By Jordan Eliseo, Chief Economist of ABC Bullion.
Whilst Warren Buffet seems to be the first name that comes to people’s minds when we talk about ‘great investors’, there are a number of other luminaries whose insights we mere mortals can hope to learn from, if not emulate.
Sir John Templeton and Benjamin Graham are also obvious candidates that come to mind, as is the perhaps lesser known Bob Farrell, the legendary Wall Street analyst, who joined Merrill Lynch in 1957 (after studying under Benjamin Graham), and spent the better part of 5 decades in the hot seat, helping to manage money through every major economic cycle witnessed across the period, in a number of roles.
As one might expect, after nearly 50 years of being a part of the ebb and flow of markets on a daily basis, one learns a few tricks, which Farrell condensed into 10 ‘rules’ or principles of investing, which were published in 1992.
I first came across them a few years ago when they were referred to by well-known economist David Rosenberg of Gluskin Sheff, and they are as follows.
- Markets tend to return to the mean over time
- Excess in one direction will lead to an opposite excess in the other direction
- There are no new eras – excesses are never permanent
- Exponential rapidly rising or falling markets usually go further than you think, but they don’t correct by going sideways
- The public buys most at the top and the least at the bottom
- Fear and greed are stronger than long term resolve
- Markets are strongest when they are broad and weakest when they narrow to a handful of blue chip names
- Bear markets have three stages – sharp down, reflexive rebound and a drawn out fundamental downtrend
- When all the experts and forecasts agree – something else is going to happen
- Bull markets are more fun than bear markets
As we enter 2014, and with the appropriate disclaimer that Bob might disagree with every word I’m about to write, I’ve decided to pen some thoughts as to what Farrell might be thinking about various asset markets and investment opportunities today, based on the 10 principles above which served him so well over his illustrious career.
Click here to read Jordan Eliseo’s thoughts on each of Bob Farrell’s 10 ‘rules’ of investing