Expert Opinion by Howard Marks
I’ve written about Howard Marks under my Reading List.
The Most Important Thing Illuminated: Uncommon Sense for the Thoughtful Investor
Since then, I enjoy Mr. Mark’s refreshing view on broad topics. He is able to string together investments into current affairs. I’ve subscribed to his memos via this link here or https://www.oaktreecapital.com/insights/memo-subscription-notification. I have chosen to feed good content into my framework and his ideas allowed me to think about clarity and prevent information overload.
His memo entitled “The Expert Opinion“, it breaks down the biggest issue with opinions and forecasts from the experts. I agree with Mr. Marks that the future is largely unknown. Just take simple examples such as Trump Election and Brexit.
- There are no facts about the future, just opinions. Anyone who asserts with conviction what he thinks will happen in the macro future is overstating his foresight, whether out of ignorance, hubris or dishonesty.
- Developments in economies, interest rates, currencies and markets aren’t the result of scientific processes. The involvement in them of people – with their emotions, foibles and biases – renders them highly unpredictable.As physicist Richard Feynman put it, “Imagine how much harder physics would be if electrons had feelings!”
- It’s one thing to have opinions on these subjects, but something very different to be confident they’re right (and act on them).
- Taking bold action based on forecasts of things that are uncertain isn’t just misguided; it’s dangerous. As Mark Twain said, “It ain’t what you don’t know that gets you into trouble.It’s what you know for certain that just ain’t true.”
- Everyone at Oaktree has opinions on the macro. And when we see extremes in markets and, especially, capital market behavior, we’re apt to take strong action. But we’re highly aware of what we don’t know, and when conditions are moderate or indistinct, we don’t bet heavily.
Under my recent post,
Personally, a key measurement would be “is the knowledge practical and am I able to apply it immediately?” The answer I gave myself was I do not foresee myself spending a lot of time to analyse and understand all the indicators. At some points, it gets too complicated. While I have studied economics and understand how various concepts interact with each other such as fiscal / monetary policies, I find it more fruitful to analyse companies. In short, I am a bottom-up investor.
In a world filled with experts on the internet space, too many opinions can be very dangerous or even fatal. It freezes your decision-making processes. It paralyses. In past, we crave for smooth flow of news because there is a lack of technology. Today, we have such a crowded news space that we find it difficult to catch up and identify the important news around the world. This is why we need news curator. This year, the issue of fake news affected the world and undermined the reputation of certain news outlet.
Likewise, I will always question on how useful is the news to me.
News has the ability to create groupthink or herd mentality. Either of it is good for the development of the human brain or cultivation of an independent mindset.
(photo source: http://www.azquotes.com/)
As an investor, I do not spend time predicting on the next GDP, inflation, unemployment, wages growth, retail sales, and other economic indicators. You could spend all day and you still get it wrong. Frankly speaking, the time is more productive when it is deployed to stock research.
Over time, develop a framework and philosophy towards your way of life and it will serve well as an inner compass to guide you through life.
Wishing you the best and abundance of resources,
Kelvin