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