The Evidence-Based Investor

Tag Archive: john maynard keynes

1. Michael Batnick on the greatest investors’ biggest clangers

   June 22, 2018 5:03 pm Comments Off on Michael Batnick on the greatest investors’ biggest clangers

   All of us make mistakes, but, as Sir Winston Churchill once said, only the wise learn from them. What then can we learn from the mistakes of the world’s greatest investors?

   That’s the question Michael Batnick asks in his new book, Big Mistakes: The Best Investors and Their Worst Moments. Even the most famous investors have dropped clangers; Warren Buffett, Bill Ackman, Jack Bogle, Ben Graham and John Maynard Keynes are among the legends whose mistakes the book analyses.

   Michael is Director of Research at Ritholtz Wealth Management, one of America’s fastest-growing financial advice businesses, based in New York City. He also writes an excellent blog, The Irrelevant Investor.

   I’ve just interviewed Michael for the last episode of the TEBI Podcast about his book, the secret to Ritholtz Wealth Management’s success and Evidence-Based Investing West, which opens in California on Sunday.

   I’d like to thank Michael Batnick for his time, and also Regis Media for sponsoring this podcast.

   I hope you’ll enjoy it, and, if you do, please subscribe to future episodes on iTunes, or on SoundCloud. Better still, why not write a review on iTunes? It will only take a few moments, and you really will be helping us in our mission to change the way the world invests.

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   The Evidence-Based Investor is produced by Regis Media, a boutique provider of content and social media management to financial advice firms around the world. For more information, visit our website and YouTube channel, or email Sam Willet or Christina Waider.

2. Tame your inner economist

   September 27, 2017 11:27 am Comments Off on Tame your inner economist

   If I had my time again, I would probably study economics at university. It’s a fascinating subject and hugely relevant to our everyday lives.

   But how useful is it for an investor to be an expert in it? In my experience, it’s of very little use whatsoever; indeed, it may even be a hindrance.

   Here’s why. First of all, economic forecasts are notoriously hit-and-miss. You name it, whether it’s interest rates, the jobs market, house prices, demand for Bitcoin or Anglo-US trade relations, we’re surrounded by “experts” proffering opinions on what is likely to happen.

   But, as any of those who actually both to keep tabs on such prognostications — as my fellow blogger Barry Ritholtz does for instance — the track record of these sooth-ayers is truly shocking. As JK Galbraith once said, “The only function of economic forecasting is to make astrology look respectable.

   Secondly, even if we could accurately forecast the economic future, the chances of us using that information to give us an edge over millions of other traders investors all around the world are very slim indeed. That’s because, contrary to common perception, the economy and the stock market are two very different things. They are of course connected, but much less closely, and in a much more subtle way, than most of us imagine.

   All known information, including the opinions of leading economists, is already incorporated in current prices; new information is, by its nature, unexpected and is absorbed by the markets and reflected in prices within seconds.

   So what if you have a PhD in macro-economic forecasting? Do you really  know something that no one else does and that will help you to outperform? Do you honestly think your adviser does, or your favourite fund manager?

   None other than John Maynard Keynes, who famously invested money on behalf of King’s College, Cambridge, gave up on using his economic expertise to try to time the market. Yes, even Keynes, arguably the greatest economist of all, failed to predict the Wall Street Crash in 1929 and the Depression that followed and to adjust the college investments accordingly.

   I recently interviewed Peter Westaway, Chief Economist for Vanguard Asset Management in Europe, on this very subject. He, too, is a very sharp guy; so much so, in fact, that for many years he was a senior economic adviser to the Bank of England. But Peter admits that even he doesn’t have an edge in the markets.

   Please watch and share this video — and, when it comes to investing, remember to tame your inner economist.