President Obama made big news recently when he declared his support for gay marriage. He indicated his position on this issue had "evolved".
The President has nothing on Barton Biggs. Mr. Biggs has been "big" in the world of securities prognosticators for many years. He was the formerly the head strategist at Morgan Stanley where he was reportedly responsible for the formation of its investment management business. He is the author of Hedgehogging, an insider's look at the hedge fund industry and the founder of Traxis Partners, a hedge fund.
Here's what Smart Money had to say about his expertise: "As the global investment strategist for Morgan Stanley, Barton Biggs is without question the premier prognosticator on the international scene and a mover of markets from Argentina to Hong Kong. It wouldn't be a stretch to say Biggs wrote the book on emerging-market investing."
Like most prognosticators (premier and otherwise), sometimes he was right and sometimes he was wrong. Perhaps the most notable time when his crystal ball failed him was in July, 1993 when he appeared on the cover of Forbes Magazine, dressed in a bear costume, imploring readers to sell U.S. stocks and buy emerging markets. According to Yahoo Finance, on July 1, 1993, the S&P 500 Index was at 449. Just three years later, on the same date, it closed at 675. What about emerging markets? According to an article by Daniel Wheeler of Dimensional Fund Advisors, emerging markets performed "terribly" in the ensuing three year period.
Given this background, I read with interest Biggs' views on those who attempt to predict the future of the market. They are set forth in his 2009 book, Wealth, War & Wisdom.
Biggs noted the "increasing evidence" that relying on expert opinion for advice is "a loser's game." He set forth with approval studies showing expert opinions on various subjects, including business, should be ignored "as random blather." He correctly observed "... that pundits who appear regularly on television are particularly unreliable... because they become obsessed with showmanship." Their focus is not on accuracy but "on their entertainment shock value."
He is, in my view, spot on with these observations, although I suspect Jim Cramer might take issue with them. Yet, there is an irony that a "premier prognosticator", who runs a hedge fund, would caution investors to ignore those who purport to have the ability to predict the twists and turns of the market.
Maybe the final phase of his evolving views will be a recognition that trying to beat the market is also a loser's game. The main beneficiaries of actively managed mutual and hedge funds are typically those who run them. Those who invest in them are often not so fortunate.
Dan Solin is a senior vice president of Index Funds Advisors. He is the New York Times bestselling author of The Smartest Investment Book You'll Ever Read, The Smartest 401(k) Book You'll Ever Read, The Smartest Retirement Book You'll Ever Read, and The Smartest Portfolio You'll Ever Own. His new book is The Smartest Money Book You'll Ever Read. The views set forth in this blog are the opinions of the author alone and may not represent the views of any firm or entity with whom he is affiliated. The data, information, and content on this blog are for information, education, and non-commercial purposes only. Returns from index funds do not represent the performance of any investment advisory firm. The information on this blog does not involve the rendering of personalized investment advice and is limited to the dissemination of opinions on investing. No reader should construe these opinions as an offer of advisory services. Readers who require investment advice should retain the services of a competent investment professional. The information on this blog is not an offer to buy or sell, or a solicitation of any offer to buy or sell any securities or class of securities mentioned herein. Furthermore, the information on this blog should not be construed as an offer of advisory services. Please note that the author does not recommend specific securities nor is he responsible for comments made by persons posting on this blog.