Austrian School for Investors

[Ed note by PT: the English version of the book “Austrian School for Investors” by Rahim Taghizadegan, Ronald Stoeferle, Mark Valek & Heinz Blasnik has just become available at Amazon (a side note: do not hesitate to order it if you see that it is “temporarily unavailable”, as Amazon will very quickly reorder once new orders are received – apparently demand for new books first has to be gauged by an algorithm). Yours truly has made minor contributions to the English version, which regular readers of this blog may well recognize. The book covers a wide range of topics, including an introduction to Austrian theory that is written in a way that is understandable for laymen, and yet should still hold the interest of those who are already au fait with Austrian theory as well – with a view toward practical application in investment. It addresses primarily individual investors, but what it doesn’t do is tell you things like “buy 20 calls FB 150 Dec. 2016” – in other words, it is not a tip sheet. In fact, its goal is rather to familiarize the reader with an “Austrian philosophy” of life and investing if you will. It does make for an excellent Christmas gift, if we may say so. As no extensive critical reviews are available yet, we have decided to reprint John Hathaway’s preface to the book here]

The cover of “Austrian School for Investors”

Preface to Austrian School for Investors

What would Ludwig Von Mises make of QE and ZIRP? Would Friedrich von Hayek be able to make sense of FOMC or ECB policy statements? What would these giants of the Austrian School and their cohorts think of hedge funds, ETFs, mutual funds and the array of other assorted investment vehicles? Would precious metals fit into an Austrian template superimposed on the present day investment world? How will the spread of government into all aspects of the private sector be ultimately resolved? The answers, in some cases obvious and in other cases complex, require an understanding of Austrian economic thought which is all too absent in modern investment discourse or media commentary.

What passes for economic wisdom in the casino like financial markets of the 21st century emanates from the conceptually flawed drumbeat of Keynesian analysis reconstituted into senseless quantitative aggregations of historical data extrapolated into future outcomes. The prevalence of economic illiteracy evident in the constant eruptions of supposedly learned PhD’s infects both public policy and investment thinking alike. These deeply rooted afflictions distort valuations and investment flows and suggest there is an inherent unsustainability for the complacent status quo.

Analysis grounded in Austrian thinking has been remarkably accurate in separating illusion from reality. It provides a sensible, highly accessible big picture view of what exists and what is likely to happen as a result. That is because it portrays economic activity and likely developments as the product of individual behavior, a common sense and practical framework. It does not employ abstract groups or forces that are somehow quantified and correlated by unintelligible formulas, a methodology that succeeds only in explaining the artificial reality that it has created.

The challenge for the modern reader is first to become acquainted with the basic precepts of Austrian economics. These are well explained in the following pages. For many the exercise will seem like learning a new language, a testament to the corruption of thought and perception that is evident in the mainstream financial media and educational system. Whatever the struggle, the result will be clarity of thinking and a removal of confusion.

The Austrian analytical framework is not a prescription for short term investment success or even a pathway to building a fortune. There is no such magic here. However, it does provide a foundation for sanity in the midst of mass delusion. It is grounded in ethical behavior, common sense, and sober reflection. The Austrian investment approach eschews leverage, promotions, and fads. It is likely to steer one away from disastrous investment outcomes through a balanced approach to wealth preservation. In short, the Austrian methodology is based on reality, not fancy, and its application in daily practice will provide an investor with favorable odds to achieve financial well-being.

This book is the result of extensive research. It is a compilation of wisdom from many sources filtered by Austrian economic thought. It is a highly relevant contribution to a complex world that cannot be understood in simplistic terms. It covers a broad range of topics ranging from macro to micro economics, from history to current events, from theoretical to practical, and from general to anecdotal.

The financial markets of today are dominated by hyper active high frequency trading guided by trend following quantitative algorithms. Original thought is replaced by artificial intelligence. Market prices are manipulated and gamed by institutional and political interests. Valuations are inflated by the zero interest rate policies of all central banks for whom it is dogma to drive up the prices of paper assets to influence the behavior of individuals and corporations to achieve their announced goals of full employment, moderate inflation, and financial market stability.

Financial wealth has become an illusion that has little resemblance to real wealth. Financial wealth is dependent on the functionality of a matrix that must be navigated according to its unique rules that are often at odds with common sense. For those who fear that the functionality of this matrix is unsustainable, The Austrian School for Investors offers a path to the kind of critical thinking that will provide sustainability for its practitioners long after the demise of the artifice of matrix dependent paper wealth.

About the author:

John Hathaway, CFA, Senior Portfolio Manager, joined Tocqueville in 1997. He co-manages the Tocqueville Gold Fund (TGLDX). In addition, he manages separate accounts with a gold equity mandate including the Falcon Gold Fund, the Falcon Gold UCITS Fund, Tocqueville Gold Amerique (FCP), a sovereign wealth fund, and various separate accounts for family offices and government entities. Prior to joining Tocqueville, Mr. Hathaway co-founded and managed Hudson Capital Advisors followed by seven years with Oak Hall Advisors as the Chief Investment Officer in 1986. In 1976, he joined the investment advisory firm David J. Greene and Company, where he became a Partner. Mr. Hathaway began his investment career in 1970 as a research analyst with Spencer Trask & Co. Mr. Hathaway graduated from Harvard College in 1963 (B.A.) and from the University of Virginia Business School in 1967 (M.B.A). He also holds the CFA designation.

Dear Readers!

You may have noticed that our so-called “semiannual” funding drive, which started sometime in the summer if memory serves, has seamlessly segued into the winter. In fact, the year is almost over! We assure you this is not merely evidence of our chutzpa; rather, it is indicative of the fact that ad income still needs to be supplemented in order to support upkeep of the site. Naturally, the traditional benefits that can be spontaneously triggered by donations to this site remain operative regardless of the season - ranging from a boost to general well-being/happiness (inter alia featuring improved sleep & appetite), children including you in their songs, up to the likely allotment of privileges in the afterlife, etc., etc., but the Christmas season is probably an especially propitious time to cross our palms with silver. A special thank you to all readers who have already chipped in, your generosity is greatly appreciated. Regardless of that, we are honored by everybody's readership and hope we have managed to add a little value to your life.

Bitcoin address: 12vB2LeWQNjWh59tyfWw23ySqJ9kTfJifA