"Opinions carry little weight with the experienced investor. "Often in error, never in doubt" should be carved on the tombstone of many an investment advisor. But the reasons for an expert's opinion may be worth much more than their weight in gold. And when we say his reasons, we mean his assumptions and why he makes them.
I was disillusioned by experts as to the value of opinions per se. In the fall of 1929, when the Dow-Jones Industrial Average plunged from a high of 381 to a low of just under 200, the head of what was then the world's largest bank told us the stock market had undergone a healthy correction and the country was ready to move onward and upward to new heights of prosperity. The market rallied into the spring of 1930, then plunged to the depression low of 1932. It was seventeen years before the Dow-Jones Industrial Average got as high as 200 again.
In this same period we got the word from the floor of the New York Stock Exchange that a Morgan broker was bidding 190 for thousands of shares of U.S. Steel. U.S. Steel was a Morgan creation. No one knew more about it than the house at 23 Wall. But by 1932 the stock sold at a low of 21-1/4.
One day from 26 Broadway, the headquarters of Standard Oil, came the word that the founder, John D. Rockefeller, and his son, John D. Rockefeller, Jr., were meeting the press. "My son and I," the elder Rockefeller announced, "are bidding 50 for one million shares of Standard Oil of New Jersey." No one could be better informed about the oil business in general or Standard Oil of New Jersey in particular than its founder and principal shareholder. Yet after a brief rally Standard Oil of New Jersey stock sold down to 20.
The point is not that any of the men involved were willfully misleading the public. I believe they were all sincere. But those three experiences taught me this:
- Never mind opinions. They are not worth a dime a dozen. Try to get the reasons for them, the assumptions underlying them.
- No one knows or ever can know for sure what the future holds. If the Almighty had intended us to know that, He would have equipped us with another sense which none of us has. The Irishman highlighted the matter when he said, "Sure and I wish I knew where I was going to die. I'd never go near that place." If we have no certainty as to when or where our own life will end, how can we presume to be sure of future developments with regard to matters not nearly so close to us?
Is this a counsel of despair? Not a bit of it. It is simply a recognition that in investing we deal always with probabilities and possibilities, never with certainties. It follows as night the day that in investing the odds are all important."