Investor Points of Few – Lost Between Common and Sense

“Investors en masse have turned their lives around during this latest bull market run. They used to be depressed and miserable. Now they’re just miserable and depressed.” (With apologies to David Frost) 

By Alan Steel

It doesn’t take much to muddy the waters between “common” and “sense.”

As the media continues to cough, splutter and advocate a highly contagious plague of negative market sentiment into the eyes and ears of investors, we’ve identified the latest “patient-zero” as a circa 350 point Dow Jones dip.

Call it 1% down. 

And as if in parallel, so too has bullish sentiment fallen amongst independent investors; from its arduous climb to the 40 percentile range over the past eight years, back down to the 20 per cent range in what has been less than a week.

Irrationality is louder than bombs.   

The Media Tirade Cometh

And you know, sometimes it’s hard writing this stuff about the actions of financial scribblers, knowing full well that all I’m building is a bastion wall against which they will eventually seek to drag and shoot me as a pariah.

Hell, I’ve got friends out there who write about money, and some do it well. But this mainstream malarkey that taunts and twists the opinions of amateur investors, who are right now likely trapped between the enticement of bull market gains and their own delusions of grandeur, appear to be running away from things they might be best placed not to.  

Now, that’s not to say things are completely rosy. There’s always a monkey in the wrench somewhere that’s trying to undo the bolts holding the markets together.

In the words of Scott Grannis, we’ve got student and sub prime auto loans stateside listing towards default, the never-ending rumours of emptying malls and the death of bricks and mortar retail, the Monty Python-esque cry of “bring out your dead” for all those so-called zombie companies that aren’t cutting much of a swathe beyond survival revenues, and suspect yield curves tied to stock market altitude sickness that seem to pale despite any comparison.

The Latest Dip

We’ve not seen a record-breaking market for this long where sentiment sucks and investors are running at the snapping of twigs. In fact, it’s bluidy unusual. And despite over forty-four years in this business I can’t remember ever having experienced one quite like it. 

In just a matter of days it seems fear-driven opinion has turned the good ol’ US of A, and our own little nation of shopkeepers to the east, into battered remnants of yet another decade deemed “financially lost.”

All because of this latest “dip.”

“Remove Your Hand, Sir…”

Unfortunately, repetitive rants about trillions of dollars, pounds and euros held in cash deposit accounts, the “money for nothing” corporate buyback party raging in the interest rate basement, and record-breaking indexes alongside jobs a’plenty and unemployment a’few, have been about as welcome of late as finding a stranger’s hand on your lap during a party political debate. 

Still, the facts continue to arrive and mess up all those eye-catching headlines, like the “350 point plague” and even the Icarus-inspired “Investors flying too close the Sun.”

However, my favourite remains the serious suggestion that a “0.25% UK Interest Rate Hike Threatens Future of Global Economy.” 

I was almost picking my teeth with excitement – yet the somewhat obvious dissonance between headlines and reality seems to have gone largely unnoticed.

What I can see are things like the FOMC looking to raise rates by a smidgen’s smidgen in December (yawn), there’s continuity in monetary policy and cash levels, regional earnings are surprising to the upside globally, delivery is outstripping expectations in Europe, emerging markets look good, and economic conditions have either improved or remained stable in the world’s largest economies.

Jings, even Japan is taking part in the secular bull in global equities.

“Who’d a thunk it?”

And a quick trip back to The World According to Grannis shows that while “two things have preceded every recession since 1960: real interest rates have risen sharply, and the Treasury yield curve has gone flat or inverted” that doesn’t seem a very likely (or even possible) outcome right now. 

As for the financial journalists and my impending lynching, well, you probably shouldn’t be doling out investment opinions if your own finances resemble Venezuela’s profit and loss account. 

It just makes it harder for investors whose amygdala’s are clearly drinking in that adrenal Kool-Aid every day.

Folks, headline surfing is not an investment strategy.

And trying to time the market is an activity lost somewhere between common and sense. 

Alan Steel, Chairman, Alan Steel Asset Management 

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