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Abstract
While investment theory and technology offer rational ways to deal with uncertainty, it is more human simply to run away from it. One place people run to is mythology, in this case investment mythology. Myths include misunderstanding the role of central banks and monetary policy; exaggerating the impact of technologies such as index funds, artificial intelligence/machine learning, and “green” energy; and believing either that markets will provide the historical rate of return forever, or the opposite, that there will never be any more growth. The authors tackle seven myths that challenge investors today, plus one (“a half”) that is part myth and part truth.
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- Abstract
- MYTH NO. 1: THERE IS SO MUCH INDEXING THAT THE MARKET MUST BE GETTING MORE INEFFICIENT BECAUSE THERE IS NOT ENOUGH MONEY MANAGED BY PEOPLE WHO ANALYZE SECURITIES
- MYTH NO. 2. BECAUSE GOVERNMENTS OWN “PRINTING PRESSES,” THEY CAN SPEND AS MUCH MONEY AS THEY WANT, AND CENTRAL BANKERS CAN GET US OUT OF ANY KIND OF SCRAPE WE GET OURSELVES INTO
- MYTH NO. 3. WE ARE IN A NEW ERA OF TECHNOLOGICAL CHANGE AT BREAKNECK SPEED WHERE GROWTH OUTPERFORMS VALUE PERMANENTLY, OR AT LEAST OUT AS FAR AS THE EYE CAN SEE
- MYTH NO. 4. WE ARE IN A NEW “BIPOLAR” WORLD OF US AND CHINESE COMPETITION FOR DOMINANCE WHERE CHINA IS THE ASCENDING POWER AND THE UNITED STATES IS DECLINING. THE UNITED STATES REPRESENTS STABILITY; CHINA, GROWTH. THEY ARE THE ONLY TWO COUNTRIES THAT MATTER
- The Military Proxy for Dominance and the Global Reserve Currency
- MYTH NO. 5. BIG DATA AND ARTIFICIAL INTELLIGENCE/MACHINE LEARNING ARE THE NEXT BIG THING IN ACTIVE MANAGEMENT
- MYTH NO. 6. INVESTMENT RETURNS ARE GENEROUS ENOUGH THAT IF WE ALL SAVE AGGRESSIVELY AND INVEST WISELY, WE CAN ALL BECOME RICH
- MYTH NO. 7½ IBBOTSON AND SINQUEFIELD’S “REAL 7.4%” IS ALWAYS AND FOREVER
- AFTERWORD
- ENDNOTES
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