Using narrative in your decision making
When you read the headline of the article
In addition to the aggregate absolute narrative – (try to ignore the source) – just look at what the headline means on a global basis – who is it coming from? What are the real implications for mood (and stocks)?
It’s coming from a guy who appears to be fully committed for the greater good.
More importantly, who are his like minded friends?
What do they have in common?
If you dig you’ll learn that David Rockefeller became a major influence on Gates and if you understand “the Rockefeller philanthropic focus” and why Rockefeller University came into being in 1901 it was all about Rockefeller Sr. putting his money into science for solving problems. Note according to the Wikipedia Rockefeller University profile you’ll learn the university has 36 Nobel laureates tied to it. This is real deal fiduciary roles and duty at the highest level.
Buffett is the ultimate fiduciary investor who is both smart and successful. His decision making involves:
- Fundamental factors
- Finding qualities of ingenuity and innovation
- Reasonableness (a fiduciary quality)
I’m guessing Gates as a philanthropist shares a similiar decision making process
It seems, they are both fiduciaries committed fully to helping others, so you have to take them seriously
So the current market environment based on (“CAPE” or Mkt Cap/GDP as example) is telling us:
- Stocks are way overpriced. For the fiduciary-investor this simply means “unreasonable.”
This is the reason Buffett is not a bull believer
It’s that simple
He will not buy stocks that are unreasonably priced, in an
unreasonably priced market environment
- Furthermore “unreasonable” also means that regardless of some theory or narrative behind a product, technology and market cap, you should never buy something aka stock because of just the narrative.
- The underlying fundamentals have to be connected and in line also.
- There can’t be any disconnect.
- And if there is an extreme disconnect, you have to make a prudent decision to adjust/trim your positions and allocations.
How do we know this?
Just take Buffet’s role as an investor and look at the approach and factors he uses:
- Reasonable book-value plus a growth narrative for individual investment selection
- Reasonable Market Cap/GDP for the overall equities/fixed mix
- And as an example I’m speaking of a 70/30 mix in a bull to 50/50 or 35/65 in a bear.