Quotes of the Day “Why Most Advice Is Useless” And "The Road Less Traveled"

In yesterday‘s video, upon making mention of an uber-confident money manager podcast guest I listen to on Friday, I emphasized how humbling financial markets are.

I am reminded this morning of said manager and of the importance of remaining humble as I read Farah Smiley’s thought-provoking book, The End of Wisdom: Why Most Advice is Useless:

An excerpt:

“Cases of banks misjudging market movements are far from rare. In 2002, banks forecasted a bullish market, only to witness a crash exceeding twenty percent. This trend of overestimation continued unabated in subsequent years, culminating in the catastrophic prediction for 2008—a bullish forecast of an 11% gain. The year-end reality was a brutal 38% drop in the Standard & Poor index and a global economy in shambles.”

“… the crux of the matter extends beyond these miscalculations. Bank analysts consistently underestimate the stock market and exchange rate volatility. This oversight could stem from the flawed mathematical models that perceive the wildly unpredictable financial market as a predictable entity. The result? Predictions that consistently miss major market swings, only managing to hit the mark during periods of market stability.

These bank analysts and asset managers, entrusted with the gargantuan task of managing the world's wealth, are yet to master the art of consistently predicting exchange rates and stocks—a humbling testament to the capricious nature of the financial world.”

So what's the humble asset manager to do? Well, first and foremost, even especially amid periods of heightened success, they must always remain humble. Then -- forever -- diligently and objectively exploit every tool available, every historical record, and, yes, every personal experience to assess risk/reward probabilities -- across the globe and across asset classes -- and act accordingly.

And, per the below from one the all time greats in the investment business, be very wary of the crowd!

In the following from his upcoming must-read book, Off Wall Street, Mark Roberts speaks to the character of the successful short seller. But, make no mistake, this 100% applies to the thoughtful, humble asset manager as well:

"The crowd is moved by faith and belief in some hoped-for outcome. However, faith, like belief, implies not thinking and questioning, but, rather, accepting what is commonly held as the truth, and moving with the crowd. The short seller disdains faith and belief, and honors independent thinking instead. Mocked and disdained by the “crowd,” when he finds himself among them, he risks losing the advantage of distance, from where he can see and maintain perspective. A good short seller observes the movements of the crowd but does not join the crowd. He is separate and quite consciously apart from them. Indeed, his distance from the crowd enables him to profit from its movement and its follies. Like the poet Robert Frost, he determinedly takes “the road less traveled,” and that makes “all the difference.”"