Tuesday, March 15, 2011

Is Investing a Journey?

J.K.Galbraith once said: "The world of finance hails the invention of the wheel over and over again, often in a slightly unstable version."  Why then do we continually fall prey to the lure of something new or even the advice of those who suggest that the future is easily told?

As investors, we look for patterns where there are none. We look to others who have been down one path, boast that their way is the right way, and no matter how crooked the journey, we follow nonetheless. It is difficult to be a contrarian, to fight off the preached legitimacy of what appears to be profound wisdom and to look beyond the fact that for every buyer, there is a seller who had a reason to unload their last be-all-to-end-all decision?

We are often beset by the desire to do something, a reflex called action bias. To not do anything if often seen as indecision. We have discussed risk often in these posts as something you should understand even if once you have that understanding, it is no longer something you can logically argue as worthwhile or even worth it. James Montier suggested that: "Risk clearly isn't a number. It is a multi-faceted concept, and it is foolhardy to reduce it to a single figure." Yet we try and use the search for this tolerance as something permanent, unwavering throughout the years of our investing lives.

"This time is different" is famously ignored quote by Sir John Templeton as the four most dangerous words in investing. I leave you with a poem today, something written decades ago about the path that men and women take based on the path that men and women have taken before.


"The Calf-Path"
by Sam Walter Foss. Public Domain

One day through the primeval wood
A calf walked home as good calves should;
But made a trail all bent askew,
A crooked trail as all calves do.
Since then three hundred years have fled,
And I infer the calf is dead.
But still he left behind his trail,
And thereby hangs my moral tale.
The trail was taken up next day
By a lone dog that passed that way;
And then a wise bell—wether sheep
Pursued the trail o'er vale and steep,
And drew the flock behind him, too,
As good bell—wethers always do.
And from that day, o'er hill and glade,
Through those old woods a path was made.
And many men wound in and out,
And dodged and turned and bent about,
And uttered words of righteous wrath
Because 'twas such a crooked path;
But still they followed — do not laugh -
The first migrations of that calf,
And through this winding wood-way stalked
Because he wobbled when he walked.
This forest path became a lane
That bent and turned and turned again;
This crooked lane became a road,
Where many a poor horse with his load
Toiled on beneath the burning sun,
And traveled some three miles in one.
And thus a century and a half
They trod the footsteps of that calf.
The years passed on in swiftness fleet,
The road became a village street;
And this, before men were aware,
A city's crowded thoroughfare.
And soon the central street was this
Of a renowned metropolis;
And men two centuries and a half
Trod in the footsteps of that calf.
Each day a hundred thousand rout
Followed this zigzag calf about
And o'er his crooked journey went
The traffic of a continent.
A hundred thousand men were led
By one calf near three centuries dead.
They followed still his crooked way.
And lost one hundred years a day,
For thus such reverence is lent
To well-established precedent.
A moral lesson this might teach
Were I ordained and called to preach;
For men are prone to go it blind
Along the calf-paths of the mind,
And work away from sun to sun
To do what other men have done.
They follow in the beaten track,
And out and in, and forth and back,
And still their devious course pursue,
To keep the path that others do.
They keep the path a sacred groove,
Along which all their lives they move;
But how the wise old wood-gods laugh,
Who saw the first primeval calf.
Ah, many things this tale might teach —
But I am not ordained to preach.


Do we need to follow the same path?


Paul Petillo is the managing editor of Target2025.com/BlueCollarDollar.com and a fellow Boomer

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