April 2016

Well it’s officially over.  The golden era of investing is no more, at least according to McKinsey & Company’s latest research.  “The forces that have driven exceptional investment returns over the past 30 years are weakening, and even reversing. It may be time for investors to lower their expectations.”  According to McKinsey, the last 30 years of returns can be attributed mostly to happy coincidence. Does this sound familiar to you?  It should.  In 2009, PIMCO announced the dawning of the NEW NORMAL, an age where investors would be lucky to scrape up 8% returns.  What actually happened?  There was a wailing and gnashing of teeth.  There were annualized returns of over 14%.  An investment in the S&P 500 would have more than doubled.   Wait.  It turns out the NEW NORMAL wasn’t so bad (unless you managed money at PIMCO). It’s odd to think of 30 years ago as being…

For investors, it’s more valuable to be wise than intelligent.  The investment world is littered with the carcasses of funds run by the ‘smartest guys in the room’.  In the investing ecosystem, intelligence is a given.  Ivy League credentials saturate fund manager bios.  Sophisticated quantitative models crunch numbers while algorithms trade by the microsecond.  Meanwhile, Charlie Munger and Berkshire Hathaway have a system of three stacks:  Yes, No, and Too Hard.  If a deal comes along that sounds good, but isn’t in their wheelhouse, they put it in the Too Hard bucket.  Intelligence is a commodity.  Wisdom is a scarce resource. Which brings me to “How do I play [headline] here?” Today the news story is oil or energy.  No one is really knows where ‘here’ is, though.  Is oil rallying or about to plunge to $10?  Commentary around news headlines makes it feel as though investors should be continuously trading their portfolios to keep up…