"Most temporary financial problems end up metastasizing into near-permanent predicaments."
“I was once asked, at a journalism conference, how I defined my job. I said: My job is to write the exact same thing between 50 and 100 times a year in such a way that neither my editors nor my readers will ever think I am repeating myself.
“That’s because good advice rarely changes, while markets change constantly. The temptation to pander is almost irresistible. And while people need good advice, what they want is advice that sounds good.”
In the spirit of Jason Zweig’s quote above, and with the gold price having recently coasted up through $2,000 per oz., we republish a commentary originally distributed back in April 2012. That it is even more relevant now than it was some 11 years ago is surely sufficient reminder that most temporary financial problems end up metastasizing into near-permanent predicaments.
With his recent book ‘The beginning of Infinity: explanations that transform the world’ David Deutsch has created what seems little short of a masterpiece.
Deutsch is a computational physicist. For the layman, this means that, unlike an economist, he actually has a clue what he’s talking about. And what he’s talking about boils down to a fundamental optimism about the nature of humanity, as the two stone carvings below might tend to suggest:
Source: David Deutsch, ‘The Beginning of Infinity’ (Allen Lane 2011)
In his words:
“It is inevitable that we face problems, but no particular problem is inevitable. We survive, and thrive, by solving each problem as it comes up. And, since the human ability to transform nature is limited only by the laws of physics, none of the endless stream of problems will ever constitute an impassable barrier. So a complementary and equally important truth about people and the physical world is that problems are soluble. By ‘soluble’ I mean that the right knowledge would solve them. It is not, of course, that we can possess knowledge just by wishing for it; but it is in principle accessible to us.”
Admittedly, Deutsch is referring to problems that can be observed, studied and resolved scientifically. But just because the scale of his landscape is cosmic and ours inhabits the more narrowly quotidian range of the investible does not invalidate the application of his method to the more behavioural problems of the financial. If human brainpower can split the atom, it can surely devise a prudent way of navigating through the investment excesses of these dismal times.
To solve a problem, you first have to identify it correctly. Know your enemy. Here, in no particular order, are our suggested big problems afflicting the investor’s world of today:
In the spirit of William of Ockham, the simplest investment response can be assumed to be the best. Nature may abhor a vacuum, but in the world of investments, there are no automatic penalties for non-participation in ugly markets. So if we take violent exception to a given asset or asset class, the simplest response is surely just to avoid it. (Note: institutional managers, especially product specialists and closet or explicit index-trackers, may not be able to operate to similar rules.) So at the risk of vast over-simplification, here are our responses:
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:
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: email@example.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 specialist managed funds.
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