“You simply can’t understand the present if you don’t understand the past.” - Max Boot
Dear Clients and Friends,
A recent survey by the Council of Trustees and Alumni mentioned that ‘more than a third [of Americans] did not know the century in which the American Revolution took place’. In addition, ‘half of the respondents believed the Civil War … [preceded] the American Revolution’. Hmmm … no problem. Who cares? Why would that be important? Anyway, we have Apple’s Siri, Google’s Chrome, and thank goodness, Facebook to answer our questions.
Well, there’s a big difference between having a fleeting thought snatched from a smartphone, and having a base of knowledge that one can recall at will. When giving consideration to complex issues that require in-depth analysis, having an historical frame of reference is invaluable. Markets are more than numbers. They reflect beliefs and perceptions of human beings. While the Efficient Market Hypothesis states that prices reflect all currently available information, this same information is still subject to human interpretation. History has shown that markets sometimes go to extremes. It seems to me that most people’s current beliefs and perspectives on markets are derived from today’s news and recent events. However, having a longer-term perspective which includes historical knowledge seems wise to me.
What to do? Well, for those who prefer books to smartphones and television, I recommend you begin by reading ‘Devil Take the Hindmost’ by Edward Chancellor. This book covers the history of financial speculation from the Middle Ages in Europe, through the internet mania of the early 2000s. One particular chapter details how Sir Isaac Newton, one of the greatest scientific intellects of all time, lost a fortune investing during the ‘South Sea Bubble’. This event, which occurred in Great Britain during the early 1700s, was one of the most famous speculative manias. Chancellor is arguably the foremost expert on financial markets history, and his books and articles provide a sound frame of reference when considering markets and investments.
In closing, next time you share a meal with a young person, ask them in which century the American Revolution occurred (the answer is the 18th). If your young friend or family member knows the answer, you’ll be pleased. If they don’t, hopefully they will be nudged to read a book on the subject. A good thing either way.
Happy March to all … Spring is almost here!
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