Investor Points of Few – The Elephant in the Doom

“The Wall Street elite are packing up their Gucci inflatables and heading out towards places like The Hamptons, while the slow-down in activity has forced the media to try and make headline hay from non-events…”

By Alan Steel

“I have a memory like an elephant. I remember every elephant I’ve ever met. In fact, elephants often consult me…” – Noel Coward

It must be summer.

The Wall Street elite are packing up their Gucci inflatables and heading out towards places like The Hamptons, while the slow-down in activity has forced the media to try and make headline hay from non-events.

Thus all the hype about things like 0.25% US interest rate nudges, and the opportunistic actions of high frequency traders creating sudden dips-and-drags on the otherwise monstrous market gains to date for the tech sector.

And all these waves of piecemeal headlines simply don’t do justice to what the market actually looks like.

It reminds me of a fable about a group of blind men trying to describe an elephant by only touching one part.

You just can’t make sense of it because the tail, sides, tusk, trunk, etc., don’t work in isolation.

That story doesn’t end well – everyone disagrees and there’s a bit of a bust-up.

The same goes for anyone trying operate on the basis of partial information.

That’s when the elephant’s sides seem like giant Walls of Worry, the trunk’s movement as volatile and unmanageable, the deafening trumpeting sound as signalling danger and its enormous plodding feet as crushing everything in its path.

You get the picture (if only they did).

Now here’s some more of that bigger picture.

Even a quick glance at Calafia Beach Pundit Scott Grannis’s 13 Stats To Be Aware Of suggests things are better than the headlines are suggesting.

Scott writes: “If there’s anything to worry about, it’s that the market apparently is not very worried about anything. The implied volatility of stocks and bonds is quite low by historical standards, which means the market is reasonably certain about what it foresees. What it foresees is a continuation of what we have seen in recent years: modest economic growth of 2% or so, relatively low and reasonably stable inflation of 1.5% to 2% or so, modest growth in corporate profits, and a modest pickup in global growth.”

Ned Davis focuses in even further on recent events like the so-called “Tech-Wreck”,  where the elephant in the doom is being made to sound scarier by comparisons to the tech-bubble of 2000.

Ned reminds us about the tech sector’s trailing 12-month earning’s growth of 8.5%, and a one-year forward earnings growth estimate of 14%.

Earlier this week in my article, The Snowmen of the Apocalypse, I wrote:

“On top of Ned Davis’s current 65% recommended equities allocation (that’s high, by the way), right now they calculate the chance of recession at 1.8%, and the chance of it happening over 12 months at just 7%.

“Many of the financial scribblers out there seem to look at Apple’s (and the other FANGs) 30% rise over the last six months as if it were an inconvenient truth in the face of the recent decline.”

Remember, it’s a jungle out there, folks.

So be like the elephant and never forget that headlines are designed to catch your attention and encourage you to make the wrong emotional decisions.

Head for an oasis of calm instead by getting some good advice that helps you see the whole beast in perspective.

Because after all, it’s your money we’re talking about here.

Alan Steel, Chairman, Alan Steel Asset Management

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