Bill Gross writes that he does not consider himself a great investor, though he plaintively quotes an Ernest Hemingway character in his latest monthly market commentary, “Wouldn’t it be pretty to think so?” (Those are the words, by the way, of one of Hemingway’s many literary alter ego characters, Jake Barnes in “The Sun Also Rises.”)
So is Gross, PIMCO’s chief, being falsely modest? Is he dissembling? No. In a commentary that many advisors would do well to read, he does question his own “greatness” as an investor.
He begins by quoting Michael Jackson’s song “The Man in the Mirror,” and suggests that when we all look in the mirror, we focus on our good points: “The brickbats come via the blogs and ambitious competitors, but the roses dominate one’s mental and even physical scrapbook.”
For folks in the money management business—he doesn’t spare himself—he argues that “time and longevity must be a critical consideration in any objective confirmation of ‘greatness’ in this business.” That’s the case even if “everyone in their own mind is at least a six-plus or a seven,” out of 10, and if money managers are likely to judge their self-assessed “great” performance “if not for the most recent year, then over the last three, five, or 10 years. Investors thrive on the numbers and turn them in their favor when observing their reflections.”
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He doesn’t excuse investors or advisors from this self-deception: “The investing public is often similarly deceived. Consultants warn against going with the flow, selecting a firm or an individual based upon recent experience, but the reality is generally otherwise.”
With a sly allusion to the mathematician Emile Borel’s assertion about how long it would take a troupe of monkeys at typewriters to replicate Shakespeare, he cites the findings of a study at London City University’s Cass Business School. As reported in the Financial Times, the study found that “a significant majority of computer-simulated monkeys beat the stock market between 1968 and 2011.”