David R. Henderson  

Investing Wisdom from a Wise Guy

PRINT
Answer for Question from My La... Was Gorbachev the Most Influen...

Not that kind of wise guy; actually a wise man. Take a look at this extended interview of investment adviser Less Antman, whom I've occasionally quoted on this blog. Apart from his advocacy of diversifying by investing in commodity futures, something I hadn't known much about, pretty much everything he says is what I tell friends, students, and colleagues when they ask my advice. And because of this interview, I'm going to explore commodity futures. My summary statement is: "You and I (and even Warren Buffett) are too ignorant to know what will happen in the future; so diversify." Incidentally, all three--friends, students, and colleagues who ask my advice--almost always ask the wrong questions. Their questions seem to presume a world of zero or one probabilities.

My highlights:

Kirk: In your opinion, what is the most important thing you've learned so far?
Less Antman: Humility. I diversify widely as an admission of ignorance. I don't try to buy low and sell high because I can't predict the short-term direction of the markets. And I never fall for the snake oil of guaranteed investments and safe havens. In fact, I think I may understand humility better than any other person on earth. Oops.
Kirk: On the other hand, if a client asks you to bring out your crystal ball and figure out the best opportunities over the next few years, what would you tell them?
Less Antman: What I'd actually tell them is, "Who are you and what have you done with my client?" No client of mine would ever ask this question, since they know I wear my ignorance of the future as a badge of honor.
Kirk: As a fee-only financial planner, what are some common financial mistakes beyond investing that you see in your clients?
Less Antman: The most serious non-investing financial mistake, bar none, has involved the choice of living quarters. This is related to my difficulty in bringing down the spending of some clients, because they committed to houses that were too expensive, or bought when they should have rented, or rented luxury apartments in the best areas when they should have lived in a slum next to a pig farm. Many people now facing foreclosure will find out it was the best thing that ever happened to them.
Going without disability insurance is second on my list, since disability is the one event that can truly destroy a person's life, and disability insurance is the one insurance that can become impossible to obtain after a single incident involving illness or injury, so delaying can mean never obtaining it.

H/T to Jeff Hummel



COMMENTS (2 to date)
Joe Calhoun writes:

David,

I use a very similar strategy for my clients and commodities are an important part of the mix. I use the commodity index ETFs though rather than actual futures. But just as important is what Antman mentions in another part of the interview - REITs. The key to a diversification strategy such as Antman's (and mine) is to include as many non correlated assets as possible. While REITs are not negatively correlated with stocks (as commodities are), the correlation is only about 25%. Another example that many people ignore are non US Dollar bonds.

Of course, as Antman points out, years like last year when everything suddenly becomes highly correlated can and do happen, but not very often.

Great interview. Thanks for posting it!

Comments for this entry have been closed
Return to top