2 years ago



26 100-BAGGERS But Biggs

26 100-BAGGERS But Biggs was something of a catastrophist. History’s periods of great wealth destruction, where the Four Horsemen of the Apocalypse ran wild, transfixed him. He worried about disasters happening again. He asked the timeless question “How to do you preserve wealth in times when the Four Horsemen are on the loose?” It was one of the two questions that, in his own words, “long obsessed” him. The other was whether the stock market was wise in its judgments or merely a “foolish consensus of crowds.” One of his books, Wealth, War and Wisdom, dealt explicitly with these questions through the lens of World War II history, a hobby interest of his. On the wisdom of crowds, Biggs found that the stock markets of the world showed “surprisingly good intuitions at the epic turning points. As the old saying goes, when coming events cast their shadows, they often fall on the NYSE.” He wrote how • “the British stock market bottomed . . . in 1940 just before the Battle of Britain”; • “the US market turned forever in late May 1942 around the epic Battle of Midway”; and • the German market “peaked at the high-water mark of the German attack on Russia just before the advance German patrols actually saw the spires of Moscow in early December 1941.” “Those were the three great momentum changes of World War II,” he wrote, “although at the time, no one except the stock markets recognized them as such.” I must admit those are amazing intuitions. It’s easy to write off the market as nutty when it doesn’t agree with you, but Biggs made the case that the collective judgment of the market can be wiser than we allow. In any event, this is tangential to what I consider the meaty second question. The second question dealt with how to preserve wealth when the Four Horsemen are on the loose. Biggs went through a lot of WWII-era carnage to find answers. You’ll find such chapter headings and subheads

THE COFFEE-CAN PORTFOLIO 27 as “Preserving Wealth in a Time of Cholera,” “The Plunder of Land in Poland,” “The Seizure of Estates in Hungary,” “The Theft of Land and Valuables in Czechoslovakia” and “Rape and Robbery by the Red Army.” And yet, after all that, even the catastrophist Biggs recommended putting 75 percent of your wealth in stocks. This is partly because his own understanding of the history of catastrophes validated such a move—stocks were still often the best way to preserve purchasing power over a period of years, even in devastated Germany. But it is also because he understood the best shot you have at growing your wealth is to own stuff. You want to be an owner. If you own stocks, you are part owner in a real business—with real people trying to figure things out and with real assets and real profits. Ownership of assets is your best long-term protection against calamity. But what to do with the other 25 percent? Biggs recommended a much smaller part of your wealth go toward a ranch or family farm. He advocated a safe haven, well stocked with seed, fertilizer, canned food, wine, medicines, clothes and so on. This survivalist stuff is not my main idea. I just want to make the point that in real collapse, your portfolio will probably be among the least of your worries. But at least in a calamity like WWII, stocks were your best bet. So, let’s pull this back to the coffee-can idea and think about a coffee can for catastrophists. First, your coffee can doesn’t have to include stocks. You could, if you were so inclined, stuff your coffee can with gold. I wouldn’t do that, but the point is the coffee-can idea is not an expression of Buffett-like optimism on America. You could put whatever you want in your coffee can. The essence of the coffee-can idea is really that it’s a way to protect you against yourself—from the emotions and volatility that make you buy or sell at the wrong times. Bullishness or bearishness doesn’t enter into it. If you are a bear and abstain from using a coffee can, you’re basically saying you’ll make a series of better short-term decisions over the next 10 years than you would if you just sat on your best ideas today. That seems

STOCK TO STUDY: T. Rowe Price Group, Inc ... - BetterInvesting
Download Summary Prospectus - Putnam Investments
Investment Management: Portfolio Diversification, Risk ... - FANARCO
Read a PDF Sample of The Essential P/E - Harriman House
Investing in 2016
Portfolio Update
Threadneedle UK Equity Fund Range - Threadneedle Investments