The Wisdom Of Brackets
Now that you've filled in your brackets for this year's March Madness, why stop with basketball? The same process you use to pick Boston College over Texas Tech or Indiana over Gonzaga has applicability to questions that go far beyond which team will be the national champion. Such is the point of The Enlightened Bracketologist: The Final Four of Everything (Bloomsbury USA, $15.95), a new book edited by Mark Reiter and Richard Sandomir.
The brackets structure forces you to organize and focus your thoughts. "The smartest executives and the most successful investors have a unique ability to process an enormous amount of information and boil it down into binaries—'yes or no' is a binary—that simplify decision-making," says Clark Winter, global chief strategist for Citigroup Global Wealth Management. Winter's investment strategies bracket is one of 101 in the book, which attempts to identify the best of everything from cheeses to talk show hosts to CEOs (that last one contributed by BusinessWeek Executive Editor John A. Byrne).
The bracket shown here has been adapted and updated from the one Winter created for the book. In each matchup, the strategist is making a decision about which will be the better-performing asset class, given his cautious view of the global investment scene. "The sentiment has shifted from greed to fear," says Winter. How does that figure in deciding investments? Winter opted for U.S. mid-cap stocks over U.S. small-caps because the mid-caps are more mature companies with more market liquidity. But in a subsequent round, derivatives beat mid-caps because they offer specific protection or targeted participation in the market.
Winter uses 32 categories, many familiar to individual investors and others, like the carry trade (borrowing low-interest-rate currencies to purchase high-rate currencies), mainly practiced by the pros. But you can pare it down to 16 or even 8 competitors. It's the process that counts, not the number. Winter explores investment decision-making further in his own book, The Either/Or Investor, to be published by Random House in May.
By Jeffery M. Laderman