The Gloom, Boom, and Doom Report is one of our favorite pieces of institutional research. Written by Marc Faber, it is one of the most stimulating and contrarian reads you are likely to find. I highly recommend it. In the March letter, Faber quotes from Tony Boekh’s upcoming book, The Great Reflation. Boekh is a former lead editor for BCA Research, another of our favorite institutional reads. Sometimes you read something that is so good that you just have to share. Here is Boekh discussing portfolio management:
From my 40 years in the business of trying to understand and predict markets, I cannot emphasize strongly enough the importance of having a mental framework of how markets work and how to integrate into this framework different indicators, which reflect the various forces that drive markets. Without that, the investor is like a boat on the ocean without a rudder, with the direction determined by which way the wind is blowing. In the world of investments, Wall Street blows by far the most wind, and it does not have the investor’s well-being in mind, only profits and bonuses for employees and shareholders of the firms there.
A framework of analysis for understanding markets is not the same as building a model or set of indicators fitted to back data. I can assure you, from a lot of experience that they always break down. An eclectic approach that is based on common sense, strong logic, and objective data, balanced by right-brain intuition and lots of curiosity, is what works best. The investment world will never be deterministic, never amenable to scientific models, at least for any period of time. Some approaches work well in some periods, other approaches in other periods. Successful investors not only know how to think outside the box but, from experience know what to pay attention to in each market environment.
What a beautiful statement of an investment philosophy that perfectly matches our own. As active portfolio managers, we are always trying “to think outside of the box” and to “use our experience to know what to pay attention to in each market environment.” Thank you, Tony, for saying it so eloquently. Needless to say, I will be buying his book ASAP.
