“A great deal of intelligence can be invested in ignorance when the need for illusion is deep.”
- Saul Bellow.
Human beings are suckers for narrative. We love to be entertained with great stories. But a problem arises when popular media subordinate all things to the cause of entertainment, a topic well addressed by the late Neil Postman in his critique of television, ‘Amusing ourselves to death’ (Methuen, 1987). Goodness knows what he felt about the Internet.
If we are suckers for narrative, we are also easily seduced by determined optimism, a topic comparably well handled by Barbara Ehrenreich in her study ‘Bright-Sided: how the relentless promotion of positive thinking has undermined America’ (Metropolitan Books, 2009). When relentless optimism mates with financial markets, the result is almost always a disaster.
Occasionally one comes across a message that is so well delivered that it demands to be repeated. The following is such a message, which was originally published in the form of a monthly letter to shareholders of the Edelweiss Fund by Tony Deden of Sage Capital Zurich AG. It is reprinted here, in part, with his kind permission.
“The history of commercialism would suggest that optimism sells. It sells books, credit cards, houses, mutual funds and a host of personal services. But in fact, as Ehrenreich reminds us, it also evolves into an ideology that “silences people and quells dissent”. Far worse, it also stupefies and destroys whatever rationalism remains among the few by becoming a State-sponsored way of life.
“It seems that this ideology of positive thinking is on the defensive. Its principal remaining acolytes are government employees such as Messrs. Bernanke and Geithner, or agents of the state masquerading as bankers, stockbrokers, television personalities and a handful of misguided billionaires who have learned how to benefit from such culture of corruption. In contrast, the common man, the saver, the professional and the businessman would all agree that they have been conned.
“Yet, the world of unbridled optimism is being taken over by a new culture of pessimism – one that equally as furiously seeks a merchandising advantage. Pessimism also sells. It sells books, bullets, guns, survival gear and hucksterism in extremis. Well, it also sells gold and, for the time being, it makes us seem so prescient and smart.
“The important lesson of this brief visit on such a weighty subject is itself simple. Both optimism and pessimism are tied in a Gordian knot not only with man’s umbilical connection with emotion but moreover with his vain attempt to foresee the future – often armed with the pseudo-intellectualism of mathematical precision. Both are attitudes we should best avoid – difficult as it is.
“Daily, my mail box is full of emails, many of which come from well-meaning friends. “Have you seen this article ?” or “Do you know this guru ?” I follow the links as I frantically go from thenewyorktimes.com to financialarmageddon.com and everywhere in between. “The dollar will rebound”, “Gold is another bubble”, “Buy bonds”, “Sell bonds”, “Pork bellies are undervalued,” and so on. I pretend to read some of these writings just so that I can make up something to say should they follow up the email with a telephone call. In an enduring quest for understanding and picking kernels of knowledge, I find myself surrounded in an epochal – and mad – battle of the optimists versus the pessimists.
“Honestly, there are intractable and momentous problems which should be the cause of considerable pessimism. But when it comes to action with other people’s money – particularly the irreplaceable kind – merely on account of the free advice of a well known guru who writes for the-world-is-coming-to-an-end.com is complete madness. To follow the advice of an analyst working for a bank that can’t even manage its own balance sheet and who is intentionally or accidentally divorced from reality, is madness squared.
“I could recite a myriad of statistics of all sorts to prove some theory about the future, but it would be pointless and pretentious. We understand the consequences of actions but do not know how history will unfold or when. To say that we are uncertain about the future would be correct.. On the other hand, do not confuse our posture for pessimism, for it is not. In matters of health and wealth, positive or negative thinking are useless.
“In the words of Honoré de Balzac, the “realism” guru of European literature, “thinking is seeing”. Investing our savings is a task that should be based on “deduction, which is a slow process of seeing by which we work up from the effect to the cause.” We can escape the madness of emotion and cacophony without cynicism or arrogance but armed with honest theory and moral courage.
“Since value is subjective and based on the individual preferences of market participants, we can conclude that we should focus on the simplicity of our own definition of such value, whilst knowing that the market, irrational as it always is, and subject to the optimism and pessimism of the crowd will, from time to time, serve us great rewards.”
If wiser investment counsel has been articulated this year, we have yet to see or hear it.
|
