It was with much sadness that I heard this weekend of the passing of Peter L. Bernstein at age 90. Peter was a rare voice of wisdom in the often misguided world of finance.
His perspective was rare and valuable because it was anchored in real world experience spanning 9 decades, conveyed through a remarkable intellect and gift for teaching. In a world too often led astray by confident formulas and theory, Peter was an academic and a pragmatist. He spent years as a front-line practitioner managing money for clients at the investment counsel firm his father had founded in the 30's. After serving in the War, Peter joined his dad's firm in 1951 just in time for the big secular bull of the 50's and 60's when stock market gains were above average and concern about risk faded into a phase of systemic complacency.
After his dad died, Peter sold their company in 1967 which turned out to be almost exactly at the peak of the bull cycle; since a secular bear in world stock markets began in 1966 and continued all the way until 1982. Peter stayed on as a manager until 1973 when he quit the management business horrified at how little traditional finance theory was serving real world investors in the new bear climate. He spent the next 35 years writing and teaching investors and practitioners about the risks and realities of theory and our investment behaviour.
Peter was a mentor for me personally for the past several years after I stumbled on to his remarkable book: “Capital Ideas: The improbable origins of modern Wall Street.” I went on to read all of his books, and many of his articles. A few years ago as we were founding our money management firm, I was grateful for Peter’s kind correspondence and encouragement as we designed a tactical management system designed to protect our capital from down market cycles.
While the conventional wisdom of the industry insists on passive, long always exposure to equities through a full market cycle, Peter assured me that we were correct to reject this approach in the interests of better protecting our clients. I was able to meet him personally two years ago and it is a memory I will always cherish.
Peter led a long and remarkable life, and he was sharp and inspiring unto the end. I will miss him. Fortunately we will always be better for the wisdom of his work which will live on so long as there are some of us who care enough to read and understand it.
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