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Fortune 500 CEO career path via finance

mygos wrote:

bchad wrote:

To quibble with mygos here a bit, there are approaches that can be totally wrong.  But I do agree that no investment approach is totally right (if by totally right you mean it performs well in all macroeconomic environments).

As to what’s wrong with tthe intangible approach?

If you can identify an intangible aspect that is a genuinely forward indicator of future performance, then you are likely to do well, since it will represent unique knowledge that can’t be mimicked by computers.

The problem is that long-term investment success requires a systematic approach so that it can work in expansions and contractions. …. …

In general, even if you have success in investing by intangibles, you will find it difficult to convince serious investors to invest with you, because they will want to know more about how your process works than “it just feels right.”

Finally, even if you can select stocks by feel, you still have to figure out how much of it to put into your portfolio.  This require decisions about how to balance the risks of being wrong (or simply having a client pull their funds because they can’t stomach a temporary low price, even if you are right in the long term), and the possibility for profit.  Many people get so excited by company stories that they forget that position sizing in a portfolio is also key to performance.

Yes, agree with you in intutive approach is greatly a hidden process and to answer about “why?” and “How” may be difficult if not utterly impossible to justify. The process is more intuitive at later stage but to start with the intuition also has some basis specially as it requires a thorough and deeper understanding of the parameters affecting the outcome and this understanding (or feeling) is by definition intrinsic in nature. To be able to “identify an intangible aspect that is a genuinely forward indicator of future performance” may be uncommon in a common investor (as much as common sense is quite uncommon in common man) but not so rare too. Some people have inherent capacity to assimilate a huge amount of data in mind and mine it for arriving at a ‘intuitive’ solution to a problem. Benjamin Graham and Phillip Fisher (and more recently Buffett) had that ability. If one could analyse the human mind each intuitive thought is result of highly complex systematic analysis and process (that is why many great inventions are outcome of some apparently  ímmediate ‘intuitive’ spark).  So, in many cases it may not be totally wrong, as in many cases (you agreed to it that) it may not be totally right too.

I am inclined to agree with much of your exposition, so  restrain myself  from discussing it further. However, knowing your depth of understaning of anything regarding investment (which I admire greatly) I think you may enjoy reading the meaningful book “Active Investment Management” by Charles Jackson , specially the later part concerning the skills. Though it is like a text book but the ideas expressed are quite nice and touches on similar thoughts as ours.

My quibble was just about the “no investment approach is totally wrong.”  For example, I think the astrological approaches are totally wrong, even if at times it lines up with some commonly observed calendar anomalies.  But it’s the calendar anomaly that is driving things, not that Mercury has entered retrograde, or that the moon is in the seventh house and Jupiter aligns with Mars.

As for whether intuitive investing is possible, I do think that sometimes intuitions are based on insights that a person hasn’t bothered or been able to put ino words.  They can align with sensible insights.  For example, bromion probably has an intuition about what companies might be frauds and therefore shortable.  He backs it up by doing due diligence to confirm his intuition, but the initial identification of companies is likely based at least partly on intuition.  So intuition can be a useful investment tool in some cases, but it is almost never employed independently.

More often, people who claim to be intuitive or intangible investors simply use this as an excuse not to do the due diligence and work that good stock picking actually requires.  They just think “wow, this product is good - it’s going to sell a lot” without looking at margins or cost of capital or competitive structure.  Or “the management said something smart, so they’re going to whip the competition” without looking at their ability to execute that idea.  There’s often little analysis about whether the rest of the market has the same intuition, which - if so - can lead to chasing returns with no regards to valuation considerations.

You want a quote?  Haven’t I written enough already???

^ Agree. Specially with the astrological basis (which in my opinion is more of humbug!) and the fact that  “More often, people who claim to be intuitive or intangible investors simply use this as an excuse not to do the due diligence and work that good stock picking actually requires.”

LOL @ bchad.  The following will give you a heart attack.

1) What I mean by there is no randomness in the stock market, it is just that.  No randomness.  Price fluctuations are never random.  They move with a purpose and aim.  Only when that purpose or aim is achieved, will it reverse.  But not before then.  Many traders understand to not fight the ocean wave.  But not many can tell you why the wave suddenly stops and decides to reverse.  And I don’t mean explaining it by supply and demand which is one way of understanding why it reverses.

2) The stock market predicts.  It anticipates.  Barring natural disaster, which I haven’t seen myself, many things are heavily predictable.  Nobody cares about whether Putin will invade Ukraine or not.  Everyone cares about how the invasion will impact the market.  If it has any relevance, it will show up.

3) Old George is not going to tell you the real reason he sold out.  It is bad for business.  Investors will pull out immediately.  I would.

4) I don’t practice astrology.  But I also don’t dismiss it.  Do you have a deep understanding of astrology?  If not, why do you dismiss it?  And if you’ve read various books on business cycles, you would not easily dismiss astrology.