What We Can Learn from Financial History
Stockerblog.com had the pleasure of recently interviewing Ken Fisher, head of the $45 billion Fisher Asset Management, a very long time Forbes columnist, and author of the books Super Stocks, The Wall Street Waltz, 100 Minds That Made the Market, and The Only Three Questions That Count: Investing by Knowing What Others Don't.
He is also coming out with a new book in the Fall, The Ten Roads to Riches: The Way the Wealthy Got There (And How You Can Too!), published by Wiley.
If you missed part one of the interview, you can see it here.
Stockerblog.com: Why don't we jump to your 100 Minds that made the Market book, which I really enjoyed. Do you have two or three favorites out of the one hundred?
Fisher: Not particularly, it all depends on what mood I'm in at a point in time.
Stockerblog.com: I noticed that one of the themes that caught my eye when going through all the individuals in the book is who escaped and who didn't escape the crash of 1929. Do you think there are any trading lessons that can be learned from their backgrounds?
Fisher: I think it's hard to draw general conclusions like that. You can view that in several different ways, and in the past, I have. One is that people who think against the crowd have always had an advantage. The other is, and I wrote about this in another one of my books, The Wall Street Waltz, Americans who paid attention to what was going on overseas tended to have a tremendous advantage over those who didn't, because overseas started going down long before we did in America. It's completely true today that there is still even more so than ever an advantage in thinking globally first and America second. And that would have been particularly useful to people. Then there's the Joe Kennedy mentality that when shoe shiners, barbers, and beauticians can tell you how to get rich, you have to remember there's no free lunch.
Those are probably the two main lessons. Another one of the points I make in the Wall Street Waltz, is that counter to common mythology, valuations were not terribly high in 1929. That is, somebody would like to believe that the PE was sky high and people ignored it. The PE was actually middling. It was neither particularly high nor particularly low. Profit margins were very fat. The fat profit margins were the euphoria, not the level of the valuations relative to the earnings, the presumption that the earnings would be maintained forever.
Stockerblog.com: Do you think there's much interest these days in financial history, by investors or people in general?
Fisher: Not much, no. I think the interest in financial history has waned in that my parents' generation had this infatuation that linked back before World War II; and today, most people act as if the world started when World War II ended. There's a presumption, which has a little bit of validity but not a lot of validity, everything is so different that history isn’t terribly important. There's a little bit of that.
For example, when you do a long term data study, invariably the further you go back, the dirtier the data are. The notion of good old data is an oxymoron. There's old data, there's good data, but there's not good old data. One of the dilemmas about thinking of financial history is there's an awful lot of grays, as opposed to blacks and whites, you need a lot of history to interpret those grays. Most people don't have the desire to have that much history.
Stockerblog.com: Do you think financial history should be taught in colleges, more than just teaching Keynesian theory and that type of thing, more about the people who were involved in Wall Street.
Fisher: When I was a kid, history business cycles was a mandated class, and basic undergraduate economics, at most universities. That's no longer true today. In my mind, but nobody's asking me, other than you, but if it were up to me, I would change an awful lot of the college curriculum. A lot of the college curriculum is screwy. I would make it very different than it is, but the educators of the world aren't asking me for my opinion on that subject.
I would have a requirement for a lot more history in most majors. I don't think they teach nearly enough history across the board. I have a lot of young people that work at my firm, and one of the things that they actually marvel at is, the ones who are in the 35 year old range, how in their lifetime, they saw education change: getting softer and fuzzier and the theme that everybody gets a ribbon, everybody gets a prize, you didn't fail. That's a whole different topic but education, starting with when I was young, with the Vietnamese War, has become softer, and softer, and softer.
End of Part 2 of the Interview – Stay tuned for future segments of the interview over the next several days, where Fisher discusses how his investing technique differs from Jim Cramer, stock market myths, favorable sectors and much more.
Fisher obviously didn't provide any stock recommendations for the interview, but many can be found in his Forbes column. For example, in the June 16 issue, he favored Enersis (ENI), Veolia Environment (VE), General Electric (GE), Nokia (NOK), and Intel (INTC).
His book, 100 Minds That Made the Market, which would make a great gift for any investor, is available at Amazon.
Author does not own any of the above mentioned stocks.
Interview by Fred Fuld at Stockerblog.com