Max Gunther (1927–1998)

Over decades a cabal of expatriate Swiss bankers meet in New York bars to discuss their speculative deals and determine a set of universal investment truths.
It could be the scene of a thriller. In fact it is the makings of an investment classic ... The axioms are not commandments. They are vague and intertwined truths. An excuse to knit a series of stories together to make a folksy philosophy.

The twelfth axiom (you cannot plan the future because you do not know what it will hold) is a lot like the fourth (do not stake your wealth on a forecast, the future cannot be told) and they all owe something to the tenth (disregard the majority opinion, it is probably wrong).

It is a simple, appealing philosophy: Think for yourself and avoid the common psychological pitfalls and you will make riches.
Take the couple who bought real estate in the wilderness, speculating roads would be built and pipes laid as the property company enthused. They were not. The couple had succumbed to optimism and greed. Had they considered the possibility of disappointment they may have bought a more expensive plot closer to existing amenities, which they could have extended themselves if necessary. They may have lost money, but not everything.

It is easy to be convinced, you want to be.

But there is more to the axioms than an appeal to man's baser instincts and a few salutary tales. First of all, the axioms made their creators very rich, apparently.

Secondly they trash conventional investment advice like diversification and liberate the investor to follow hunches - provided they are well thought through.

Agree or disagree, by picking apart the mechanics of buy and sell decisions the axioms challenge us all to work out precisely why we make the decisions we do.

It is an important exercise because, as Gunther reels off story after story of financial ruin it becomes increasingly apparent that without axioms the investor is reliant on blind luck.… (mer)