Investor Points of Few – What We’ve Got Here is a Failure to Communicate

By Alan Steel

Jeff Miller’s latest financial market assessment on Dash of Insight reminds me of the now infamous line from the 1967 film Cool Hand Luke, where prison warden (Strother Martin) tells rebellious prisoner Paul Newman (Luke) that, “What we’ve got here is a failure to communicate.”  

And boy does that ring true right now.

In the words of Jeff Miller:

“As some market worries have been put to rest, there is a growing appetite for new ones. Pundits who say that things look OK are not very exciting. Last week we saw a shift in attention. Despite healthy earnings and good economic data, I expect pundits to be asking: ‘What should investors be worried about?'”

Now, I’ve banged this drum many times before – and been labelled an optimist for my efforts – but it’s not hard to see the logic in maintaining a positive view about the opportunity in equities for long-term investors. 

This is not some misplaced “best of all possible worlds” mentality. The stock markets are far more often in bullish (positive) territory – certainly over the last century – than the much louder voices, the proponents of a bear market attitude and investment perspective, would suggest.

In fact, for the sake of perspective, here’s a long-term look at the proportion of bull versus bear markets:  

Pretty compelling viewing in terms of risk and reward. 

Coupled with the shorter-term view – the current eight-year bull market being led by solid corporate earnings and economic data – and you start to wonder why the investor herd seems so desperate for bad omens?

Maybe it’s because human being are quite literally “born to run.”

That’s not just a convenient Bruce Springsteen reference. It’s a song that’s been spun in our heads for millions of years now, dating back to when we hunted and gathered on the Savannah grasslands and communicated in a series of grunts, clicks and whistles.

Human beings inherited a type of panic button in the centre of our heads – like an adrenaline-induced trigger that urges us to run away at the first hint of trouble. It’s a genetic build that probably saved our species when animal skins were everyone’s attire, and one that can now decimate investments through knee-jerk reactions to scary financial headlines.

It’s been called our Lizard Brain (Amygdala). And it’s the reason why the investor herd reacts as it does to the Wall Street boffin fantasists with new mathematical algorithms that are supposed to stay ahead of negative market movements. It’s also why folks buy into those cleverly named investment products, like Absolute Return Funds, that do anything but what they say on the tin.

And all the while, despite strong evidence to the contrary, the loudest voices keep singing “Born to Run,” “It’s The End Of The World As We Know It,” “Gimme Shelter” and “Here Comes The Flood.”

It’s certainly been a dour disco of these tracks for the past eight years dating back to March 2009 when the market turned out of recession.

And most everyone seems to want to dance to those tunes. 

But you can change that playlist. It’s your choice.

And don’t let a failure to communicate affect your investment returns.

Get some good advice instead.

After all, it’s your money. 

Alan Steel, Chairman, Alan Steel Asset Management

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