You Don’t Need A PhD from Harvard To Pick Stocks Right

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You Don’t Need A PhD from Harvard To Pick Stocks Right
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You Don’t Need A PhD from Harvard To Pick Stocks Right by Sara Grillo, CFA, President at Grillo Investment Management via LinkedIn

I’ve recently decided to stop writing, and more importantly, to stop reading, blogs with titles like, “Where Stocks are Headed this Year” or “Global Economic Forecast”. In my decade of experience with the markets I’ve found there is no way to predict the economy. If there were, somebody other than Abby Joseph Cohen of Goldman Sachs would have figured it out by now. Actually, Nouriel Roubini was the only one who predicted the global collapse of 2008, but he hasn’t done anything notable since. If you needed a PhD in economics from Harvard to know how to make money in the stock market, then why is it that many of the best investors are the least book smart? Contrary to what the rest of the world thinks, investing money is not an intellectual activity.

From what I’ve seen, investment success is negatively correlated with intelligence. Why? Because the people who have the courage to buy when the market is truly down, instead of sell, and sell when the market is high, instead of buy, have to be seriously backwards people. They have to be stubbornly arrogant and semi -delusional to believe they are right to run into the burning building when everyone else is running out. An intelligent person would let their logic interfere with that decision.

There are many people earning a living as economists. They make a prediction about the direction of the world economy, and then most of the time the opposite comes true. And they never get fired, which I think is unfair. They generally have a less than 50% success rate in predicting what is going to happen. If my dentist took out the wrong tooth 1 out of 10 times he did surgery, he’d be shunned, sued, lose his license, and go broke, in that order. If Mi Amor Antonio missed his sales quota even 2 out of 7 days he went to work, he’d be fired on the 8th day. But these economists dress up in their Zegna suits and stand up making a slide presentation at these conferences and sound smart when they talk, so they get to keep their jobs. Yet they have zero accountability for what they say. Unbelievable.

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