Posts filed under “Philosophy”
Since its a lazy Friday before a 3 day weekend (many schools are closed for a Jewish holiday Monday), I guess its time to wax philosophical about the subject of precisely what it is you are supposed to be doing professionally.
I guess its just human nature. This subject keeps coming up, and is seemly ignored. I have addressed it many times over the years (see below).
When you walk into your office each morning, you probably ask yourself “What do I have to do today?” You think about the sales, meetings, reports, calls, people to be managed, etc. that have to be addressed. We have a tendency to get lost in the minutiae, caught up in the moment. Professionally, we often cannot see the forest for the trees.
Perhaps we need to start each day with a simple question: WHAT IS MY JOB? That may sound overly basic, but its oft overlooked. We can too easily get caught up in the moment, and forget what it is we are actually supposed to be doing with the working hours we have.
I know my job is: Its to look out over the world and assess where opportunity and risk lay. Look, I can critique people’s analytical errata all I want on the blog but that is merely a mental exercise — its not what I actually get paid for. Clients do not give their hard earned cash to managers who are the most acerbic critics of fill in the blank; rather, they go to money managers who know how to navigate around whatever it is that is driving asset prices. And these days, that is the FOMC. “Critique the Fed but manage your assets” is the modern equivalent of “Praise the Lord and Pass the Ammo.”
I see this unfortunate tendency to go full on wonkasaurus too often amongst equity traders, bond managers, prop desks. They seem to forget that their job is to manage risk and seek opportunity. Long digressions into why the Fed is misguided or Congress has failed are beside the point. That should be the starting point of their analysis, not the end point.
The rest of the analysis must be: If the Fed is misguided, how shall we position ourselves?
Lately, there has been an uptick in Wannabe Wonks. These tend to be under-invested pros who seem to think their job is to criticize “Helicopter Ben.” Perhaps there is some degree of rationalization going on, as the Fed has made it exceedingly difficult to use the normal tools of investing — earnings, economic data, valuation, trend, price action, etc. — to run money. Perhaps there is a touch of selective perception going on. After all, we all have a natural tendency to be biased towards our existing positions.
Even economists occasionally forget that their clients pay them for Intel in order to adjust their positioning, not merely go off into the weeds about what the Fed should be doing. (That’s what academics are for).
The military calls this ability to understand unfolding events Situational Awareness. It is a 360 degree view of the battle field around you. You need to know what is happening in real time. What assets are deployed where, what vectors are driving energy into what region of the conflict, what reserves can be called upon, how will current chess board play out over time.
Perhaps most important of all is not having that glaring blind spot which leaves you vulnerable to a fatal assault.
For too many people, QE has been that blind spot . . .
Your Fault, Reader: Take Responsibility for Your Stock Losses (2005)
Do You Wanna Be Right, or Do You Wanna Make Money? (October 6th, 2010)
Trading as a “Massive Multiplayer Experience” (May 18th, 2011)
Where Sea Monsters Live (May 1st, 2012)
QE Wheeeeeee! (September 13, 2012)
The reality is fear and greed are part of the human condition. There are however times when it appears that the greed factor is dominating — I have not yet figured out if this is a cyclical phenomena or something more insidious. Regardless, I found this amusing: Source: Reflections of Me
Anthony Freda/Daniel Zollinger What Would Jesus – Or the Rabbis of Old – Do? Preface: If you are an atheist and believe that religion is crazy, please remember that some 85% of the American population identifies itself as Christian and millions more identify themselves as Jewish. Very few Americans are atheists … and the…Read More
This Monday morning we reach our tenth and final installment in our series of most common investor errors.
This is a rather simple but overlooked aspect of investing — and that is making sure that when you work with any sort of professional (Lawyer/Accountant/Manager/Planner) you get your money’s worth.
10. When Paying Fees, Get What You Pay For: It always surprises me how much money some people are willing to throw at people like me to manage their financial affairs — whether its necessary or not.
For the professionals who charge by the hour (Lawyers and Accountants) avoid chatting or dawdling on the phone. When they take you out to lunch, expect tat you are actually paying the bill — either your account is charged for the tab or the time is billed. Make it business, not social.
And when retaining a financial professional, make sure your fees cover a variety of the services you actually need.
For some people, hiring a pro can make sense. If you have a more complex financial situation — perhaps you may have a complicated tax issue, or may be looking at a generational wealth transfer. These sorts of issues are often best served with a competent professional managing them.
We have lots of clients who are too busy running their own businesses and do not have the time to manage their own investments. And as noted in many of our prior points (1-9), a lot of folk simply lack the temperament and discipline to deal with stress and emotions of capital markets. If that describes you, paying someone to run your assets or at least facilitate your investing and income management makes sense.
But for many others, they might be better off simply dollar cost averaging into a group of broad indices and saving the 1-2% annual fees.
Consider what sort of help you really need, and find someone competent to assist you in your financial planning. If your needs are straightforward and simple, you might be able to do it yourself and save the fees.
1. Excess Fees
2. Reaching for Yield
3. You Are Your Own Worst Enemy
4. Asset Allocation vs Stock Picking
5. Passive vs Active Management
6. Mutual Fund vs ETFs
7. Neglecting the Long Cycle
8. Cognitive Deficits
9. Past Performance vs Future Results
Back in November 2010, I penned a piece for Bloomberg about the absurd meme circulating regarding the impact of Uncertainty. The key point was that uncertainty was an essential part of markets, and indeed life. The future is by definition unknowable and therefore uncertain. Those who complained about it revealed how little they actually understood…Read More