Friday, June 12, 2015

History Lessons

Historical Gremlin here to talk about history.  Most people I speak to have at best a cursory interest in history, either some obscure fact or holiday is typically what peaks their interest such as July 4th in the USA.  However, most people underestimate the power of understanding history.  This is not limited to world politics, but also personal wealth and decision making can definitely learned after a few lessons in history.

Personally, I love history and frequently indulge myself by listening to Podcasts on various subjects.  I find it much more relaxing, especially when driving.  It kills two birds with one stone for me.  I learn new things and it keeps my mind fresh from an academic perspective.  It also it allows me to not focus on the road-rage that come with living in the DC area.

Listening to Podcasts on The History of Rome, one of the lessons that can be ascertained for investors is on re balancing and selling positions.  Oddly when thinking about this after listening to this section I came across a post from the Dividend Growth Investor, saying the exact same things.  The lesson comes from conspirators who killed Julius Caesar no less.  When Brutus, Cassius, and friends killed Caesar, because they believed to be defending the Republic, they neglected the fact that they would need to have someone waiting to replace him.  Someone as loved as Caesar was, despite his faults.  Investing should be viewed no differently, although clearly it is a different microscope.  One should never replace or sacrifice an item, especially if you do not have something ready to be an equal or better replacement. 

In reading numerous investment guides on retirement from my 401K program, there has been a lot of talk about re-balancing accounts.  In other words sell your good stocks, read kill off, so you can acquire ones not performing as well.  Naturally this plays into the hands of of those companies to sell this idea, they make money every time you make a move.  However, it also does nothing to ensure the quality you sell will produce in a similar fashion.  Also re-balancing in a 401K (not just in a stock portfolio) is foolish, because it is likely that the selected funds available all draw on similar stocks.   Why allow them move money back and forth, so they can keep more of your money?

Another set of lessons, again from Roman History, can be learned from that of Marcus Licinius Crassus.  Crassus had been born into a rich family, but had it all stripped away due to political upheaval.  Once the pendulum swung back his way he was ruthless in regaining wealth from rivals, and even went after those who were neutral on the matter to acquire more wealth.  Now of course this sounds horrible up front, but realize that Crassus was brilliant in that he acquired assets at the time at a considerable discount due to the ongoing events.  He then used those assets to buy more, and wheel continued to spin around and around until he was the wealthiest man in Rome at the time.

It should be noted that essentially he was a growth investor, before such a thing existed.  He understood that the best time to acquire a position is at its lowest point, then hold it making more profit over a long period of time.  He showed an example of this in his acquisition of property.  In Rome at time there was no fire-fighting service, so every time a fire popped up he would lead an army of slaves there and offer to put out the fire.  The offer was simple; let us put out the fire and give me ownership of the building or let it burn.  Clearly times were different, but it is hard not to see a Warren Buffett type enterprise in him.  Indeed, Crassus' estimated modern day personal wealth would around $170 billion, approximately three times that of Buffett.

So do not be afraid to look into the past to get a glimpse of how to be a better investor, or how to better attain wealth.  Sure times have changes in many ways (mostly for the better), but it does not mean that the age old lessons do us no good.

Have a good weekend and steer clear of those looking to pillage,
- Gremlin

No comments:

Post a Comment