150th Edition
What do the smart people think?
During my investment career there was always one comment that routinely surfaced that I always found unsettling. It would include the phrase “smart money.” As if there was this group of investors who knew more than the rest of us. Smart money is investing in such and such…. Smart money has turned negative towards….
Phrases like that. I never understood exactly who this group of smarter-than-the-rest-of-us really was. Early in my career, I suspected they didn’t exist. Eventually, I became certain. In fact, the opposite was actually true. Let me try to explain. The stock market is a discounting mechanism, and it is forward looking. It incorporates all available knowledge and information, as well as all opinions and forecasts regarding the future. In other words, the market combines the wisdom and predictions of the smartest investors with the viewpoints of the rest of us. Over the long term it has generally been a very good predictor of the overall economy. Here is something else to consider. During every bull market over the last one hundred years, there have always been skeptics sharing their bearish prognostications. Not surprisingly, during every bear market, there have been eternal optimists touting bullish predictions. I’ve never known any individual investor or stock market pundit to be correct all the time. Thankfully, even the most foolish among us are not wrong all the time either. Whatever you hear, whoever you listen to regarding the stock market, take it all with a grain of salt.
In other areas, there may be smart people worth listening to. It does require an ability to identify really smart people within an ever-expanding discourse. Doing so is rather difficult today, with AI, and all the influencers and social media pundits. But I thought I would give it a shot in today’s blog.
I’ve identified three smart individuals. What exactly are they saying?
Thomas Sowell on his experience with AI:
Noted economist, author and social theorist, Thomas Sowell wrote an interesting op ed for the Wall Street Journal stating that “My voice is all over the Internet saying things I have never said and would never say.” AI gives people the ability to create these deceptions and fraud anonymously. He issues a clear warning about AI “undermining the very concept of truth.” Probably a warning we should take seriously. Can we utilize AI properly and responsibly and retain the ability to discern truth? I hope so.
Nick Saban and his decision to stop coaching college football:
While Coach Saban basically said he stopped coaching due to his age, he also attributed NIL and current player attitudes in his decision to retire. When the best coach, perhaps ever, doesn’t like the direction that the game is heading, there is something wrong. Paying players, the transfer portal, and widespread gambling is ruining college sports. I watch less of it every season. Maybe I’ve just become a curmudgeon. It could be worse, I guess.
Arthur Herman on America as the sole global superpower:
Noted author, Arthur Herman, wrote an interesting essay in the Wall Street Journal – “America is the Sole Superpower Again.” He contends that China, which was once believed to be destined to surpass the U.S. as the world’s dominate economy, has blown its chance. Could it be that capitalism has won the day over communism? That might be an interesting topic to debate and discuss in high schools and colleges. Understanding the competitive advantages of free-market capitalism, compared to totalitarianism and its state control of the economy, might convince young people to engage in a deeper analysis of the case for socialism. Currently, that doesn’t seem likely, but one can always be hopeful.
One last thought for today. How can we best determine whether a person knows what they are talking about and are worth listening to? Ask these questions: First, is their agenda self-serving? Second, is their argument comprehensive, logical, and well supported? Lastly, is it one-sided, hyperbolic, and unsupported?
If you follow this advice and you’re still not sure, talk to the oldest man you know. Better yet, talk to the oldest woman you know. The older I get, the more I miss my grandmother.
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Michael Kayes
*These views are my personal opinions and are not the viewpoints of any company or organization.