The attached blogpost summarizes his talk. The money quote:
So where do the new normal proponents get it wrong? Montier argued that they are confusing the distribution of economic outcomes — and the forecast of those outcomes — with the distribution of asset market returns. Although the distribution of economic outcomes may well be wider than was the case historically, anyone trying to invest on the back of an economic forecast is, to use Montier’s indelicate word, “insane.”
Montier contended that proponents of the new normal also misunderstand fat tails, which are nothing new and which “create fat pitches” — the opportunities that investors seek to exploit through mean reversion strategies. Investors, he said, shouldn’t throw out the old ways of investing; they should embrace them.
Seven “immutable laws of investing” apply, Montier argued, as they have in the past:
- Always insist on a margin of safety.
- This time is never different.
- Be patient and wait for the fat pitch.
- Be contrarian.
- Risk is the permanent loss of capital, never a number.
- Be leery of leverage.
- Never invest in something you don’t understand.
With these rules in mind, Montier noted, somewhat bleakly, that “not very many assets have any margin of safety.”
Montier is correct to say that few assets this year carried a margin of safety. Wait for the fat pitch.