“All that we see or seem
Is but a dream within a dream.”
- ‘A dream within a dream’, Edgar Allan Poe.
Get your Free
financial review
How best to describe the reality of the modern investment world ? Our friend, the Zurich-based fund manager Tony Deden, expresses it starkly. It’s like a restaurant where we all want to eat – but everything on the menu contains poison. Poe called reality a dream. To Tony, it’s closer to being a nightmare.
If you think Tony is exaggerating, our challenge to you is to identify something you can really trust. Trust is the bedrock of investment practice and without it, any realistic expectation of protecting and growing our wealth well into the future can only be founded on sand.
Over to Tony:
“In my nearly thirty years of investment practice, I never experienced anxiety except for a few brief weeks around 1999-2000 and then starting in 2010 continuously. While uncertainty about the future is always part of any process that demands current action, the anxiety we feel today is a by-product of the rigged financial system in which we operate. Not to be anxious in the face of utter falsity, fraud, corruption in high places and lack of trust in institutions, could only imply there is something wrong with our judgment. The apprehension and ambiguity are overpowering. We live in difficult times not of our own making.
“We find affinity with the sentiments of the eloquent James Grant as to our place within the financial world. “There is nothing either obvious or urgent,” he writes, “about the idea of sound money to the people who own so much of the other kind.” And then, as if to underline our predicament: “The bald fact is we, believers in markets, are out of step with markets.”
John Lanchester, one of our favourite writers, and the author of the highly recommended ‘Whoops! Why Everyone Owes Everyone and No One Can Pay’, reviewed a trio of books about Facebook for the London Review of Books in August 2017. As soon as we had read his review, we quit Facebook, not that we’d ever been that active on it in the first place. Here is just some of what he wrote:
“The fact is that fraudulent content, and stolen content, are rife on Facebook, and the company doesn’t really mind, because it isn’t in its interest to mind. Much of the video content on the site is stolen from the people who created it. An illuminating YouTube video from Kurzgesagt, a German outfit that makes high-quality short explanatory films, notes that in 2015, 725 of Facebook’s top one thousand most viewed videos were stolen. This is another area where Facebook’s interests contradict society’s. We may collectively have an interest in sustaining creative and imaginative work in many different forms and on many platforms. Facebook doesn’t. It has two priorities, as Martínez explains in ‘Chaos Monkeys’: growth and monetisation. It simply doesn’t care where the content comes from. It is only now starting to care about the perception that much of the content is fraudulent, because if that perception were to become general, it might affect the amount of trust and therefore the amount of time people give to the site.
“Zuckerberg himself has spoken up on this issue, in a Facebook post addressing the question of ‘Facebook and the election’. After a certain amount of boilerplate bulls**t (‘Our goal is to give every person a voice. We believe deeply in people’), he gets to the nub of it. ‘Of all the content on Facebook, more than 99 per cent of what people see is authentic. Only a very small amount is fake news and hoaxes.’ More than one Facebook user pointed out that in their own news feed, Zuckerberg’s post about authenticity ran next to fake news. In one case, the fake story pretended to be from the TV sports channel ESPN. When it was clicked on, it took users to an ad selling a diet supplement. As the writer Doc Searls pointed out, it’s a double fraud, ‘outright lies from a forged source’, which is quite something to have right slap next to the head of Facebook boasting about the absence of fraud. Evan Williams, co-founder of Twitter and founder of the long-read specialist Medium, found the same post by Zuckerberg next to a different fake ESPN story and another piece of fake news purporting to be from CNN, announcing that Congress had disqualified Trump from office. When clicked-through, that turned out to be from a company offering a 12-week programme to strengthen toes. (That’s right: strengthen toes.) Still, we now know that Zuck believes in people. That’s the main thing.”
While we were only too happy to abandon Facebook (we could never find any practical use for it), we elected to stay on the social media site Twitter (even after being involuntarily cancelled, twice). What follows are two examples of why. We maintain that Twitter remains the closest thing the Internet has to the conception of The Daily You – a newspaper and journal tailored to exactly the things that interest you. We were, admittedly, not early adopters of the service. It launched in March 2006 and we only clambered aboard in November 2009. And, yes, it can be an assault on the senses at times. But it’s still almost uniquely tailorable. You can elect to follow only the people you wish to follow, and if people misbehave, or outstay their welcome on your timeline, it takes no time whatsoever to edit them away.
By dipping into our colleague Killian Connolly’s timeline we stumbled onto two posts connected to the Facebook / Cambridge Analytica scandal. The first was from the US economist Brian Wesbury:
“So, somebody got my Facebook info, and rather than sending phishing links to my friends, they sent me a news feed that the stock market would crash if Trump won the election. Oh wait, that was from Nobel-winner Paul Krugman of the New York Times.”
The second was from Michael Krieger, something of a kindred spirit, a former Lehman Brothers commodities analyst who abandoned Wall Street in order to write about social affairs. Michael alluded to the inherent bias of the social media panic cited in the National Review:
“Where were these worries four years ago for the much larger and arguably more manipulative effort by the Obama campaign?
“Instead of using a personality quiz, the Obama campaign merely got a portion of its core supporters to use their Facebook profiles to log into a campaign site. Then they used well-tested techniques of gaining consent from that user to harvest all their friends’ data. Sasha Issenberg gushed about how the Obama campaign used the same permissions structure of Facebook to extract the data of scores of millions of Facebook users who were unaware of what was happening to them. Combining Facebook data with other sources such as voter-registration rolls, Issenberg wrote, generated “a new political currency that predicted the behavior of individual humans. The campaign didn’t just know who you were; it knew exactly how it could turn you into the type of person it wanted you to be.”
“The level of data sophistication was so intense that Issenberg could describe it this way:
“Obama’s campaign began the election year confident it knew the name of every one of the 69,456,897 Americans whose votes had put him in the White House. They may have cast those votes by secret ballot, but Obama’s analysts could look at the Democrats’ vote totals in each precinct and identify the people most likely to have backed him. Pundits talked in the abstract about reassembling Obama’s 2008 coalition. But within the campaign, the goal was literal. They would reassemble the coalition, one by one, through personal contacts.
“Today’s Cambridge Analytica scandal causes our tech chin-strokers to worry about “information” you did not consent to share, but the Obama team created social interactions you wouldn’t have had. They didn’t just build a psychological profile of persuadable voters, and algorithmically determine ways of persuading them, but actually encouraged particular friends — ones the campaign had profiled as influencers — to reach out to them personally. In a post-election interview, the campaign’s digital director Teddy Goff explained the strategy: “People don’t trust campaigns. They don’t even trust media organizations,” he told Time’s Michael Sherer, “Who do they trust? Their friends?” This level of manipulation was celebrated in the press.”
And Michael’s coup de grace ?
“Just the latest example of stuff that’s been going on forever that nobody cared about until the wrong person won the election.”
In fact, while we were cross-checking these sources, we came across a third example and a third reason for appreciating what Twitter can bring to the engaged user. Nestled within Michael’s timeline was a headline we hadn’t even heard – a story revealing that Bank of America Merrill Lynch, our alma mater, had paid $42 million to settle charges that it defrauded clients in 16 million trades between 2008 and 2013. Like we say, it’s all about trust. (Or the lack of it.)
These are undoubtedly dark times. As Tony Deden puts it, fraud defines every aspect of our modern life. Fraud stretches across government, finance, family, accounting, law, medicine and the church. While fraud thrives, trust, “the human condition that binds families, communities and builds societies, has just about vanished”.
But this commentary is not meant to be only a counsel of despair. The reason we labour the point about the dismal state of the modern condition is because the first step in solving a problem is recognising that there is one.
If, like us, you nurse grave concerns about the impartiality of the news media, there is a straightforward and logical response: replace it. (Our preferred replacements are Twitter and now Substack.) Prior to the Brexit referendum, for example, we had comparatively few concerns about the objectivity of the BBC. In the aftermath of the referendum, and more recently Covid, ‘climate change’ and Ukraine, we can no longer take the BBC or most of its correspondents seriously. But that’s ok, because happily the BBC has no monopoly on news provision. And as Rolf Dobelli has articulately written, we should feel no compulsion to consume news anyway: as he suggests, news is to the mind what sugar is to the body. Every time we agonise about the quality of our own “news filter” in the specific context of the world of investments, we keep coming back to the same conclusion: the only thing that really matters about the financial markets is the price. The only objective characteristic of any investment is its price, which makes technical analysis the only form of analysis untainted by subjective hopes and fears. (It’s also why we put such great store in the views of our friend Paul Rodriguez, an accomplished technical analyst, during our market podcasts.) If you accept this thesis, then it follows that at a time of heightened uncertainty and almost universally untrustworthy media, a value bias in investments makes absolute sense because it offers out the hope of what the great value investor Ben Graham called a “margin of safety”. To reiterate, what we call value investing could be described as a “heads I win, tails I don’t lose too much” approach to capital allocation. If prices themselves have been corroded and manipulated by government interference, and they have, then it makes sense only to engage with those financial instruments at the lowest relative or absolute price.
There is, by way of conclusion, one asset that should form a part of everybody’s portfolio. It is an asset that comes into its own during times of uncertainty and rising political angst. It is an asset uniquely suited for an environment of monetary inflation and currency debasement and widespread distrust of institutions and politicians. That asset, of course, is gold. Our friend Tony Deden describes gold as follows:
“Gold is not a drug that cures the disease but merely a symbol of the flight from dishonesty ⎯ a symbol of independence, honest money and permanence. We value it subjectively and we ought to be concerned with the motivation of its ownership more so than that of its price. The same must be the case for our general predisposition to our capital pool. Our investment portfolio should not be a function of the last bid on some stock exchange. It should not be merely promises or claims on uncertain events. It should be tangible and have economic value. It should not be hope, illusion or euphoria. Our purpose in the ownership of assets should not be that of making money but simply the very ownership in tangible and economic goods in itself. That is the essence of wealth.”
Wise counsel is like a light in the darkness.
And for those who might be interested, you can follow me on Twitter via @TimPrice1969, and on Substack via https://timprice.substack.com/. Gluttons for punishment, you have been warned.
………….
As you may know, we also manage bespoke investment portfolios for private clients internationally. We would be delighted to help you too. Because of the current heightened market volatility we are offering a completely free financial review, with no strings attached, to see if our value-oriented approach might benefit your portfolio – with no obligation at all:
Get your Free
financial review
…………
Tim Price is co-manager of the VT Price Value Portfolio and author of ‘Investing through the Looking Glass: a rational guide to irrational financial markets’. You can access a full archive of these weekly investment commentaries here. You can listen to our regular ‘State of the Markets’ podcasts, with Paul Rodriguez of ThinkTrading.com, here. Email us: info@pricevaluepartners.com.
Price Value Partners manage investment portfolios for private clients. We also manage the VT Price Value Portfolio, an unconstrained global fund investing in Benjamin Graham-style value stocks and also in systematic trend-following funds.
“All that we see or seem
Is but a dream within a dream.”
Get your Free
financial review
How best to describe the reality of the modern investment world ? Our friend, the Zurich-based fund manager Tony Deden, expresses it starkly. It’s like a restaurant where we all want to eat – but everything on the menu contains poison. Poe called reality a dream. To Tony, it’s closer to being a nightmare.
If you think Tony is exaggerating, our challenge to you is to identify something you can really trust. Trust is the bedrock of investment practice and without it, any realistic expectation of protecting and growing our wealth well into the future can only be founded on sand.
Over to Tony:
“In my nearly thirty years of investment practice, I never experienced anxiety except for a few brief weeks around 1999-2000 and then starting in 2010 continuously. While uncertainty about the future is always part of any process that demands current action, the anxiety we feel today is a by-product of the rigged financial system in which we operate. Not to be anxious in the face of utter falsity, fraud, corruption in high places and lack of trust in institutions, could only imply there is something wrong with our judgment. The apprehension and ambiguity are overpowering. We live in difficult times not of our own making.
“We find affinity with the sentiments of the eloquent James Grant as to our place within the financial world. “There is nothing either obvious or urgent,” he writes, “about the idea of sound money to the people who own so much of the other kind.” And then, as if to underline our predicament: “The bald fact is we, believers in markets, are out of step with markets.”
John Lanchester, one of our favourite writers, and the author of the highly recommended ‘Whoops! Why Everyone Owes Everyone and No One Can Pay’, reviewed a trio of books about Facebook for the London Review of Books in August 2017. As soon as we had read his review, we quit Facebook, not that we’d ever been that active on it in the first place. Here is just some of what he wrote:
“The fact is that fraudulent content, and stolen content, are rife on Facebook, and the company doesn’t really mind, because it isn’t in its interest to mind. Much of the video content on the site is stolen from the people who created it. An illuminating YouTube video from Kurzgesagt, a German outfit that makes high-quality short explanatory films, notes that in 2015, 725 of Facebook’s top one thousand most viewed videos were stolen. This is another area where Facebook’s interests contradict society’s. We may collectively have an interest in sustaining creative and imaginative work in many different forms and on many platforms. Facebook doesn’t. It has two priorities, as Martínez explains in ‘Chaos Monkeys’: growth and monetisation. It simply doesn’t care where the content comes from. It is only now starting to care about the perception that much of the content is fraudulent, because if that perception were to become general, it might affect the amount of trust and therefore the amount of time people give to the site.
“Zuckerberg himself has spoken up on this issue, in a Facebook post addressing the question of ‘Facebook and the election’. After a certain amount of boilerplate bulls**t (‘Our goal is to give every person a voice. We believe deeply in people’), he gets to the nub of it. ‘Of all the content on Facebook, more than 99 per cent of what people see is authentic. Only a very small amount is fake news and hoaxes.’ More than one Facebook user pointed out that in their own news feed, Zuckerberg’s post about authenticity ran next to fake news. In one case, the fake story pretended to be from the TV sports channel ESPN. When it was clicked on, it took users to an ad selling a diet supplement. As the writer Doc Searls pointed out, it’s a double fraud, ‘outright lies from a forged source’, which is quite something to have right slap next to the head of Facebook boasting about the absence of fraud. Evan Williams, co-founder of Twitter and founder of the long-read specialist Medium, found the same post by Zuckerberg next to a different fake ESPN story and another piece of fake news purporting to be from CNN, announcing that Congress had disqualified Trump from office. When clicked-through, that turned out to be from a company offering a 12-week programme to strengthen toes. (That’s right: strengthen toes.) Still, we now know that Zuck believes in people. That’s the main thing.”
While we were only too happy to abandon Facebook (we could never find any practical use for it), we elected to stay on the social media site Twitter (even after being involuntarily cancelled, twice). What follows are two examples of why. We maintain that Twitter remains the closest thing the Internet has to the conception of The Daily You – a newspaper and journal tailored to exactly the things that interest you. We were, admittedly, not early adopters of the service. It launched in March 2006 and we only clambered aboard in November 2009. And, yes, it can be an assault on the senses at times. But it’s still almost uniquely tailorable. You can elect to follow only the people you wish to follow, and if people misbehave, or outstay their welcome on your timeline, it takes no time whatsoever to edit them away.
By dipping into our colleague Killian Connolly’s timeline we stumbled onto two posts connected to the Facebook / Cambridge Analytica scandal. The first was from the US economist Brian Wesbury:
“So, somebody got my Facebook info, and rather than sending phishing links to my friends, they sent me a news feed that the stock market would crash if Trump won the election. Oh wait, that was from Nobel-winner Paul Krugman of the New York Times.”
The second was from Michael Krieger, something of a kindred spirit, a former Lehman Brothers commodities analyst who abandoned Wall Street in order to write about social affairs. Michael alluded to the inherent bias of the social media panic cited in the National Review:
“Where were these worries four years ago for the much larger and arguably more manipulative effort by the Obama campaign?
“Instead of using a personality quiz, the Obama campaign merely got a portion of its core supporters to use their Facebook profiles to log into a campaign site. Then they used well-tested techniques of gaining consent from that user to harvest all their friends’ data. Sasha Issenberg gushed about how the Obama campaign used the same permissions structure of Facebook to extract the data of scores of millions of Facebook users who were unaware of what was happening to them. Combining Facebook data with other sources such as voter-registration rolls, Issenberg wrote, generated “a new political currency that predicted the behavior of individual humans. The campaign didn’t just know who you were; it knew exactly how it could turn you into the type of person it wanted you to be.”
“The level of data sophistication was so intense that Issenberg could describe it this way:
“Obama’s campaign began the election year confident it knew the name of every one of the 69,456,897 Americans whose votes had put him in the White House. They may have cast those votes by secret ballot, but Obama’s analysts could look at the Democrats’ vote totals in each precinct and identify the people most likely to have backed him. Pundits talked in the abstract about reassembling Obama’s 2008 coalition. But within the campaign, the goal was literal. They would reassemble the coalition, one by one, through personal contacts.
“Today’s Cambridge Analytica scandal causes our tech chin-strokers to worry about “information” you did not consent to share, but the Obama team created social interactions you wouldn’t have had. They didn’t just build a psychological profile of persuadable voters, and algorithmically determine ways of persuading them, but actually encouraged particular friends — ones the campaign had profiled as influencers — to reach out to them personally. In a post-election interview, the campaign’s digital director Teddy Goff explained the strategy: “People don’t trust campaigns. They don’t even trust media organizations,” he told Time’s Michael Sherer, “Who do they trust? Their friends?” This level of manipulation was celebrated in the press.”
And Michael’s coup de grace ?
“Just the latest example of stuff that’s been going on forever that nobody cared about until the wrong person won the election.”
In fact, while we were cross-checking these sources, we came across a third example and a third reason for appreciating what Twitter can bring to the engaged user. Nestled within Michael’s timeline was a headline we hadn’t even heard – a story revealing that Bank of America Merrill Lynch, our alma mater, had paid $42 million to settle charges that it defrauded clients in 16 million trades between 2008 and 2013. Like we say, it’s all about trust. (Or the lack of it.)
These are undoubtedly dark times. As Tony Deden puts it, fraud defines every aspect of our modern life. Fraud stretches across government, finance, family, accounting, law, medicine and the church. While fraud thrives, trust, “the human condition that binds families, communities and builds societies, has just about vanished”.
But this commentary is not meant to be only a counsel of despair. The reason we labour the point about the dismal state of the modern condition is because the first step in solving a problem is recognising that there is one.
If, like us, you nurse grave concerns about the impartiality of the news media, there is a straightforward and logical response: replace it. (Our preferred replacements are Twitter and now Substack.) Prior to the Brexit referendum, for example, we had comparatively few concerns about the objectivity of the BBC. In the aftermath of the referendum, and more recently Covid, ‘climate change’ and Ukraine, we can no longer take the BBC or most of its correspondents seriously. But that’s ok, because happily the BBC has no monopoly on news provision. And as Rolf Dobelli has articulately written, we should feel no compulsion to consume news anyway: as he suggests, news is to the mind what sugar is to the body. Every time we agonise about the quality of our own “news filter” in the specific context of the world of investments, we keep coming back to the same conclusion: the only thing that really matters about the financial markets is the price. The only objective characteristic of any investment is its price, which makes technical analysis the only form of analysis untainted by subjective hopes and fears. (It’s also why we put such great store in the views of our friend Paul Rodriguez, an accomplished technical analyst, during our market podcasts.) If you accept this thesis, then it follows that at a time of heightened uncertainty and almost universally untrustworthy media, a value bias in investments makes absolute sense because it offers out the hope of what the great value investor Ben Graham called a “margin of safety”. To reiterate, what we call value investing could be described as a “heads I win, tails I don’t lose too much” approach to capital allocation. If prices themselves have been corroded and manipulated by government interference, and they have, then it makes sense only to engage with those financial instruments at the lowest relative or absolute price.
There is, by way of conclusion, one asset that should form a part of everybody’s portfolio. It is an asset that comes into its own during times of uncertainty and rising political angst. It is an asset uniquely suited for an environment of monetary inflation and currency debasement and widespread distrust of institutions and politicians. That asset, of course, is gold. Our friend Tony Deden describes gold as follows:
“Gold is not a drug that cures the disease but merely a symbol of the flight from dishonesty ⎯ a symbol of independence, honest money and permanence. We value it subjectively and we ought to be concerned with the motivation of its ownership more so than that of its price. The same must be the case for our general predisposition to our capital pool. Our investment portfolio should not be a function of the last bid on some stock exchange. It should not be merely promises or claims on uncertain events. It should be tangible and have economic value. It should not be hope, illusion or euphoria. Our purpose in the ownership of assets should not be that of making money but simply the very ownership in tangible and economic goods in itself. That is the essence of wealth.”
Wise counsel is like a light in the darkness.
And for those who might be interested, you can follow me on Twitter via @TimPrice1969, and on Substack via https://timprice.substack.com/. Gluttons for punishment, you have been warned.
………….
As you may know, we also manage bespoke investment portfolios for private clients internationally. We would be delighted to help you too. Because of the current heightened market volatility we are offering a completely free financial review, with no strings attached, to see if our value-oriented approach might benefit your portfolio – with no obligation at all:
Get your Free
financial review
…………
Tim Price is co-manager of the VT Price Value Portfolio and author of ‘Investing through the Looking Glass: a rational guide to irrational financial markets’. You can access a full archive of these weekly investment commentaries here. You can listen to our regular ‘State of the Markets’ podcasts, with Paul Rodriguez of ThinkTrading.com, here. Email us: info@pricevaluepartners.com.
Price Value Partners manage investment portfolios for private clients. We also manage the VT Price Value Portfolio, an unconstrained global fund investing in Benjamin Graham-style value stocks and also in systematic trend-following funds.
Take a closer look
Take a look at the data of our investments and see what makes us different.
LOOK CLOSERSubscribe
Sign up for the latest news on investments and market insights.
KEEP IN TOUCHContact us
In order to find out more about PVP please get in touch with our team.
CONTACT USTim Price