Monthly Letter July 2013

The markets are 6 months ahead of the real economy! They are said to be forward looking, taking the aggregate informa on available to mankind and being the best gauge of what the future will look like. This is what you will hear from the believers in the e cient market. From the more cynical commentators you are much more likely to hear that the equity market has predicted 15 out of the last 3 recessions and that it is prone to both over and undershoo ng. It might sound strange, but we can sym- pathize with both views. The market does have a lot of faults and cannot be trusted like a Swiss watch but it is an a empt to put a price on the future and predic ng the future is no science, at least not yet.

We have an awful lot of tools at our disposals to try and predict the future of the world and (more importantly to us) the equity market. We get some very well put proposi ons about what will happen. The most well-versed will win the discussion in the short run. The most disciplined and adapt- able will win the investment race in the long run. Keynes said that he will change his mind when the facts change. That is a very fair statement, but not all that easy to im- plement. Naviga ng between what is actual new informa on and what is just noise is quite a challenge. The art of inves ng is to know which facts to change your view on

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