12.03.2005
Cognitive Impairment improves investment performance?
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Ellen Simon of the Associated Press is reporting that cognitive impairment is improving investment performance.
Really? The study quotes Tilson Capital Partners belief that rational investors who follow the herd get trampled. They pile on at the end of trends, after the ref's whistle.
Then, when they have an open receiver, they get happy feet and throw the ball away instead of staying in the pocket, even when they are driving down the field.
...Medical study confirms brain impairment HELPS improve investment returns," Ajay Singh Kapur, chief global equity strategist at Citigroup, wrote in a summary of the study.
He uses the study as an argument for fighting instinct and getting into the market when investment sentiment is most negative and exiting when investor sentiment is high.
It's a rational argument. But think back to the last bubble: Big time money-managers took just as many lumps as day traders in boxer shorts. Most pros didn't stay ahead of sentiment. Most pros didn't bail out when it became clear valuations were irrational.
Following the crowd or running from the crowd isn't as solid a strategy as buying good stocks at cheap prices and waiting for them to rise, Tilson said.
"Contrarians, value-oriented investors, they look at intrinsic value," he said. "They don't play games with sentiment, because that's inherently a short-term game."
He is currently investing in McDonald's Corp., Wal-Mart Stores Inc., Costco Wholesale Corp. and Microsoft Corp., stocks that have been overlooked in recent months because most investors have been hunting for bigger gains from riskier stocks.
Yes, he and his firm are making a bet against the general consensus, he said. "That being said, we're just doing stock picking."
His paper wraps up with a series of quotes. One of them is, "The human mind craves clairvoyance, but anyone's ability to see the future is extremely limited."
Really? The study quotes Tilson Capital Partners belief that rational investors who follow the herd get trampled. They pile on at the end of trends, after the ref's whistle.
Then, when they have an open receiver, they get happy feet and throw the ball away instead of staying in the pocket, even when they are driving down the field.
...Medical study confirms brain impairment HELPS improve investment returns," Ajay Singh Kapur, chief global equity strategist at Citigroup, wrote in a summary of the study.
He uses the study as an argument for fighting instinct and getting into the market when investment sentiment is most negative and exiting when investor sentiment is high.
It's a rational argument. But think back to the last bubble: Big time money-managers took just as many lumps as day traders in boxer shorts. Most pros didn't stay ahead of sentiment. Most pros didn't bail out when it became clear valuations were irrational.
Following the crowd or running from the crowd isn't as solid a strategy as buying good stocks at cheap prices and waiting for them to rise, Tilson said.
"Contrarians, value-oriented investors, they look at intrinsic value," he said. "They don't play games with sentiment, because that's inherently a short-term game."
He is currently investing in McDonald's Corp., Wal-Mart Stores Inc., Costco Wholesale Corp. and Microsoft Corp., stocks that have been overlooked in recent months because most investors have been hunting for bigger gains from riskier stocks.
Yes, he and his firm are making a bet against the general consensus, he said. "That being said, we're just doing stock picking."
His paper wraps up with a series of quotes. One of them is, "The human mind craves clairvoyance, but anyone's ability to see the future is extremely limited."
