Broker Check

Pontificating on Investments is Foolish

| June 07, 2021
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Having an educated opinion is one thing, but dogmatically asserting the direction of an investment has a record of making the pontificator eat one’s words. Historian Niall Ferguson, aptly wrote, “Nothing illustrates more clearly how hard human beings find it to learn from history than the repetitive history of stock market bubbles.”1

Ferguson grounds this point in two different articles from Business Week magazine. In August of 1979 the magazine ran a frightening front cover about the Death of Equities and said that its demise “‘looks like an almost permanent condition.’”2 The stock market must have been offended and wanted to teach the publication a lesson because it proceeded to triple in five years.

Twenty years later the very same magazine ran an article about a book titled Dow 36,000: The New Strategy for Profiting From the Coming Rise in the Stock Market. The Dow was roughly 10k in 1999, and the authors predicted that 36k would be reached in just 3-5 years’ time.3

Let’s just say, they were wrong.

The stock market was about to slide due to the infamous tech-bubble, and, as of June 3, 2021, the author’s mark has still not been reached.

There are two things to glean from this. First, beware prophetic dogmatists of any investment stripe (stock, bonds, real estate, commodities, crypto, etc.). The above examples demonstrate the problem with pessimistic and optimistic certainties when it comes to investing. Second, while you may not be one to get on your soapbox and give investment projections to the world, you might handle your money and investments in a way that continues year after year to be proved wrong.

Here’s a suggestion: do something differently.

Wise investors make mistakes, even big ones; foolish investors repeat the mistakes ad nauseum and handcuff themselves to their own biases by only listening to those who confirm what they already believe.

What kind will you be?

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Sources:

1. The Ascent of Money, 114.

2. Quoted in above, 114.

3. See above, 115.

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