Posts filed under “Investing”

Is Willful Ignorance an Investment Strategy?

Every now and again, someone who’s opinion’s I respect will write something just beyond the pale. I guess its a risk factor for those who write a lot, and perhaps don’t have enough time to really engage in deep thought about what they are saying. (I generate alot of "content," and this was a wake up call to me).

Consider this (unnamed) writer, who I typically have some regard for:

‘Big-Picture’ Thinking Will Get You Squashed

"Market participants often feel that it is necessary for them to form broad theories about where the market is headed. They postulate how interest rates, the Fed, foreign exchanges, macroeconomic factors, energy costs, housing and a variety of other factors are going to drive the stock market one way or the other. The arguments are often superb and the logic compelling. There is something about "big picture" predictions that is very enticing for many market players. The media promotes them constantly and at social gatherings it is usually the focus when talk turns to investing."


Lets analyze the theories put forth here:

• Broad overviews about the economy or markets are unneccessary;
• Understanding the intersection of the Fed, foreign markets and macroeconomics is counterproductive;
• Avoid arguments that are "superb"
• Steer clear of logic that is "compelling"

I get a sense of "Truthiness" from this writer, that these annoying, biased facts are somehow interfering with trading. 

The really funny thing was that prior to reading this anti-Big Picture commentary, I just had read not one but two separate comments about the importance of an overview — of being a great generalist, doing lots of reading, and learning all sorts of things beyond your own expertise. You know, "Big Picture" stuff.

The first was from Warren Buffett’s partner, Charlie Munger:

On the importance of reading: "In my whole life, I have known no wise people (over a broad subject matter area) who didn’t read all the time — none, zero… You’d be amazed at how much Warren reads — at how much I read. My children laugh at me. They think I’m a book with a couple of legs sticking out."  -Charlie Munger’s Worldly Wisdom   

The second commentary was from Barton Biggs:

"Reading is definitely  my thing, too and I think you have to read not just business stuff but also history, novels, and even some poetry. Investing is about glimpsing, however dimly, the ebb and flow of human events. It’s very much about breasting the tides of emotion, too, which is where the novels and poetry come in. Besides, sometimes you have to refresh your mind and soul by consuming some crafted, eloquent writing." -Hedgehogging

My own experience comports with that. Becoming well read, educating yourself on a variety of subject matters, being able to place the course of society, the economy, politics, and investing into a larger context can only help.

Do I really beleive this stuff? Hell yeah. Enough to have named this blog The Big Picture.

Facts? Logic? Superb Arguments? Who needs ‘em! 


UPDATE June 6, 2006 11:02am

Okay! The cats out of the bag in the comments.

Yes, that was Rev Shark from Friday.


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