STREET DOGS

THE decision to invest in stocks requires not only an assessment of the risk-return trade-off given the existing data, but also an act of faith (trust) that the data in our possession are reliable and that the overall system is fair. Most of us will not enter a three-card game played on the street, even after observing a lot of rounds (and thus getting an estimate of the “true” distribution of payoffs). The reason is that we do not trust the fairness of the game (and the person playing it) … for many people, especially people unfamiliar with finance, the stock market is not intrinsically different from the three-card game. — Luigi Guiso et al

(Unfortunately) we have moved from a society in which there are some things that one simply does not do, to one in which if everyone else is doing it, I can do it too. It represents a shift from moral absolutism to moral relativism. Business ethics, it seems to me, has been a major casualty of that shift in our traditional societal values. — John C Bogle

(And yet) there are some outstanding businesses and individuals with whom we are happy to invest … when we find the real thing, the timeless ingenuity of the honest entrepreneurs, the modest craftsmen and craftswomen who humbly seek to improve the lot of their customers through their own enterprise, we find inspiration too, for as investors we try to model our own practice on theirs. It is no secret that our quest is to find scarcity. But the scarce substance we prize above all else is trustworthiness. Aware that we worry too much in a world growing more wary and distrustful, it is here we place an increasing premium, here that we seek refuge from financial folly, and here that we expect the next bull market. — Dylan Grice Michel Pireu — e-mail pireum@streetdogs.co.za