The gods perceive what lies in the future,
and mortals, what occurs in the present,
but wise men apprehend what is imminent.
—Philostratus, Life of Apollonius
of Tyana, VIII, 7
As a young broker during the late sixties, I followed the advice of my firm’s analysts when making recommendations. It worked for a very short while. As soon as the seventies arrived, the firm’s bullish stance ceased to be useful and I lost a lot of money for my clients. That was over forty years ago. Today, I survey the output of the financial service industry’s research departments on a regular basis. I do not see any improvement. They are most optimistic when prices are at their highest, insisting that the outlook is for even higher prices. Their sell recommendations don’t come out until after the market has tanked.
Should we not be doing the opposite?
I find that picking an advisor is the toughest challenge in investing, but we all need one because, as humans, we don’t want to deal with uncertainty alone. The unfortunate thing about this is that advisors-both good and bad-have no skin in the game. If you do well, great. If you don’t, sorry!
Some time back I found Robert Prechter’s newsletter. Bob had begun his career as an analyst at my firm. He became interested in the work of Ralph Elliott, recognized its value, and went out on his own to become an independent newsletter writer. His calls have not all been on the money, but his approach has been to respect the fractal nature of markets and try to buy low and sell high. When he has been wrong, it has been to underestimate the magnitude of the move. But he has consistently advocated taking risk at lows and steering clear of the mania phase.
Today we are in the mania phase. The hallmark of it is that the majority of investors and most advisors are convinced that the extreme overvaluation of the moment and the rampant speculation don’t matter because, “This time it’s different.”
So, the wise men I tune in to, Prechter and his group of Wave analysts, apprehend what is imminent: The mother of all bear markets.
Poet C. P. Cavafi riffed on Philostratus’ observations. He wrote, in part:
…Of all the future holds, wise men apprehend
what is imminent. Their hearing, sometimes,
in moments of complete absorption in their studies,
The secret call of events that are about to happen
reaches them. And they listen to it reverently.
While in the street, outside,
the people hear nothing at all.