When someone mentions investing and history in the same sentence, some might think the only relation between the two topics is that we can look back to see how the financial markets have done.
But Patrick Huey, a certified financial planner and the owner of Victory Independent Planning LLC, makes a different argument.
He intertwines history with today’s market conditions in his books, “History Lessons for the Modern Investor” and “The Seven Pillars of (Financial) Wisdom.”
“Amid what the media has labeled a ‘retirement crisis,’ where few will have saved or invested enough to fund their post-career lives, we have simultaneously created the most amazing technology for broadcasting bad advice and money-losing strategies to the masses,” Huey said.
So he set out to write a book that would dispel the myths so many are pitching these day.
“I wrote the book for … people who have accumulated their money through hard work but have never had the time or desire to understand the basics of economics and investing,” Huey said. “They are people who need a little help and guidance and want to know the right questions to ask when they sit down and talk to a professional.”
His approach was to use storytelling to get the message across.
“The fantasy writer Patrick Rothfus said it best: ‘All the wisdom of the world is in stories,’” Huey said. “And in my practice working with clients, I found myself searching for better examples, better analogies to help them understand the concepts they needed to succeed.”
He calls from both aspects of his education – a history degree from the University of Pittsburgh and an MBA from Arizona State University – to come up with the stories he uses as teaching tools.
His first writing venture was a blog, now long dormant, “that sounded like a mashup episode where two sitcom casts appear together,” he said in hindsight. “But I kept honing the stories and eventually had enough to put into print that make a cogent case for learning from other’s mistakes.”
Unlike many books on investing, readers won’t find pie charts, graphs and mathematical formulas in his books.
“The idea was not to present groundbreaking strategies or get-rich-quick schemes with diagrams,” Huey said. “It was to engage in storytelling to emphasize basic principles that we all forget under times of stress.”
He writes about historical figures and how their strategies and theories tie in with markets today.
Copernicus, for example, offered lessons about inflation. In the 1500s, as people asked why their money wasn’t worth as much as it used to be, Copernicus posited that an abundance of money (high supply) was inflationary because more money was being spent on the same amount of goods. Likewise, when the monetary base is expanding and the supply of goods is shrinking, inflation will result. That goes a long way to explain today’s economic conditions. Although the expansion of the money supply has moderated, slower growth is still growth.
Huey writes that economic lessons can be learned from the battlefield, too, as he details Gen. George Washington’s strategy of running a defensive posture against the British.
“In investment terms, the soon-to-be father of his country made the most of his opportunities while limiting his risk of a devastating outcome,” Huey said. “Investors accomplish this by hedging, using noncorrelated assets to reduce risk and narrow the potential set of outcomes.”
Washington avoided major losses and bided his time. It was an effective strategy in the revolution, and it applies to investing, Huey said.
One takeaway from the relationship between history and the financial markets that investors need to remember is that markets are cyclical. “If you can’t deal with, or manage, those periodic reversals from a financial and psychological standpoint, investing will be difficult at best,” Huey said.
Regardless of the difficulties in navigating investments during turbulent times, if someone wants to retire comfortably, a solid savings plan is key.
Huey is of the mind that you can’t fall for the “simple trick” ads that flood social media and television.
“I use stories to explain concepts that my clients need to successfully navigate the financial world and retire on their own terms,” Huey said. “I write to teach, but am ever mindful of the need to entertain first. And that is the premise of ‘History Lessons for the Modern Investor.’"
He summed up what it takes to stay ahead of the curve in today’s financial climate.
“You don’t have to be brilliant or even good at math to be a successful investor," he said. "I am, admittedly. But you do need to know a few fundamentals about how markets and economies work.”