When I started this blog, I was going through something resembling a transition, which I will leave at that. One manifestation was a growing intellectual curiosity, a need to understand more. About most things, but especially about some things. I did not see the problems that were coming in 2008. But some people did and I wanted to know why.
Clearly, a topic that struck a nerve and caught my interest was the field of economics. While far from anything more than an interested observer now, I've become versed enough to identify the different teams and personalities that represent the most popular theories. And while not explicitly affiliated, my writing could suggest that I am partial to a particular competitor. Nevertheless, one thing that I have realized more clearly lately is that there is a world of difference between being a good economist and a good investor. I definitely do not consider myself part of the first group; I'd like to believe that I'm working myself towards membership in the second.
What got me thinking about this distinction in the first place, though, was the number of very smart folks pushing agendas that seem anathema to me. Specifically, how can an economy driven to its knees by too much debt be cured by using the exact same thing. Low interest rates, funny money, economic distortions, malinvestments -- I thought that was the usual sequence. But, maybe I'm wrong. Maybe money printing will antedate the next period of meaningful economic growth. Maybe booms and busts are simply inevitable -- and the latter actually precede the former.
Anyway, I keep trying to draw a connection between economic theory and investment choices. I like symmetry and maybe this need is just another example. As such, I may seem partial to certain thinking because, in part, its operating assumptions attempt the same feat. But, while the nexus definitely exists, it may be more tenuous than I originally assumed. Thus, it is important to realize that it is one thing to see the problems coming, but potentially a wholly different exercise in knowing what to do once they arrive.
But, then I remember, from the point of view of an investor (which is what I think I am), it shouldn't really matter. Put differently, the motivation behind economics is to draw an understanding of supply and demand, production and distribution -- but often in a context that is minimally correlated to the most efficient ends and greatest profitability. If I have discovered anything, it is that while economic theory tries to feign some sort of detachment, there is always an agenda at work, and more often than not it is loaded with emotional and personal preference dressed up in other ways. These distractions should not be within the realm of the investor's thinking.
The guys that I read and follow have similar ideas to me, and in many ways have shaped my point of view. I also think they have done a good job of navigating the past few years. They identified the bubbles and understood what the inevitable government "solutions" would look like. And, as a consequence, tended towards certain scarce assets (wink, wink) when others turned up their noses. But, they are not trying to save the world in doing that, and know that they are out of their element when trying to extrapolate their reasoning to some greater end. They are not married to an ideology and single driving theory. Truly, they change as the facts do.
So, where does that leave me? Still fascinated by economics. It never hurts to be more informed -- for no other reason than to seem erudite at dinner parties. But now I think I understand better that what drives my thinking and decisions doesn't necessarily translate well to what social scientists are striving for. The thought process is different. They chase some global answer, I am looking for an idea that can be profitable in the midst of the storm. And between those two ends lies many miles.
