I recently came across an older publication from James Montier: An admission of Ignorance and found it very interesting and instructive.
Throughout the article, Montier makes four key points:
· “While ignorance is not bliss, it is a fact of life”, challenging the dominant model in the financial industry that everything can be known and forecasted out. I guess recent market conditions exemplify once more that this is clearly not the case.
· Since, in investing as well as in life in general, we can’t know or control everything, it makes sense to not try and forecast and us a margin of safety: “the margin of safety becomes central as a buffer against ignorance / error”
· As a result value investing which implicitly (or sometime explicitly as on this blog) contains a margin of safety should over-perform…which it does handsomely, as you can see on the table in p4 of Montier’s article
· Finally, if we accept our ignorance, then we must also recognize that market timing is essentially vain (which does not mean investors should always been fully invested). As Montier says, it is probably to “build positions slowly over time […] each teim Mr. Market is kind enough to generate bargains I would deploy capital into them.
All these points resonate very strongly and I hope I am able to integrate them properly in my value investing journey on Margin of Safety Investing.
In the coming weeks I will be sharing more Montier’s article as he is one of my favority value investing writer – check back on the site!
Many happy returns,
Disclosure: No positions