A interesting article appeared on MoneyWeb yesterday, by Magnus Heystek, debating whether or not Tim Noakes, doyen of the no-carb revolution, is running a ponzi scheme! Just like investment fads, mania can grip the world and now carb-free restaurants, banting menus abound. Bacon producers have never had it so good. In what Magnus referred to as “collective delusions”, be it in diets, religion or investments, we see the birth, growth and eventual demise of such bubbles.
For the uninitiated, banting has become synonymous with the Tim Noakes diet, which refers to going on a low-carb high-fat diet. However, it’s no new thing and whilst the Real Meal Revolution book is very popular, we have had William Banting promoting such things in the late 1800’s and Atkins more recently, in the 1970/80s.
Now collective delusions, according to the article, are typified as the spontaneous and rapid spread of false or exaggerated beliefs within a population at large, temporarily affecting a particular region, culture or country. Now the purpose of my weekly view is not to question the high priests of the Low-Carb High-Fat diet (“LCHF”), although it’s worth noting that 3 billion people in the Far East, who have rice and noodles as staples in their diet, or the countries around the Med, whose staple is pasta, are among the oldest and healthiest populations alive. My question is “How popular belief or collective delusion can incorrectly become accepted as the norm?”.
When I started in the investment management industry, the Nikkei 225 was at 40,000 points; many people were convinced that we should have meetings standing up (the Japanese way); the Emperor’s palace in Tokyo was worth more the whole of California and a Price to Earnings (PE) ratio of 70 was normal – because accounting practices were different. With the benefit of hindsight, this was a form of collective delusion I guess.
Now, however, the collective delusion appears to be in blind Central Bank acceptance and that Japan is now broken forever. There is no doubt that LCHF works for some people, but a balanced diet has worked for thousands of years, just like a diversified balanced portfolio with clearly defined investment objectives.
Weekly comment Week 43 2014 - Is the Banting Diet a Bubble - SC .pdf
William Banting (c. December 1796 – 16 March 1878), was a notable English undertaker. Formerly suffering from obesity, he is also known for being the first to popularise a weight loss diet based on limiting intake of refined and easily digestible carbohydrates. He undertook his dietary changes at the suggestion of Soho Square physician Dr. William Harvey, who in turn had learnt of this type of diet, but in the context of diabetes management, from attending lectures in Paris by Claude Bernard.
The Atkins Diet, officially called the Atkins Nutritional Approach, is a low-carbohydrate diet promoted by Robert Atkins from a research paper he read in The Journal of the American Medical Association published by Alfred W. Pennington, titled “Weight Reduction”, published in 1958.
Atkins used the study to resolve his own overweight condition. He later popularized the method in a series of books, starting with Dr. Atkins’ Diet Revolution in 1972. In his second book, Dr. Atkins’ New Diet Revolution (2002), he modified parts of the diet but did not alter the original concepts. The New Atkins for a New You (2010) is based upon a broad array of information gained over the last decade not covered in previous editions, including nutrient-rich foods. The New Atkins for a New You Cookbook was released in 2011 by Colette Heimowitz to provide dieters with simple, low-carb recipes. [Source: Wikipedia – October, 2014]