Portfolio Construction: The Way We See It – Part 1

In this ever changing world we live in, there are “advisors” everywhere. Flip on the TV, pull up a news app on your mobile device, or even the national paper. I came across a gem a few weeks ago from the NY Times archives.

SUNDAY, June 5, 1994; Picking Stocks by the Stars

Published: June 5, 1994

For those who missed the recent conference on “Astrology and the Stock Market” in Manhattan (about 40 people attended), here are some tips from several of the hot sessions:

The Art of Timing: Combining Astrological Indicators — Graham Bates, London financial astrologer. “I’m worried and confused about the eclipses in November. I don’t know what they’re going to do, but I know they’ll be important.”

Stocks, Planets and Solar Cycles — Richard Mogey, executive director of the Foundation for the Study of Cycles. “There’s a 23 percent gain the fifth year of every decade because of the Jupiter-Saturn cycle. I’d expect the same in 1995.”

The Cosmic ‘Inner Winner!’ — Paul Farrell, author of “Think Astrology and Grow Rich.” “When Uranus and Neptune go into Aquarius, I look toward information and technology.”

Beyond Cycles: Using Interpretive Astrology to Identify Key Turning Points in Markets — Charles Harvey, president of the Astrological Association of Great Britain. “When there is a new moon in the eighth house, Placidus system, in New York, there is always a major change in interest rates. That happens July 8.”

Want something more specific? Henry Weingarten, who heads the Astrologers Fund (the conference sponsor), predicts, “Novell will be at 30 next May.” But, “If it hits 35 before then, I’m out.”

There will always be very smart individuals that develop complex theories of why and how the markets work. This is part of human nature and our innate desire to understand how our world works. This is why we have departments in government and universities dedicated to studying human behavior. Our investment approach at Parsec is incredibly simple. We accept that markets behave irrationally in the short term. We feel that it would be a breach of our fiduciary duty to attempt to predict short term market movements.

Fiduciary duty is extremely important to us. This duty is a very old idea, which was defined here in America with Harvard College v. Amory in 1830. The decision of this case scolded the trustees and instructed them of their duty to manage the trust as they would manage their own affairs. This is known as the “Prudent Person Rule.” Here at Parsec, when evaluating an investment, we ask ourselves first is this in the best interest of our client and secondly would we invest in this particular security.

Be on the lookout for further posts on this topic.

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