In addition to my regular column, the July issue of Research magazine includes an article about advisor blogs. It features many of the terrific advisor blogs out there including those of Barry Ritholtz, Michael Kitces, Bill Winterberg, Wade Pfau, Meb Faber, Tadas Viskanta and Josh Brown. I make an appearance too.
As a starting point, it should be clear (pardon the pun) that if transparency means anything, full disclosure will be a key part of our future. The Internet and everyone’s instant access to it militates against secrecy everywhere all the time. If nothing can be expected to remain secret, it’s silly to try to hide things.
I don’t mean full disclosure in the sense of lots of fine print that nobody reads and nobody wants you to read. Instead, within financial services, I mean full disclosure in the sense of conveying real understanding about what is being offered and why, about what can go wrong and the likelihood of something going wrong, and about what one’s goals are and ought to be along with a clear statement of what success will look like or cannot look like. Full disclosure will mean real clarity and no more complexity for its own sake (so as to justify a higher fee).
“The return of events – a replay of the patterns of the past seventy-five years of capital market history – will happen only for the most part. Most is not all. There is no certainty. Rational people do not bet the ranch on a model with an R2 of less than 1.00, that works out only for the most part. And God forbid it works out only for the minor part! Consequences, not probabilities, determine the decisions that matter. Diversification is still the optimal strategy for the long run.”
Peter Bernstein (Facing the Consequences)
Recently I wrote a piece on financial services lies here at Above the Market. Lie #10 was “I don’t need help.” Here’s what I wrote about it.
American virologist David Baltimore, who won the Nobel Prize for Medicine in 1975 for his work on the genetic mechanisms of viruses, once told me that over the years (and especially while he was president of CalTech) he received many manuscripts claiming to have solved some great scientific problem. Most prominent scientists have drawers full of similar submissions, almost always from people who work alone and outside of the scientific community. Unfortunately, none of these offerings has done anything remotely close to what was claimed, and Dr. Baltimore offered some fascinating insight into why he thinks that’s so. At its best, he noted, good science (like good investing and good thinking) is a collaborative, community effort. On the other hand, “crackpots work alone.” Good collaboration among professionals and with good professionals by consumers improves investment outcomes, usually by a lot. A good professional can offer help with goals and plans, an Investment Policy Statement, asset allocation, risk management, behavioral management, protection from fraud (especially for seniors), and tax, estate and financial planning. We all need more help than we think.
A commenter calling himself (herself?) “pott” responded to that post as follows.
“Crackpots work alone” — a crackpot. https://www.quantamagazine.org/20150402-prime-proof-zhang-interview/ Damn right, mister.
We all lie, especially to and about ourselves. Sometimes the lies are overt. Sometimes they are unintentional. Sometimes they are sales puffery. And sometimes they are devious. What follows are ten great lies in the financial services industry. The first three are propagated primarily by academic finance. The fourth is within the province of the academics but is a bigger problem amongst the professionals – advisors and money managers alike. The next three are predominantly professional lies. Number eight is asserted most often by the professional class and believed by consumers while the last two are universal but play out most unfortunately amongst consumer investors. I’m sure there are more. Do you have others to suggest?
Here goes…. Continue reading
The Magnificent Seven is a terrific 1960 movie “western” about seven gunfighters hired to protect a small Mexican village from marauding bandits. A re-make is currently in the works and the “original is itself a re-make of Akira Kurosawa’s Japanese classic, Seven Samurai. Meanwhile, Maleficent is the “Mistress of All Evil” in Sleeping Beauty who curses the infant princess to prick her finger on the spindle of a spinning wheel and die before the sun sets on her sixteenth birthday. Today I’m offering up a mash-up from these movies to outline what I’m calling the Maleficent 7 – seven inherent human problems and limitations that impede our ability to make good decisions generally and especially about money. Continue reading
“I probably find more information that says vaccines aren’t safe,” she says. “I think it’s only because …” She pauses. “Well, I don’t really know. It could be maybe what I’m paying attention to more.”
Smoot also says she trusts the experiences of other parents more than data from a scientific study. “Right now,” she says, “the people telling their personal stories influence me more. I feel like the data could be flawed for one reason or another, but I feel like someone’s story, because they’ve gone through something, and they don’t want other people to go through it, I feel like I trust that more.”
When I attend presentations of various sorts, I am often frustrated in that I want to try to take in and engage with what is being presented but I also want to take careful notes, especially with respect to direct sources. I also want to be able to check these and other related sources out for myself, both to “check the work” and to gain further understanding. Since I am presenting “Beating the Bias Trap” at FPA – NorCal in San Francisco on Tuesday, what follows is my list of direct sources and other materials relating to my subject. My goal is to help attendees get the most out of my presentation as possible. The list and its topics generally follow the order of my presentation. I trust that attendees will find it useful and that others interested in the subject will find some helpful materials. Continue reading
I was James Osborne’s guest yesterday on his “Fireside Markets” podcast. James entitled it “Investing as a Liberal Art.” It was a wide-ranging discussion that lasted nearly an hour. You may access it here. I hope you’ll tune in and listen to earlier discussions too.
Bill Baer of NBC Sports created this wonderful image of tweets accusing ESPN’s Buster Olney of being biased against their teams…with 28 different teams represented. To hear the Twitterverse tell it, Buster is biased against everybody (and for everybody too) — just everybody else. Talk about confirmation bias and bias blindness! Great stuff.
H/T: The Big Lead