Thirteen Simple Rules

Investor Jeffrey Harding provides thirteen simple rules for deciding who to trust in understanding the economy:

  1. Free market economists tend to be contrarians and you should listen to them—but if they are selling you something, run for the door.
  2. Contrarian investors are worth listening to—but if they are selling you something, run for the door.
  3. Because someone was right before doesn’t mean they’ll be right again.
  4. There are permabears and permabulls. Simple Internet searches will reveal who is who. Avoid both.
  5. If you increasingly hear experts say we are not in a bubble, we probably are.
  6. If you get advice from someone who says, “this time is different”, run for the door.
  7. If the stock market is making all-time highs, such as the present, it probably is too high.
  8. If home prices are at an all-time high, such as the present, they may be too high.
  9. If commercial real estate prices are at all-time highs, such as the present, they may be too high.
  10. If personal and corporate debt is at an all-time high, such as the present, there may be more risk to asset values.
  11. A lot of debt at this stage in the cycle will kill you on the downside.
  12. Booms can last longer than you think.
  13. Be patient.

My own experience is that everybody is selling something even if it’s only their ability to offer advice. Consider that in the contexts of #1 and #2. Also, the prevailing wisdom is the prevailing wisdom for a very good reason. That being said there’s a lot of money to be made by voting against it. Also lost.

4 comments… add one
  • Andy Link
  • Guarneri Link

    But that bet might not be measuring what you think. Seides return is pathetic, and you don’t know what he invested in.

  • Ben Wolf Link

    Avoid anyone making axiomatic claims. If A always resulted in B we’d all be billionaires.

    Avoid anyone who makes extreme claims. I won’t name Jim Rodgers and Peter Schiff, but I’m sure you can figure out who they are.

    #13 is eighty percent of the game.

    Read Epictetus and Aurelius. Stoicism is the perfect philosophy for the investor and trader.

  • Guarneri Link

    The prism through which investments (not the economy) should be viewed is discovering asymmetrical risk-reward conditions. They generally rectify. That’s a concept, not a methodology. You could write long essays on how to do that.

    But noodle it for awhile, especially in light of the blather you see in the financial press, and those peddling advice.

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