Oct

13

magWould it be wise to speculate a little now consciously in the investment account in which bankers were speculating so unconsciously and so unwisely in 1929?

That's from the May 12, 1933 issue of "American Banker". I guess most bankers answered a resounding NO back in 1933 just like they are answering today. That quote reminds me of a little anecdote from a few years back . A Japanese fund manager was greeted with resounding ridicule when he talked about the Japanese approach to buy stocks only when prices are rising aggressively rather than waiting for a market drop. His reasoning was that buying stocks with rising prices will insulate the portfolio manager from criticism if he should fall. The portfolio manager could easily justify his buy decision by stating that everyone was buying and he was just part of the herd. If the manager bought a depressed stock that fell further, he would be accused of individualism and subject to scorn. It always amazes me how circular the world is. Today's chumps are tomorrow's heroes. Be humble or prepare to be humbled, as the saying goes.


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2 Comments so far

  1. steve leslie on October 14, 2008 11:59 am

    Immensely important point Mr. Talisse. The profoundness of such a statement is of amazing relevance.

    This reminds me back to 1999 when nearly every mutual fund of consequence owned the big technology names. Cisco,Oracle,Microsoft,Ebay,Amazon, yahoo,jdsu and so forth. No more than a dozen names were carrying the Naz to the 5000 mark. You get the point. Value stocks were anathema. Yet post 2000 they became quite popular. Reason: value stocks had true value in them.

    The heuristic was the same then as it is now and as it shall be 20 years from now. Money managers lose their jobs based on relative performance in their peer group. Individuals such as Peter Lynch, Ralph Wanger, Bill Miller, Heebner, and a few others are true outliers. The rest are merely lemmings. Senators and Congressmen and women keep their jobs not for what they do but for what they don't do. Like making great mistakes and foul-ups. Look at Spitzer. He burned his bridges with his Democratic supporters, gets caught in an affair with a prostitute and there was nobody left to protect him.

    The speculator takes advantage of this bias and zigs when the mainstream intelligentsia zags.

  2. Anonymous on October 14, 2008 6:38 pm

    mutual fund outflows on Friday were $8.8 Billion and on track for an all-time record for the month. already $45 Billion liquidated. Any contrarians will point out that that is an indicator of a capitulation. There are others, but this is a good start.

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