MICHEL PIREU: The last song I’ll ever sing for you
It’s the last time I tell you that you don’t have a chance
Scott Adams is a US artist and cartoonist. He is the creator of the Dilbert comic strip and author of several nonfiction works of satire, commentary and business. Some years ago, in a tongue-in-cheek article in the Wall Street Journal, he advised investors to put their money on the companies they hate the most. It went something like this:
“When I heard that BP was destroying a big portion of Earth, with no serious discussion of cutting their dividend, I had two thoughts: 1) I hate them, and 2) This would be an excellent time to buy their stock. And so I did. People ask me how it feels to take the side of moral bankruptcy. Answer: Pretty good! Thanks for asking. How’s it feel to be a disgruntled victim?
“I have a theory that you should invest in the companies you hate the most. The usual reason for hating a company is that it’s so powerful it can make you balance your wallet on your nose while you beg for their product. Oil companies such as BP don’t actually make you beg for oil, but I think we all realise they could. It’s implied in the price of gas [petrol].
“If there’s oil on the moon, BP will be the first to send a hose into space and suck on the moon until it’s the size of a grapefruit. As an investor, that’s the side I want to be on. Perhaps you think it’s absurd, but let’s compare my method to all of the other ways you could decide where to invest:
“Technical Analysis involves studying graphs as a way to predict future moves. It’s a widely used method on Wall Street, and it has exactly the same scientific validity as pretending you are a witch and forecasting market moves from chicken droppings.
“Investing in Well-Managed Companies, which we assume they are when they make money. That perception is reinforced by CEOs who are more than happy to tell you all the clever things they did to make it happen. The problem with relying on this source of information is that they are skilled in a special form of deceit.
“Track Record, investing in companies that have a long track record of being profitable sounds reasonable; the problem is that every investment expert knows two truths about investing: 1) Past performance is no indication of future performance, 2) You need to consider a company’s track record. And, yes, those are opposites.
“Invest in Companies You Love. Go ahead, listen to the dopey-happy hallucinations of professional liars. Be gullible.
“What About Warren Buffett? Do you know who would be the first person to tell you you aren’t smart enough or well-informed enough to pull that off? OK, he’s probably too nice to do that, but I’m pretty sure he’s thinking it.
“The other day I was in an Apple Store. I wanted the new iPad. The smiling Apple employee said she would be willing to put me on a list, so I instinctively put my wallet on my nose and started barking like a seal, but it didn’t help. My point is that I hate Apple. I hate their closed systems. I hated Steve Jobs’s black turtlenecks. I wish I had bought Apple 15 years ago when I first started hating them.”
The Rubinstein Rule is worth keeping in mind when you’re trying to decide whether to invest in a company. It comes from the old story of Arthur Rubinstein — widely regarded as one of the greatest pianists of all time — judging a piano competition in London. Rubinstein was asked to score contestants on a scale between one and 20. When the competition ended the sponsors were dismayed to find that the maestro had graded most contestants zero, a few 20 and none in between. They asked why he had scored in such an extreme manner. “Simple,” replied Rubinstein. “Either they can play the piano or they cannot.”
It is undoubtedly riskier when you don’t know what you’re doing than when you do. In knowing what to ignore when it comes to investing it has to be said that most available stock market “data” is of no earthly use in making money. In fact, it’s darn dangerous. It can fascinate and waylay you forever. That includes the so-called “professional” sources of data and stories.
This is because unless it’s exactly what you need, it’s just as much a part of the information glut as the stuff that comes from those people who don’t know what they’re talking about, and are more or less lying in trying to have you believe they do. Investing is the biggest business there is. It attracts all sorts, but no-one who primarily has your interest at heart.
And yet so many investors are so intimidated by the available information; so busy trying to make sense of the hype, the numbers and the stats; so focused on their “need” to be well-rounded, educated and informed that they simply forget that the first requirement for success is to know enough to cut through the surfeit to what’s important.
• Michel Pireu passed away suddenly on Monday morning after completing this column, having been a contributor to Business Day for almost two decades. It was his family’s wish that it be published as he intended.
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