The More Things Change…

“There can be few fields of human endeavor in which history counts for so little as in the world of finance. Past experience, to the extent that it is part of memory at all, is dismissed as the primitive refuge of those who do not have the insight to appreciate the incredible wonders of the present.” – John Kenneth Galbraith 

Investment products and the way we transact might look radically different today than they did 100 years ago, but investors’ emotions have evolved very little over that time.

Take a look at the seven articles published in The Financial Analysts Journal in the Second Quarter of 1949. In parentheses, I show what the 2015 version of these articles would look like.

  1. LIFO Inventory Accounting in a Period of Declining Prices
    (Accounting for Stock Options in a Period of Declining Prices)
  2. Recent Developments in Petroleum Chemistry
    (Recent Developments in Hydraulic Fracturing)
  3. The Valuation of Listed Stocks
    (The Valuation of Listed Stocks)
  4. A Method of Determining Profit Margins and Break-Even Point in the Steel Industry
    (Have Corporate Profit Margins Peaked?)
  5. The Effects of the Yield-Maturity Curve on True Yields
    (The Effects of the Yield Curve on Real Rates)
  6. Patterns in Investment Research
    (Factor Investing and the Rise of Smart Beta)
  7. Factors in Bank Stock Appraisal
    (How NIM Affects Bank Stocks)

Lets turn to some of the classic investing books. Security Analysis, which many consider the bible for fundamental analysis, was published 81 years ago. Reminiscences of a Stock Operator, which inspired generations of stock traders, was published 92 years ago. The fact that people are still debating which school is “right” so many decades later reveals a few things:

  1. There is no right way to invest, only what’s right for you.
  2. For every investing methodology, a few investors excel while many will spend the majority of their time spinning their wheels.
  3. Spend less time convincing others to do what works for you and more time on literally anything else .