Charles Murray is a controversial guy, to say the least. His past and current books (the Bell Curve, Coming Apart to name two) are routinely debated in the public sphere with gusto. His latest op-ed in the Wall Street Journal is a must read:
Why Capitalism Has an Image Problem – Charles Murray
“Capitalism is the economic expression of liberty. The pursuit of happiness, with happiness defined in the classic sense of justified and lasting satisfaction with life as a whole, depends on economic liberty every bit as much as it depends on other kinds of freedom.”
Mark Mills and Julio Ottino’s Op-Ed in the WSJ on Monday, Jan 30, “The Coming Tech-led Boom,” is a must-read for anyone needing a good dose of optimism to combat persistent media hypochondri-nomics.
A couple teaser paragraphs:
First, demographics. By 2020, America will be younger than both China and the euro zone, if the latter still exists. Youth brings more than a base of workers and taxpayers; it brings the ineluctable energy that propels everything. Amplified and leavened by the experience of their elders, youth and economic scale (the U.S. is still the world’s largest economy) are not to be underestimated, especially in the context of the other two great forces: our culture and educational system.
The American culture is particularly suited to times of tumult and challenge. Culture cannot be changed or copied overnight; it is a feature of a people that has, to use a physics term, high inertia. Ours is distinguished by incontrovertibly powerful features, namely open-mindedness, risk-taking, hard work, playfulness, and, critical for nascent new ideas, a healthy dose of anti-establishment thinking. Where else could an Apple or a Steve Jobs have emerged?
Andy Kessler’s Op-Ed in Tuesday’s WSJ is a must-read tied to the trends in overall standards of living and availability of products. He touches on income disparity—I’m not going there but you can make your own conclusions. Kessler’s perspective is most useful for putting into context capitalism and the boons it brings to wide swaths of the population over time. My favorite part:
“Just about every product or service that makes our lives better requires a mass market or it’s not economic to bother offering. Those who invent and produce for the mass market get rich. And the more these innovators better the rest of our lives, the richer they get but the less they can differentiate themselves from the masses whose wants they serve. It’s the Pages and Bransons and Zuckerbergs who have made the unequal equal: So, sure, income equality may widen, but consumption equality will become more the norm.” The Rise of Consumption Equality – Andy Kessler
And, check out the website to my class at Cal Berkeley here: http://www.fisherinvestments.org
He never gets as much fanfare as Adam Smith, and tends to get pushed aside by contemporaries like Von Mises these days, but Frédéric Bastiat is one of the great humanistic economists ever, and his work should be on every serious econ student’s desk.
A free marketer, yes, but also one of the great prose writers of the dismal science. This wasn’t just ornament; he believed verbal rhetoric and reason was as much a part of proper economic thought as math-based empiricism. That makes for a rare breed today.
And while it’s impossible to know what he’d think of the state of today’s economic thought, I’m quite certain he’d be pleased to see the proliferation of capitalism and the astounding wealth creation the world has seen since his time.
Here’s a great little primer on him from the weekend’s WSJ:
There are bits to quibble with, but this article by James Stewart in last week’s WSJ on how to think through asset allocation is quite worthwhile. Simply, the way I see it, most folks entering or in retirement probably need more equity exposure than they believe.
Books Discussed in this Review:
Restless Genius: Barney Kilgore, The Wall Street Journal, and the Invention of Modern Journalism – by Richard J. Tofel
War at the Wall Street Journal: Inside the Struggle to Control an American Business Empire – by Sarah Ellison
Investors never actually experience firsthand most of what they act upon. The vast, vast majority of information is obtained secondhand—via newsfeeds of all sorts, be they scuttlebutt (that Phil Fisher favorite), blogs, TV, newspapers, journals, magazines, even Twitter. In some sense, financial statements are a kind of secondhand account—10Ks, earnings calls, and balance sheets are not direct experiences of a company and its goings on. They’re descriptions; not the thing itself, but something describing the thing.
Sometimes (actually, often) a secondhand view can be quite useful. A well-wrought story distills and focuses otherwise chaotic events as they happen—it makes sense of things for you and highlights the important features. That’s the ostensible function of journalism—objectivism but also a better shaping of things for more efficient understanding.
That’s in theory. At this point, we’re all well aware of the inherent biases and subjectivity of any publication. This gets to one of those philosophical issues that has major practical implications for investors—is it possible to get clear information to make cogent decisions out of secondhand accounts like newspapers? Is it possible to really “know” what’s going on in the world just by sitting in an office and reading words on papers and screens?
Mostly, yes. But the onus is still on the reader to get to the “truth”—that is, one cannot leave all the interpreting to the journalist. Particularly in the internet age, there’s no doubt in my mind it’s possible to obtain all the needed information to successfully invest globally. And it’s mostly free of charge, for that matter. It takes work though. For one thing, the right information’s not all in one place—you’ve got to read a wide variety of stuff. Also, you must be constantly vigilant of the content you’re reading. Journalism and news generally are by definition a selected presentation of facts—there’s no way to communicate all the information. That means all journalism is subjective. Just the editorial choice to run a story at all is a choice. So an investor cannot sit back and ask the world to tell him/her what is important—they have to make that determination themselves and seek it out within the sea of information.
But there’s another factor. An investor doesn’t just need to know the right information to invest, an investor must also know what the world is thinking. It’s a reflexive kind of activity, what I call in my book 20/20 Money being “the layer on top of the layer.” You don’t just have to know; you have to know what others think about what is known. That’s because all investing is relative—most known or widely believed information is already reflected in prices. To make a market-beating investment, you have to determine what’s not reflected yet in a price. So reading the news is also about seeing what the world is thinking—what the most salient issues are; who’s saying what, and why.
On that basis, there is no more indispensible, indubitable investing resource than the Wall Street Journal. Any and every serious investor must read it daily (even Saturdays). It’s what the investing public reads and therefore is what you must read to know what others are thinking.
Barney Kilgore took the Wall Street Journal from a glorified newsletter to one of the best journalistic periodicals in the world. A cub reporter in the Depression era, Kilgore did everything at one time or another—from editorials to on-the-ground political reporting, from economic analysis to earnings analysis.
Kilgore hailed from South Bend and had ties to Notre Dame and the country’s robust middle—very American, workman-like, a Calvinistic/puritan worldview. He valued hard work and long hours as virtues in themselves. Yet he was an adventurer and regaled himself in the adventures of city life—from San Francisco to New York.
As a reporter, he cut his teeth in the Depression and covered the ailing banks, reporting heavily on complex regulations like the Glass-Steagall bill. His market education was almost purely experiential (no textbooks here). Not just following the news, but commenting and reporting on it as Kilgore did, hones you, toughens you, sharpens your investing mind. For me, there was no faster or better learning process I underwent than my days editing MarketMinder and writing our daily commentary.
Kilgore came all the way up through the ranks: he wrote, edited, and published at the Journal. Mostly, he was a visionary and innovator. All those little things the Journal is famous for—the front page “What’s News” column which briefly highlights the day’s important news, the daily “Review and Outlook” editorial section, known for its biting political wit—all came from his mind. He saw the paper go national, then international, and its basic form is still retained today.
His ideological roots skewed heavily toward free markets. He believed in Irving Fisher’s insights (even after his disastrous prediction of further and indefinite stock market climb in 1929). Kilgore believed markets ultimately held more wisdom than the individual and were the only possibility for forward information about the economy. Indeed, amid the deluge of information available today, the market is still the surest forward indicator of the economy. All that ethos still exists in the paper now.
But part of Kilgore’s charm was his dual mission to educate and entertain—he wanted the Journal to be a thing regular folks could read to both enjoy and learn a few things about the vagaries and intricacies of the economy. This attitude is what allowed him to shun tradition and innovate the paper into prominence. These days we think of it as an institution, but its roots are about unconventional-ism. Enter Rupert Murdoch.
Many view Murdoch’s purchase of the Journal in 2007 as an atrocity of the paper’s independence and integrity. I say hogwash. Both Dow Jones (publisher of the WSJ) and the New York Times Company were/are majority-owned by families (the Bancrofts and Salzbergs, respectively), and, as such, over the decades have become stodgy, turgid, anti-innovation publications. These were dying animals. True, the Journal was the only major newspaper to successfully get its readership to pay for online access, but that was more a function of its indispensability as a business resource than the paper’s innovation.
I think Kilgore would be much pleased with Murdoch so far. Murdoch has already livened the paper by adding more color photos (something the New York Times for years has done better), decreased the width of the paper, and mandated more international and political news. These are all to the good, especially tied to Kilgore’s desire for the WSJ to be the de facto paper of the US. Kilgore believed any well-informed citizen should understand business, the economy, and how markets work.
These days, the Journal is gaining in circulation and subscribers. But make no mistake: The newspaper business is rough, competitive, and has been in recession for more than a decade. In order to survive blogs and the Internet, newspapers have had to jettison high-cost talent and experienced journalists/editors for cheaper, less experienced writers. The average age of a writer for the Journal these days is much younger than ever before. This creates a problem of perspective—headlines seem to take a more breathless, sensational overtone from those with younger pens. Indeed, the panic of 2008 may well have seemed and felt like the end of the world to those reporting their first true downturn. Even the emergence from the most recent recession seems something of a revelation, when it’s really part of a very normal cyclical pattern through time. Murdoch, a businessman first, has surely taken advantage of this cheap labor, and in an era where newspapers must compete with so many new sources of information, he probably also doesn’t mind a little higher sensationalism, too, to move papers.
Beyond that, the Journal is no less good than it was before. Yes, the ideological bent of the publication will out no matter what. But the WSJ was well known as the most conservative of the major papers long before Murdoch anyway. It’s hard to believe editorial and op-ed veterans of the Journal like Henninger, Jenkins, Stephens, Noonan, and others, can get any more free market than they already are.
Here’s one man’s strategy for WSJ reading:
If you only have five minutes, read the front page, especially the “What’s News” section. The major economic releases and political news are all there. (But remember it’s a newspaper, so anything that happened in the morning won’t be in the paper till tomorrow. The online edition is updated constantly though.) Then skip to the “Review and Outlook” at the back of the “A” section. This will have a right-wing bent, but will tell you immediately the salient political/economic issues of the day.
If you have 15 extra minutes, read the op-eds. The most important economic and business personas in the world write there. Barack Obama did just a couple weeks ago. So do Treasury Secretaries, foreign heads of state, prominent CEOs, and so on. Their views shape policy and the economy.
If you have 30 minutes, read the entire “A” section—which is global news with an economic skew.
Important tip: Murdoch likes his journalists to leave certain important information toward the middle of a piece to keep people reading. But the headline and first third of basically any story are enough to get about 90% of the important information. You can skip the anecdotes and repetition otherwise.
If you have 45 minutes, also scan the Marketplace and Money and Investing sections. But even if you have a lot of time, still skim these unless something really catches your eye that’s pertinent to your own dealings.
If you can round out the hour, it’s well worth looking through the market data at the back end of the Money and Investing section. Take one small piece a day, as possible, and figure out what all that stuff means. Within a few months you’ll know all about options markets, forward commodities contracts, bonds, stocks, funds, and so on.
Generally ignore the Personal Journal section. There’s seldom much there of interest outside mundane fare and pieces about the art and high-end real estate markets to make people feel finance can be cultured and sophisticated.
If you can’t read the weekly edition, the weekend Journal has really improved under Murdoch. It’s a great rundown of the week’s action, and the new book review section is starting to come into its own with some of the best critics and voices commenting.
Most importantly for serious investors, no matter what, subscribe to the thing and at least scan the headlines daily. Make the time. Even for curious citizens, there are few better avenues out there for the daily news.
*The content contained in this article represents only the opinions and viewpoints of the Fisher Investments editorial staff.
Matt Ridley wrote a great piece in last weekend’s WSJ on the importance of examining knowledge we take for granted, particularly early in life. Or, as Yoda says to Luke, “You must unlearn what you have learned.” This lesson also goes for entire swaths of communal knowledge, such as the notion pervading 20th century intellectual thought that human minds are “blank slates” to be fashioned en toto by culture/society…good thing Steven Pinker came along.
I clipped a couple worthy passages:
For adults, one of the most important lessons to learn in life is the necessity of unlearning. We all think that we know certain things to be true beyond doubt, but these things often turn out to be false and, until we unlearn them, they get in the way of new understanding. Among the scientific certainties I have had to unlearn: that upbringing strongly shapes your personality; that nurture is the opposite of nature; that dietary fat causes obesity more than dietary carbohydrate; that carbon dioxide has been the main driver of climate change in the past.
I would put it slightly differently: We are always on a path, never at a turning point (every generation narcissistically thinks it stands at a turning point in history). There simply is no ideal human social arrangement, and there won’t ever be one. For me this has been the biggest disenthrallment of all—the growing realization of the ever-changing, chronically dynamic nature of the world. “Nothing endures,” said Heraclitus (supposedly), “but change.”
In the words of the WSJ today, “Direct talks with borrowers get better results than government’s loan-modification program”. Yes, indeed. The government’s program to keep many mortgage borrowers afloat by a new program stipulated in the stimulus turned out to be as turgid, labyrinthine, and tortoise-like as you’d imagine. From the article:
The Treasury reported Monday that the government’s Home Affordable Modification Program, or HAMP, had provided permanent help to 521,630 homeowners since the program began in spring 2009.
By comparison, over the same period, banks negotiating directly with borrowers have made about two million permanent loan modifications outside the government’s program. These modifications continued to rise in recent months even as the number of HAMP modifications trailed off.
Remember that cold-hearted bankers actually have a pretty good incentive in many cases to modify bad loans and keep folks in those houses all by themselves—a partial payment is often a better deal for a bank than going through the whole foreclosure business. Either way, banks (read: private industry) proved more efficient than the government in providing “home relief”. This should surprise no one. The faster these issues are worked out the better for the economy, in my view.
For years I’ve made a practice of reading the Wall Street Journal daily. And to really do it, even for a very skilled skimmer, takes the better part of an hour. In any given week, I generally have a goal of reading the WSJ, FT, Economist, Bloomberg Businessweek, and The New Yorker. Then monthly (or bi-weekly), the New York Review of Books, Forbes, Fortune, and Foreign Policy.
That’s a lot of reading, but to my mind that’s what the investing job requires. I know people who do considerably more. I tried a tactic over the last month that’s worked beautifully so far: for daily newspapers, let them build up and then bang them all out one day each week. It’s simply amazing how many stories become generally irrelevant after just a couple days. Yet, it’s all still fresh enough that you stay informed and don’t miss an important op ed or editorial. It’s simply a myth that investors (except very specific types of jobs, like for traders) need to have up to the second information in most cases.
In the meantime, I’ll keep experimenting—reading is a skill set that needs to be continually honed and absolutely can be improved (both speed and comprehension). Most folks don’t bring much consciousness to how they read, but it matters.