Yogi Berra: “In theory there is no difference between theory and practice. In practice there is.”
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Would you make more money if you had more time to watch the markets?
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A little perspective
In managing investments, making decisions based on feelings of excessive optimism or excessive pessimism rarely ends well. Maintaining a balanced perspective in an ever-changing and often chaotic world is a difficult yet critically important part of achieving long-term investing success.
To be sure, the news lately has been enough to scare many people into believing that things are shaping up for another 2008 debacle. Seemingly at every turn we hear of the debt crisis in the Eurozone, the possibility that the United States might not meet its deadline to raise the debt ceiling and the ramifications that may have, China potentially slowing down, and the U.S. housing and unemployment figures remaining at disappointing levels. And this is just to name a few!
While the United States and the rest of the world are facing many significant obstacles, and while nobody knows for sure how future events will unfold, I offer the following examples of recent positive, noteworthy items that went largely ignored:
- Japanese auto manufacturers and parts suppliers resumed shipments after being forced to essentially shut down because of last winter’s earthquake, tsunami, and nuclear incident.
- Foreign and domestic auto manufacturers established new plants and/or increased hiring in the United States, and sales increased meaningfully. (more…)
Revisiting the “outlandish” predictions of the late 1990s
Here’s a little blast from the past. Remember the “DOW 36,000” guy? I guess sooner or later, they all come to their senses and realize that a well-balanced and thoroughly diversified portfolio with periodic rebalancing makes the most sense.
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Is rampant inflation an upcoming problem for the US?
I am a buy and hold investor, but two recent lectures by Niall Ferguson, a Harvard Economic-Historian, make a strong case for the impending economic collapse of the United States. He predicts default and/or rampant inflation and suggests re-allocating one’s portfolio to a mixture of gold and foreign investments. I can already hear you saying “no, this time won’t be different, America will recover”, but I suppose I just wanted to hear it straight from the source. Any words of wisdom would be most appreciated.
At any given time, it is not difficult to find somebody professing to know the short term future of the economy or the capital markets. Quite often these people are highly regarded professionals armed with plenty of data to support their claims. And quite often they are wrong. History is replete with examples of how investors made wholesale changes in their portfolios based on excessively optimistic or pessimistic predictions, only to regret it deeply after the opposite occurred.
We believe that the future is fundamentally unknowable, and thus cannot be predicted with any precision. We believe investors could use their time and energy and brainpower much more effectively by controlling what they can control instead of trying to predict what cannot be predicted. We do this for our clients and with our clients by maintaining portfolios that are designed to address a wide range of economic and market climates, including inflation.
Christine Benz joins Paul to discuss her book “30-Minute Money Solutions”
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