Brains, Benchmarks, and Best Sectors


By Stockpickr Guest Columnist Fred Fuld of Stockerblog.com

Recently, I had the pleasure of interviewing Ken Fisher, head of the $30 billion Fisher Asset Management, a very longtime Forbes columnist and author of the books Super Stocks , The Wall Street Waltz , 100 Minds That Made the Market and The Only Three Questions That Count: Investing by Knowing What Others Don't .

He is also coming out with a new book in the fall, The Ten Roads to Riches: The Way the Wealthy Got There (And How You Can Too!), published by Wiley.

This is the seventh installment of my interview with Fisher. If you haven't read them yet, catch up with the earlier installments: part 1, part 2, part 3, part 4, part 5 and part 6.

Stockerblog.com: One of the key things I got out of the chapter "What My Brain Is Doing to Mislead Me" is to look at benchmarks. For example, if the market is down in general and your portfolio is down, and if you don't look at it from a perspective standpoint, that can misdirect your brain, right?

Fisher: I think that's right, Another way to see that is, on the upside, an awful lot of people who are investors are investors who are trying to prove how smart they are. When you meet them and talk to them, you can really see their ego right out front. They hate the notion of a benchmark, because what they want is to say, "I'm smart." They don't want the notion that It's up 20 and I'm up 15 and I'm not smart.

The benchmark actually allows you to really calibrate how much real alpha you have, and it apprises you to say. 'It's up 20. I'm smart'.

In other words, the benchmark helps you measure risk, and the guy who wants to lead with his ego wants to denote the notion that because he's so smart, there is no risk. If I'm all knowing, there isn't any risk, right?

Stockerblog.com: Are there any particular sectors or industries that you like right now?

Fisher: I'm of the feeling, which most people aren't, that this which is quite technically a bear market is really more like a big long grinding correction of a bull market; and I think when it's over, probably the sectors that have been leading before this began will continue to be the sectors that lead. So that would take you back into materials, energy, and industrials, and emerging markets.

One of the points that they're not very big on right now is that if we were in this global recession that so many people fear, if we're really in that world, because the emerging market stocks and countries are so dependent on developed world demand, then stocks would be tanking.

In fact, all year long they've been acting in line with the market. To me, that's a sign we're not really in that world, which says to me we're coming out that other side of this period. We're going to have a resumption of the world we were in before.

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Fisher didn't provide any stock recommendations for the interview, but many of the stocks he has favored in the past can be found in his previous Forbes columns, such as Novartis (NVS), Nokia (NOK), Rohm & Haas (ROH) and Hewlett-Packard (HPQ).

His book 100 Minds That Made the Market, which would make a great gift for any investor, is available at Amazon.

You can also check out his portfolio, which includes AT&T (T), Devon (DVN), Goldman Sachs (GS) and General Electric (GE), at Stockpickr.com.

Interview by Fred Fuld at Stockerblog.com. Author does not own any of the above mentioned stocks.