Cast in Iron

The media occasionally locks in on a particular “hot” sector. In the late 1990s, it was technology. In the mid-2000s, it was mining. Writing headlines about fashionable sectors is one thing. Building investment strategies around them is another.

A reason journalists focus on particular industries or sectors is that these stories fit into a chosen narrative. In the case of the tech stocks boom, it was the information revolution. In the case of mining stocks, it was the rise of China.

There’s nothing wrong with this kind of analysis, by the way. The lift in productivity brought by digital technology and communication was a real story, as was the impact of China as it integrated into the world economy over the past decade.

Where it goes wrong for investors is when they extrapolate from well-documented economic trends in order to make changes to their portfolios based on what has already happened or speculation about what might happen in the future.

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