Thank goodness January’s over. We said goodbye to David Bowie, Glenn Frey of the Eagles and then Terry Wogan. And with our weather and stock markets all over the place, most of us were definitely under pressure. “Planet Earth is Blue and There’s Nothing We Can Do”? Don’t believe it.
Maybe we can stop reacting to every shock horror headline for starters. Have a laugh instead. In the midst of the market falls a week or so ago I received an email with financial terms from the past brought up to date reflecting January’s turmoil and quoted gloomy predictions of “experts”.
So I thought I’d take this chance to share them. At times like this I find it’s good to laugh:
Market Correction…. The day after you invest in the stock market.
P/E Ratio …………… The percentage of investors wetting their pants as the market goes down.
Broker …………………What my broker’s made me.
Value Investing……….The Art of Buying Low and Selling Lower
Bull Market…………….A random market movement causing investors to mistake themselves for geniuses
Bear Market………….. A 6 to 15 month period when the bairns get no pocket money, the wife gets no jewellery and the husband no sex.
There’s definitely something odd going on. Apple announced the biggest quarterly profit in history, with more money in cash than the GDP of two thirds of the countries in the world, and “experts” were disappointed. Apple shares fell again. No mention of the 100 million Apps on their mobile devices or their 1 billion users.
And then we’re told the big increase in UK and US stock markets on Friday was linked to the Bank of Japan. Oh, really?
And see all this stuff about “disappointing” GDP numbers? Nobody mentions the flaws these days. Hidden away in the small print of business news you might spot that GDP fails to capture the benefits of technology.
Think of Apple’s free Apps for starters….traffic updates, weather, business advice etc. All free, so not captured in the data.
And no allowance made for changes in the quality of goods and services over time.
I recall some years back how JP Morgan bothered to calculate the quoted trade surpluses and deficits of all countries. Obviously they should add up to zero. Funnily enough they didn’t – and left you wondering how come the world was in deficit trading with itself.
Have you never wondered how economists are never happy? Oil’s too dear or too cheap. Inflation is bad and so is deflation. Interest rates are going up too fast then down too slow.
Central bankers are idiots for raising interest rates – then for dropping them (pity Penelope Cruz isn’t a central banker). And a 0.25 per cent smidgeon increase is a hike. I know who I’d like to see taking a hike.
Perennial doomster Marc Faber said last week that a 40 per cent stock market fall was on the cards this year. When challenged about his similar prediction in 2012 he replied it wasn’t a prediction. He’d said it could fall 40 per cent. On that basis George Osbourne could announce an end to robbing our pension funds.
Want some good news? The one man I know who did accurately predict the 2008 Financial Crisis , Joe Kalish of Ned Davis Research, (and before you ask I didn’t listen to him either) believes this isn’t time to rush into caution.
In 2008 he recommended only 40 per cent in equities. Today NDR still suggest 65 per cent exposure. And what’s reassuring is long haul successful fund managers like Neil Woodford and Carl Stick concur.
In a couple of client rooms we have a picture of two peaks with a valley between. On the first peak are the words GREED/BUY, in the valley FEAR/SELL, and on the second peak …REPEAT UNTIL BROKE.
Stop reacting to short term headlines. Switch off the telly and put on some music instead.
Alan Steel is the founder and chairman At Large of Alan Steel Asset Management Ltd.