Unpredictable Risk

In an interview last week, the great Charlie Munger said “more damage to the world comes from the cognitive glitches than does from malevolence.” Arthur Conan Doyle’s Sherlock Holmes noted “If you eliminate the impossible, whatever remains, however improbable, must be the truth.” And of course, Ockham’s Razor suggests that, all other things being equal, simpler theories are better.

And so goes the summation to our third installment of the Decline of the Canadian Empire. This month we endeavour to dig a bit deeper into the Canadian investment market, attempting to bring some transparency to what comprises the main index and the underlying risks therein. And we note, as with most analysis, there is no clear black and white answer to whether the market is good or bad – it just is what it is.

We’ve written before on bias blindness – that investors tend to believe their thesis is not only true, but obviously true. And those disagreeing with the thesis are not only stupid, but possibly delusional. Such is the case with investors in the Canadian market – either investors completely disregard certain strong business models in which to invest for the long term (following the idiomatic expression, “throwing the baby out with the bathwater”) or they are disregarding the “big risk” constituents by playing the passive game.

We hope you enjoy our current comment – of course we welcome any input or questions you may have.

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