Think Different

Is it different this time?

Source: The Missing Bite

Sir John Templeton once said that the four most dangerous words in investing are, “This time it’s different.” There’s a lot of truth in this. When people assert that things have changed, often they are just trying to rationalize an extreme position. So during the dot-com or housing bubbles some folks said, “It’s different this time” to justify sky-high valuations. Employees at Enron who participated in that company’s 401(k) plan had invested almost 60% of their assets, on average, in Enron stock, saying “Enron’s different.” Oops.

It’s always true that diversification reduces risk and that prices have to be based on fundamentals like cash-flow earnings, and income. But it’s also true that we live in a dynamic, adaptive global economy where technology and new businesses are disrupting old ways of doing things. It’s never different this time, but it’s always different this time. That’s why markets rise, over the long run.

Source: Jeremy Seigel, Financial Analysts Journal, 48:1

The key is knowing what has changed. Bywords and catch-phrases won’t help you save for retirement or pay for your child’s college education. We don’t know the future. But we do know that it will probably be better than the past.


Douglas R. Tengdin, CFA
Chief Investment Officer
Phone: 603-224-1350
Leave a comment if you have any questions—I read them all!

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