It Ain’t Necessarily So
The markets are clearly panicked.
And this is usually when the investor bandwagon fishes in the deepest parts of the ocean to try and hook low and no-risk catches, like Government Bonds and US Treasuries.
But not this time.
For over 10 years the US Federal Reserve and Bank of England have held interest rates at historic, bargain-basement levels, like a lure to create cheap borrowing and build companies and products.
But folks aren’t biting.
Instead, they’re going to cash, abandoning stock markets in $£multi-billion droves, and getting historically low returns as part of that bargain.
That’s what fear does. And we can blame the 2008/09 Great Recession, the media, the Mayans or even our horoscopes. But those are just events and triggers.
The subsequent behaviour runs deeper through a mechanism that’s anchored in our brains – our Amygdalas - and is delivered through our biases.
In other words, we make poor decisions based on the “most convenient truths” we invent.
Meanwhile, here in Borisville, it’s been two steps forward and three steps back.
The last five to 10 years have hooked investors into the perceived safety of netting things like cheap trackers, which have proven no match for investing and sticking with global funds in the best managed businesses with strong balance sheets.
It’s like Mark Twain said, “It ain’t what you don’t know that gets you into trouble. It’s what you know for sure that just ain’t so.”
If you found this note interesting and you want to chat about it, do get in touch.
Alan Steel, Chairman, Alan Steel Asset Management
 FT 19/03/2020