Home > Investment tips > The idiocy of the “frozen smile”

The idiocy of the “frozen smile”

For decades I would watch on in disbelief as Professors and then quant analysts would try to ram the normal distribution down my throat, as though it applied to every situation. 

It doesn’t and anyone who applies the normal distribution to financial returns is stark raving mad.

Those who were criticising Peter Schiff in 2006 for being a pessimist were themselves insanely unrealistic about the prospects of the US economy.  See how Peter Schiff was ridiculed by the “optimists” here:

Similarly, the Economist (a mere shadow of the publication it once was) speculates on the benefits and costs of pessimism.

Again, who says someone is pessimistic or just realistic?  Who decides?

I can be happy if circumstances justify it.  If I’m raped in jail by five men, I know I will be unhappy.  I’d be surprised if anyone would be happy after such an event occurring, no matter what positive-thinking feel good course was taken the day after. 

If I’m making love to the woman of my dreams I know I will be happy.  No one is going to convince me any different.  I know it will be good.  No amount of preaching about the sins of the flesh would stop me being happy the day after.

Being sad in one instance does not make me a suicidal depressive and being happy in the other doesn’t make me a naive fool. 

It depends on the circumstances.

I deal with reality as it is, not as I want it to be.  I don’t shirk from reality – no matter what it gives me.  I take the emotional responses to that reality as well – I do not shirk the emotional consequences of looking squarely at reality as I see it.  Every post on this blog is supported by facts and contains multiple links supporting my assertions which any fool can click on and verify for themselves.

I’m depressed today because I see how badly screwed up all our futures will be.  If this was different, if I was living in a different time, if govts were smaller (and fairer), if gold was money, I guarantee you I would be “happy” because I would be looking forward to the future.

As an investor, look at the facts as they are.  Forget your preconceptions.  Respect those who base their conclusions on facts, not fantasy, not last year’s trends.  Ignore “authority figures” when it comes to investing.  As can be seen from the clip above, they are almost invariably wrong because they are talking their own book.

The best investment strategy when in doubt is actually to invest in last year’s worst performing asset class.  Why?  Because markets overbuy and oversell.  And because idiots like Laffer and Stein exist.

By the way, this year’s two worst peforming asset classes in Australia were foreign stocks and commercial real estate funds and commercial real estate trusts. 

We’ll see how they go in 2010 (I’m actually predicting another down year, but we’ll see!).

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Categories: Investment tips
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