Gyroscopic Investing

MediumTex wrote: To me, talking about the PP to a group of CFA candidates would be like talking about a defensive driving course to a bunch of racecar drivers.

KevinW wrote: I would go further and say it's like talking about the merits of hiking boots as a mode of transport, to a bunch of race car drivers.

KevinW wrote:And leather? A barbarous relic with no intrinsic value.

KevinW wrote: I would go further and say it's like talking about the merits of hiking boots as a mode of transport, to a bunch of race car drivers.

A good pair of boots will let you travel 3-4 mph, practically anywhere on earth, in practically any weather.  The only maintenance they require is polish, which any amateur can do themselves, and an occasional resole which any cobbler can do for you.

Which is totally uninteresting and ridiculous to the race drivers.  Boots don't have anywhere near enough horsepower to go 100+ mph.  There's no air/fuel ratio, shifting algorithm, wing downforce, or tire pressure to obsessively optimize.  The referees wrote rules that say rain, maintenance, and fuel shortages aren't problems, so it's paranoid to worry about those things.  And leather? A barbarous relic with no intrinsic value.

Even if you want to manage others' money using the PP, you'd need to know it inside and out and articulate how and why it performs the way it does in a variety of economic circumstances.  Unfortunately, I'm still far from that point in my knowledge of finance and economics.  Simply telling your clients you will equal weight their money into those 4 assets because it's performed well in the past or just quoting Harry Browne alone isn't gonna fly.

An important standard a CFA charterholder must abide by is Diligence and Reasonable Basis.  One can agree or disagree that the PP is a good choice for a particular person's investment goals as long as there's a reasonable and adequate basis backed by extensive research and analysis to support that stance.

amp wrote:

Even if you want to manage others' money using the PP, you'd need to know it inside and out and articulate how and why it performs the way it does in a variety of economic circumstances.  Unfortunately, I'm still far from that point in my knowledge of finance and economics.  Simply telling your clients you will equal weight their money into those 4 assets because it's performed well in the past or just quoting Harry Browne alone isn't gonna fly.

An important standard a CFA charterholder must abide by is Diligence and Reasonable Basis.  One can agree or disagree that the PP is a good choice for a particular person's investment goals as long as there's a reasonable and adequate basis backed by extensive research and analysis to support that stance.

Actually, I don't think there are too many advisors that can explain why any investment performs the way it does.  If they do, it's of the 6 o'clock news variety with no depth.  It's a sales business, financial and economic knowledge is icing on the cake, but not necessary (I'd bet it's actually a hindrance to be overly educated, it'd be harder to keep a straight face and say anything with certainty).

Past performance is really all you need and is how most products are sold.  If it's a new product, then it needs to be exotic and indescribable.

If you go down the road of explaining the various economic conditions that may be encountered, I think some clients will be looking for your crystal ball so you can tell them which PP asset will go up the most next year/month/hour.

And by the way, realtors have a "code of ethics" too...   ::)

When I was studying for the first CFA exam there were a lot of ethics-related topics covered.  I kept reading the material and thinking to myself "Oh, wow, it would be really cool if they actually did that."

MediumTex wrote: The key with many economic belief systems is to never look behind the curtain.  Once you look behind the curtain, one often sees carefully cultivated beliefs begin to disintegrate, which can be a disturbing and disorienting experience (especially for those who benefit most from a certain economic arrangement).