Some readers find Money Morning confusing.
They don’t get how one person (yours truly) can predict that the Aussie stock market will triple over the next five years, while another (our good pal Vern Gowdie) can predict a 90% market crash.
We understand that confusion. Most people are used to the mainstream ‘company line’ approach of financial advice. That’s where everyone says the same thing at the same time.
So when a publication like Money Morning dares to give readers different views, it’s not a surprise that it’s a shock.
From time to time a reader will challenge us head on. They’ll ask us to explain how we can publish two different views. Here’s how we responded to one gentleman just last week who wrote in to say he was ‘really confused‘ by our publishing of two opposing views…
Hi Richard,
Thanks for your email. It’s a relatively common question, so you’re not the first to ask.
The important thing to note with investing is that there are rarely right or wrong answers to anything. It’s all about the analysis that an individual analyst may use in order to reach a specific conclusion.
In mainstream financial services organisations there is typically a ‘house’ view. The chief analyst or strategist will form a view and all other analysts must follow and comply with that message – even if they don’t agree with it. Put simply, it’s the central planning of ideas.
At Port Phillip Publishing we have a different philosophy. The only ‘house’ view, if you can call it that, is that our editors broadly have the same macroeconomic view of the market (to varying degrees) which advocates free market principles and limited (or in my case zero) government involvement.
This open philosophy means that editors are free to do their own analysis, form their own views, and put forward their own ideas on how people should invest in today’s markets. Naturally, in an open market for ideas there will be conflicting views. But we see that as a positive, not a negative.
But here’s the thing, on the surface it may appear that my view of a soaring market differs completely from Vern’s view of a 90% crash and Dan’s view of an Australian recession. In reality the views aren’t that different.
All three of us agree that governments and central banks have made a hash of supposedly ‘solving’ the 2008 financial meltdown. Each of us agrees that they have in fact made the situation much worse. Each of us agrees that the central banks are distorting markets and asset prices. And each of us agrees that this will lead to a big stock market crash.
The difference is the timing and how investors should approach the market until that event happens.
My view is that the global experiment with paper money and inflation is back on track. By that I mean that governments and central banks have done just enough to avoid a complete collapse, and that the next 5-10 years will see a resumption of the market direction that occurred from the early 1980s through to 2008. This will see the market more than triple over the next six years.
Therefore, I take the view that investors should take advantage of this inflationary stock rally by using central bank and government meddling to their advantage.
Conversely, Vern’s view is that the market is so risky right now that if the market only advances by – say – 5% per year, the reward from holding stocks doesn’t offset the risk if stocks fall.
Because if Vern is right, the market is at serious risk of a calamitous 90% crash. So he suggests that investors hold all their money in cash and then look to buy stocks after the fall.
So who’s right?
That’s impossible to tell until after the event.
The important part is that Port Phillip Publishing employs free thinking analysts who are free to publish their ideas without the constraints of a ‘house’ view. After all, just because Goldman Sachs, JP Morgan, Commonwealth Bank or Royal Bank of Scotland have a single ‘house’ view it doesn’t make it any more likely they’ll get it right – 2008 is a perfect example of that.
In fact I’d argue it’s more likely they’ll get it wrong and miss big market moves due to the lack of questioning and opposing views within the organisation.
But let me make one final point.
Although Port Phillip Publishing has an open policy on ideas, that doesn’t mean we publish any old rubbish. Part of Dan [Denning] and I’s role as publishers is to vet every idea we publish to make sure the analyst is making a coherent and defensible argument.
If we don’t believe the analyst has thought about an idea thoroughly or if we believe they haven’t fully explained their position, we’ll ask them to rethink their work. Only when we’re satisfied that the analyst has prepared an idea that stands up to criticism will we allow it to be published. It’s then up to the market and the course of events to determine whether the analyst was right or wrong in their view.
After that, it’s then up to the reader to decide for themselves whose argument makes more sense. Some readers follow one idea because it conforms to their own views. Other readers take a mix of the ideas because they’re both equally well argued. Others don’t have a biased view, and therefore base their investments on the ideas that they believe will work best for them with the money they have to invest.
I hope that goes some way to explaining how we operate.
Ultimately, we’re providing investment ideas to individuals. We don’t manage money. The final decision on whose advice you follow and how you invest your savings is entirely up to you. That, we believe, is the beauty of individuals taking charge of their investments and making their own decisions.
Cheers,
Kris+
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