… is from page 119 of the 2010 Revised Edition of Thomas Sowell’s 2009 book, The Housing Boom and Bust:
The notion that financial institutions should invest according to where they are located geographically is a staggering assumption, for which no argument is given, unless incessant repetition is considered to be an argument. From the standpoint of risk, diversification is usually safer than concentration, whether with mortgage lending, commodity speculation, insurance or innumerable other investments.
DBx: Yes indeed. And diversification is also usually safer when it comes to sources of material supply. Relying exclusively or artificially heavily upon domestic sources of supplies of steel, computer parts, or food puts us as unnecessary risk of finding ourselves with less access to these items than we’d have had we been more diverse in our sources of supply.
