Thursday, May 3, 2012

Taking Investment Advice From Competent People

There are a lot of competent people in the world, particularly in their niche.  They are considered very smart in their field of work.  Many people don't realize how smart Michael Jordan was on the basketball court.  People think of him as a great basketball player.  They think of him soaring through the air and dunking.  I thought Michael Jordan was actually at his best during his last couple of years with the Bulls.  He was an incredibly intelligent player who knew how to manipulate his opponent's weaknesses.

Michael Jordan was an incredibly talented basketball player and very smart on the court.  He is probably quite intelligent in other areas of life too.  It does not necessarily mean that I would take investment advice from him.

Warren Buffett has had incredible success in investing, yet he doesn't understand free market economics.  If he does understand, then he is basically evil for promoting what he does.  He is the opposite of his father.  Howard Buffett was a great libertarian congressman who understood the benefits of free markets and less government.

It actually astounds me how many brilliant people there are, particularly in their field of work, who seem to have the mentality of a 5 year old when it comes to understanding free market economics.

My main word of advice here is to be careful about listening to experts.  The more intelligent the person is, the more of a risk there is that you may be guided down a bad path.

I even see bad investment advice in the libertarian/ Austrian school arena.  Peter Schiff was great in calling the housing bubble.  He has been great in advocating gold.  Yet, he had his clients in international stocks that went tumbling down in 2008.

Robert Murphy is another great free market economist.  I consider him to be brilliant on many levels.  Yet, he has been admittedly wrong in some of his predictions.  He did not call the housing bust like Schiff did. He also predicted high price inflation.  While his prediction may still come true, his timing was at least bad.

There are other free market economists who have made some bad calls.  While they understand that economics is all about human action, they don't necessarily do a good job in predicting how humans will act.

If Austrian school economists get things wrong, how do you think others are going to do when they don't even have a sound and correct basis for their thinking in economics?

You may know someone who you consider really brilliant.  Yet, they are most likely not that brilliant when it comes to understanding free market economics.  If that is the case, then think of this person whenever you hear some talking head on television giving out investment advice.  If you understand Austrian economics, you may know more than the person on television.

1 comment:

Michael said...

Of course before investing in anything should take advice form professional. Its very important to know all about the market. I really like your post and happy to see it.
US Gold Bureau