You Know Nothing, So Invest Like It

You Know Nothing, So Invest Like It

“The more I learn, the more I realize how much I don’t know.”

When I sat down to write my blog post this week, it started like this:

“China, Grexit, Ebola, China, Brexit, Taper, Donald Trump, Russia, China, Oil, Debt Ceiling, etc., etc., etc….

These are the things the finance industry spends hours on hours analyzing and worrying about.  All week CNBC was running specials and trading floors across the country were on lockdown for the big, bad Brexit.  And what happened?

Nothing…“

Whoops.

Forbes went a step further than me and actually published an article that opened with this:

“The Brexit story is over. It’s a foregone conclusion. No one is leaving the U.K. The “establishment” isn’t having it. The lords have spoken.”

So with that out of the way, what is there to worry about next? – June 23, 2016

What happened last night doesn’t qualify as nothing.  After the United Kingdom voted to leave the European Union, volatility skyrocketed, currency markets went crazy and global equity markets tumbled.  Kudos to the fear mongers.  The next few days should be fun for you.

So how did this happen?  Why were so many seemingly caught off guard by the results of the referendum?  Two days ago oddsmakers were saying 90% chance of remain! Forecasting is a tough business.  You’ll probably notice that many of the same people who yesterday were telling you Brexit wasn’t happening, are today telling you what the impact will be now that it has.

It’s ok though.  If you’re an investor, none of this really matters.  Did I have an opinion?  Sure.  Did my opinion affect my investment plans in any way?  Nope.  A few months from now there’s a good chance we’ll remember this morning just like we remember what happened last August when the Chinese yuan struck fear into markets: a bunch of hedge funds blew up, financial media had great ratings and normal investors who did nothing were no worse off six months later.

During the vote yesterday, exit polls were not allowed in the U.K..  CNBC reported that hedge funds were hiring their own pollsters to gain an “edge” and JPMorgan was sending updates like this throughout he night:

image

Make no mistake, expending resources on polling and quantitative “Brexit” models to make short-term trades in wildly volatile markets has nothing to do with investing.  This is better categorized as white collar gambling.  In a room full of investors, are the guys with access to this information the smartest guys in the room?  No way.  These are the guys who make much more money for themselves than they do for their customers.  They do a bunch of complicated stuff to justify their existence.  They do lots of work and keep very busy, but busy does not equate to productive.  These are the speculators.  Speculating is fine, but don’t mistake it for investing.

“Being busy is a form of laziness – lazy thinking and indiscriminate action.” – Tim Ferriss

The smartest investors in the world understand that they know very little.  They don’t waste time trying to predict the unpredictable.  Good investors diversify and think long-term.  What will the impact of Brexit be on your long-term investment plan?  N O T H I N G.

Keep your costs low, diversify your investments and rebalance occasionally.  You’ll be better off than most and won’t have to waste one second of your life worrying about the next pseudo crisis.  One of the few certainties in investing is that there’s always going to be a Brexit.  Don’t let it knock you off track.

Further Reading…

No One Knows What Will Happen

The Power of Doing Nothing


Tim Brennan

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