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November 8, 2005

A world full of intelligent but misinformed people, Tues., Nov. 8, 2005, 12:35 PM

I read a blog link that suggested I was calling people stupid" if they happen to believe in the current rally in U.S. equities. Now wait just a minute.

First of all, I care too much about people to call anybody stupid.

Many buy-siders have more resources, better education, and a higher IQ than me. Many of them are on the other side of my trades. Many do very well indeed. So what does stupidity have to do with anything?

I do say there is a built-in bias to the sell-side, which doesn't make them bad people, but it does result in the buy-side often being misinformed. That is not a reflection on anybody's intelligence. It is a statement that there is a need for more factual reporting and greater independence and objectivity in assessing information. That's all.

If I thought my readers were stupid, I'd just go back to retirement. But I like the buy-side community today because we are demanding better quality information, and we are sharing more of that information, and becoming better informed in the process.

That's good because I don't want to see a world full of intelligent but misinformed people.

If somebody came to me and said they had for two year's running +50 pct annual gains, and they thought I was stupid" for being in a portfolio earning presently just over 4 pct, what do you I might say? Well, I'd simply point out the facts that if they happened to lose "50 pct in the next year, their three-year performance would be inferior to someone who stayed with +4 pct returns.

That's good information to share.

Besides, you know I haven't been in cash for the past two years. It's just that I think that the sell-side is under-selling capital risks today, and those risks are becoming excessive, so for me, I think a bigger cash weighting is important.

And of course I understand that the sell-side doesn't want to see that.

Today's rally is what it is; but a comparative performance is what it is at the end of the day.

So just because I recently went to 80-pct cash has only to do with where I hope to be some day in the future, and has nothing to do with anybody's stupidity.

It happens that I have a lot of unallocated cash plus a bigger than usual position in gold. That's fine because gold happens to represent a form of unallocated cash. Once I see the capital market risks decline, I will soon afterwards be holding less cash, less gold and more stocks and bonds.

Posted by Posted by Bill Cara on November 8, 2005 12:36:17 PM | Category: Cara re: Cara

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