Brains, Benchmarks, and Best Sectors
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 any of the earlier segments of the interview, you can check them out: Part 1, Part 2, Part 3, Part 4, Part 5, and Part 6.
Stockerblog.com: In the chapter on What my Brain is Doing to Mislead Me, one of the key things I got out of that chapter is looking at benchmarks because if you don't look at benchmarks, in other words, if the market is down in general and your portfolio is down, obviously that can do things to your brain if you don't look at it from a perspective standpoint, right?
Fisher: I think that's right, Another way to see that is, on the upside, an awful lot of people who are investors are investors who are trying to prove how smart they are. When you meet them and talk to them, you can really see their ego right out front, they hate the notion of a benchmark, because what they want is to say 'I'm smart'. They don't want the notion that its up 20 and I'm up 15 and I'm not smart.
The benchmark actually allows you to really calibrate how much real alpha you have, and it apprises you to say its up 20, 'I'm smart'.
In other words, the benchmark helps you measure risk, and the guy who want to lead with his ego wants to denote the notion that because he's so smart, there is no risk. If I'm all knowing, there isn't any risk, right?
Stockerblog.com: Any other suggestions that maybe you've come up since you wrote the book of how to prevent your brain from misleading you?
Fisher: No, I don't think I really have a lot of help on that that's new. I haven't had some revelation since the book came out.
Stockerblog.com: Any particular sectors or industries you like right now?
Fisher: Yeah, I'm of the feeling, which most people aren't, that this which is quite technically a bear market, is really more like a big long grinding correction of a bull market; and I think when it's over, probably the sectors that have been leading before this began will continue to be the sectors that lead. So that would take you back into materials, energy, and industrials, and emerging markets.
One of the points that they're not very big on right now is that if we were in this global recession that so many people fear, if we're really in that world, because the emerging market stocks and countries are so dependent on developed world demand, then stocks would be tanking.
In fact, all year long they've been acting in line with the market. To me, that's a sign we're not really in that world, which says to me we're coming out that other side of this period, we're going to have a resumption of the world we were in before.
End of Part 7 of the Interview – Stay tuned for the eighth and final segment of the interview in the next couple days, where Fisher discusses dealing with stress when investing in the market.
Fisher obviously didn't provide any stock recommendations for the interview, but many of the stocks he has favored in the past can be found in his previous Forbes columns. For example, Novartis AG (NVS), Nokia (NOK), Rohm & Haas (ROH), and Hewlett-Packard (HPQ).
His book, The Only Three Questions That Count: Investing by Knowing What Others Don't, 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