Earlier this month (on January 15) an obscure bank in an obscure country took an obscure action that stunned markets, caused bankruptcies, humbled hedge funds and caused unexpected margin calls for thousands of (mainly retail) currency traders across the globe.(1) Investors everywhere wondered what in the world was going on.(2)
In my last post I cautioned about the careless use of demographic projections in making investment decisions. I cited one example which committed the error of failing to recognize that demographics is a description of a condition, not a cause of it. I also cited the particularly instructive example of Thomas Malthus himself, whose use of straight-line projections of current trends led him into serious error.
(Just as a heads up, I spoke on this topic at a conference in Amelia island, Florida last June. If you were there, you can skip this post and go back to watching cat videos on YouTube.)
In this long series of posts I’ve been discussing the limitations of the investment committee and the paucity of solutions. In my last post I mentioned another approach: the Investment Committee Operating Manual, or ICOM.(1) Since I’m unable to attach a sample of an ICOM (too many IT groups block posts with attachments), I’m putting the entire text in this post. It makes for a very long post, but it’s not meant to be read straight through. Instead, I hope it simply offers an example you may wish to consider for your own investment committee.
In my first three posts on this subject I (a) complained about the dysfunctional nature of so many investment committees, (b) speculated about why dysfunctionality seemed to be so widespread, and (c) gave some examples of wayward paths investment committees often wander down.
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