Weekend reading: Enough speculation

by The Investor on November 27, 2010

The best money reading on the Web, rounded up for your pleasure.

Now that politics is firmly back on the media agenda, I’m stepping back. Nothing if not contrarian! Instead I’ll refocus Weekend Reading back towards highlighting a particular article of the week, before the usual link roundup.

Will I rant again in the future? Indubitably.

But I think (guess!) that most people read Monevator for investing insights. While I consider an element of macroeconomic and political crossover worthy of consideration, spending time on the detail of your strategy – such as The Accumulator’s recent guide to withholding tax – is more likely to make you money. Yet I suspect most of us put the focus the other way, ranting at the numbskulls on Question Time once a week, but checking our pensions once a year.

For one thing, as Larry Swedroe reminds us in my post of the week, short-term economic noise is a terrible guide to future returns.

Swedroe quotes Warren Buffett, who said:

“We have long felt that the only value of stock forecasters is to make fortune-tellers look good. Even now, Charlie (Munger) and I continue to believe that short-term market forecasts are poison and should be kept locked up in a safe place, away from children and also from grown-ups who behave in the market like children.”

Buffett certainly believes he can predict the future earnings of a company over the medium to long-term. Backing his faith has him jostling with best friend Bill Gates for the title of World’s Richest Man.

But Swedroe is a passive index investor to the bone, and he concludes:

Smart investors don’t focus on things over which they have no control – forecasting the future and managing returns. Instead, you should focus your attention on the things you actually can control.

Yours truly continues to lurch between the two stools, with all the elegance that image conjures up!