Critical Thinking requires Courage and Solitude

Monthly Market Commentary: January 1, 2015

Recently, Bloomberg published an article by Michelle Fay Cortez (July 4, 2014) entitled: “Shocking: Many Pick Electric Jolt Over Solitude in Study.” The article explains that most people vastly prefer passive activities like reading or listening to music over spending just a few minutes by themselves. People tend to avoid being alone with their own thoughts.

Randy Kasten who is the author of “Just Trust Me: Finding the Truth in a World of Spin” explains that, “The ability to think critically is one skill separating innovators from followers. Critical thinking reduces the power of advertisers, the unscrupulous and the pretentious, and can neutralize the sway of an unsupported argument.”

I am discussing the “critical thinking” issue and the current distractions from critical thinking because I am somewhat surprised that close to 90% of active fund managers underperformed the S&P 500 in 2014 (hedge funds also had a poor year). I am saying this because we had within the US stock market widely diverging performances of different sectors, which – at least in theory - would have allowed an active manager to overweight strong sectors while at the same time underweighting weak sectors.

Maybe the US stock market was not as strong as the indices suggest. Possibly, fund managers do not have sufficient time for deep reflection or it could be that, as Clare Boothe Luce (she was highly intelligent and the wife of Henry Luce) opined,
“What generally passes for ‘thought’ among the majority of mankind is the time one takes out to rearrange one's prejudices.”

I am enclosing an update on the state of the art market by Kenny Schachter.  

I wish my readers a prosperous New Year in good health and remember the words of Ann Landers:
“That ability to block out distraction helps to explain what makes some brains more efficient than others.”   

Kind regards
Yours sincerely  
Marc Faber 

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