Snow on the Ground and Roger on CNBC Asia

Walker, where I live, had its second snow storm of the season this week. We live on a mountain at 7000 feet with lots of pine trees and it is very picturesque.

I am scheduled to appear on CNBC Asia Sunday night about 13 minutes into the first hour of Market Watch.

On to market related things, well sort of. Yesterday afternoon I had to attend a luncheon (the details of why I had to attend would take to long to type) hosted by another money manager. Joe, as I will call him, talked at us about what he sees for the next few years and what he is doing to position around his expectations. He also had opinions about China, our savings rate, and some other things that I don’t remember. This went on for 90 minutes.

The reason I am posting this is because of the philosophical differences between the way Joe manages money and the way I do. Joe thinks he is very smart and believes he can out smart the market. His bottom up stock pick themes are not simple. My approach is to listen to what the market is saying, to take what the market is giving and get out of the way when the path of least resistance is down. For example the market is saying there are problems with large American pharma stocks, I first wrote about this in May for Motley Fool. Chances are we can figure out why the group is having problems but even if we can’t we can look at the price action over the last two years to give us a clue. Ditto with the insurers. I wrote a negative piece on AIG, also in the spring for the Fool. While I had no idea that the group would get hit like it has I just didn’t (and still don’t) think it was the right place to be. Joe owns AON corp. I’m sure his logic is very compelling, but as it turned out his logic was not smarter than the market.

He also employs no counter strategy, in case he is wrong with any of his themes. As I have said before, to be properly diversified against the unknown and your opinions being wrong you should always have some stocks going up and some going down. The way you out perform the market is by getting the big picture things correct more often than not. When I am wrong about some things my clients won’t be hurt. This should be very important to anyone that manages money, except Joe.

The reason I like to keep things very simple to assess the big picture and help guide investing themes is that I have noticed the most successful investors all keep things quite simple. Michael Steinhardt, George Soros (back when he didn’t talk about politics so much), and Jim Rogers all can articulate what they believe in a sentence or two. While I am no Julian Robertson I do try to emulate these guys where possible. For example, I am overweight Australia because they are one of China’s largest trade partners and will be selling more and more stuff to China. Anyone else think that is simple?

Moving on to one last issue. Michael Kahn had an interesting nugget in his column in Barron’s online this week. Any time the Dow closes down more than 0.5% in the October before the election the incumbent has lost. The number the Dow needs to take back today is 10029.87. As I am about to hit the button to post this the Dow is at 10005.16.

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