, Third Millennium Thinking: Creating Sense in a World of Nonsense
This collaboration between a physicist, a philosopher and a psychologist is another book about evaluating evidence, confronting uncertainty and accepting the limits of your own knowledge. I haven't gotten going yet, but it looks great.

Jamil Zaki, Hope for Cynics: The Surprising Science of Human Goodness
As a card-carrying cynic, I knew I had to read this book. Zaki, a behavioral scientist at Stanford University, argues that cynicism is physiologically bad for you and often an inaccurate view of the world. Other people are better than you think! What I've read so far is making me feel better about the world.

If you read any of these books, send me a note to tell me what you think.
 

My two latest columns are here:

A Couple Won the Powerball. Investing It Turned Into Tragedy: one of the saddest stories I've ever reported, about how high fees fueled a heartbreaking betrayal of trust.

The Fees on These Funds Will Leave You High and Dry: one of Wall Street's trendiest products, "interval funds," carry fees most other funds don't have the chutzpah to charge.

A favorite cartoonist of mine, Zach Weinersmith, recently posted this gem about the speculative mania in artificial intelligence:

And that, in turn, reminded me of this old cover of a trade publication from 1987:

In fact, AI was all the rage in 1987, as this snippet from an almost-full-page ad in The Wall Street Journal from July 14 of that year shows. (On mobile, turn your device sideways to enlarge.)

Maybe the latest boom in AI will finally reach its full potential. But the AI revolution has been a looooooong time coming.

Be well and invest well,

Jason

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Is there any thing whereof it may be said, See, this is new? it hath been already of old time, which was before us.

—Ecclesiastes I: 10