Author Michael Lewis has made waves with his latest book about high frequency trading (HFT) and its impact on the financial markets.
It was amusing to see Lewis defend his position as media types defended the purity of the financial markets. Truth is, I don’t know enough about HFT to defend or oppose it.
Last week reminded me that it's critical to understand not only the source of your information but also, that source’s motivation. One of my best friends is a private wealth advisor for a large investment firm. He was also my mentor many moons ago when I started in the business straight out of grad school.
There is one piece of advice he gave me that stands out above the rest and still influences me today: “No one cares more about your business than you do.”
For the purposes of this week’s commentary, I’ll modify that to say that outside of your spouse, no one cares more about your investment portfolio than you do. No one.
Not Michael Lewis. Not media gurus on CNBC. Not even well intentioned hedge fund managers turned weekly newsletter writers. Michael Lewis wants to sell books, CNBC wants to resurrect its viewership and sell ad space.
And in addition to helping you crush the returns of most mutual funds year in and year out, I would love it if you would renew each year and tell all your friends about The Whaley Report.
I'm constantly evaluating not just the legitimacy of information sources but also the potential objectives of the sources.
Gloom, Doom and Boom
Marc Faber is a case in point. I’ve seen Faber speak on several occasions at various investment conferences. He is very succinct and captivating with his opinions and there has been more than one occasion that I have left his speeches re-thinking my perspective on the investment climate.
The problem with Faber is that the sky is always falling somewhere. We're always on the precipice of Hell. What would you expect from a guy who publishes a service titled The Gloom, Boom and Doom Report?
I still read articles that Faber writes and occasionally will watch a clip of him speaking on Bloomberg but I pass all of his information through the “Faber thinks we are always on the precipice of Hell” filter.
I encourage you to create these same filters for any sources of information that you routinely pay attention to. Faber doesn’t care about your investment portfolio, he cares about selling newsletters and speaking fees.
That’s not to say that he doesn’t provide valuable insight and a good contrarian view of the world. I’m not picking on Faber, he’s certainly not alone, he’s just a shining example of why its so important to take that extra step to question a source’s motivation.
Gold Bugs Me
A similar situation is the large number of investment managers, research providers and bloggers who believe gold is always a great investment at any price.
Even after gold peaked on October 4, 2012 and went on to decline 34% over the next 8 months, these guys were saying to buy it all the way down. If you bought the peak and then added a position every time gold declined 5%, you now have a gold position that's 12% underwater, and that's after gold has rallied 9% off the lows.
No one cares more about your investment portfolio than you do. I encourage you to evaluate all of your sources of information with this additional lens. This includes your advisor(s), news sources, friends with stock tips and even me.
While it's true that publishing this report takes the same amount of time and energy whether my mother is the only one receiving it or I’m sending it out to 1 million subscribers, I sincerely try to provide you with information each week that I believe informs you, educates you and is valuable.
I try not to be perma-bull, perma-bear and as objective and unbiased as I can be while still remaining a human being. If you ever feel like I’m not living up to this agenda, drop me a line at TheWhaleyReport@whaleyglobalresearch.com , I welcome the accountability.