Capital Ideas

I am very surprised in many instances where people in forums are consistently discussing on both fundamental analysis and technical analysis (2 fields of investment methodology, which in much of the researches, proven outdated and bow to the wisdom of the market and being defeated by random walkers). It seems to me that everybody, particularly the investing community, know only Warren Buffett, Benjamin Graham, Jesse Livermore and the other Technical Analyst, Fundamentalists or Chartist. None of them even have a single vivid idea on what is a random walkers.

The lacking of understanding on the subject, which often lead to many of the people to look down on academician, overlooked the current academic researches and influential findings, and thus overestimated their knowledge and competence on the market, which could then prove disastrous to their investment results or their wealth accumulation process.

After some times observing around and chatting with many of the market participants, and even the lecturer that are teaching finance & investment, i found that most of them do not even know why the academic textbook (or even the CFA Exam Syllabus) stress much on Markowitz, Black-Scholes-Merton, Treynor, Miller & Mogdigliani and etc.) Particularly the lecturers, instructors and tutors; they teach for the sake of teaching, and most of the time, memorize the ideas without true understanding on the basic fundamental issues behind theories and hypotheses. As they don't know the material well, they produce student that are blur, incompetence, and in some cases, sadly to say, stupid students in the country. As a result, even those student studying finance laugh and view these Capital Ideas taught in textbooks as useless and academicians that developed these theories as foolish and remain dreamers in the universities.

However, this reality is not the case. In fact, many of these ideas are very powerful and had changed the investment landscape beyond recognition. Many practitioners have adopted these Capital Ideas, and at the same time, improving the limitations on these outstanding and amazing Ideas. The truth is, in my opinion after some time of observations are, the investment public (particularly those retailers that know only fundamental, technical, chart, volume, ROE, EPS and etc), are too naive to conclude that theories remain theories, and due to personal grandiosity, think they that are above average (while they never realize that their investment results could not even beat the Bond Fund, not to say Equity Mutual Fund).

I was very exciting when Peter Bernstein publish his recent outstanding books on Capital Ideas Evolving, and find the material could be very helpful for the serious investors. I strongly believe that serious investors should buy this book and go through this book in detail. For the next few days, i will consistently write on the important points from the book, and upload it to this blog to share some critical ideas that are shaping the professional investment community in today's investment world.