It’s hard to believe how less than five months ago investors held their breath as stock markets coughed, spluttered, and collapsed over COVID-19 hysteria. 

Experts describe these sudden events as “Waterfall Declines,” while the rest of us might think of it like Private Frazer saying, “Aw naw! We’re doomed.”

In the March 20th Letter from Linlithgow – The Age of Unreason that you can find here on our website - I quoted US fund manager Bill Miller from just a few days earlier: 

“I think this is an exceptional buying opportunity. There have been four great buying opportunities in my adult lifetime. The first was in 1974, the second in 1982, the third was in 1987, and the fourth was in 2008/09. This is the fifth one.” 

To me, given that observation, Corporal Jones’ advice to ‘Don’t panic’ now makes far more sense.

Don’t Go Chasing Waterfalls

Since the Wall Street Crash in 1929, there have been 12 previous steep falls in major stock market indices that have exceeded 30%.  

Yet, despite experts predicting anything but a v-shaped recovery for this one, the COVID-inspired crash in the US markets has become the second fastest recovery ever. 

(Pity that the UK market has done exactly as it has since 2000, very little.)

Investment flow statistics show that investors heavily sold their equity portfolios in a blind panic and rushed off into the perceived safety of (primarily) cash, gold and bonds, and sadly locked taxable gains into the bargain.

Fast forward to today and we’ve travelled quickly from the sublime to the ridiculous. 

Headlines claim there’s now a bubble in stock markets just five months post-COVIDageddon, as investors continue to rush into gold and bonds. 

10 Rules

After 50 years of experience studying what he described as “Dull markets, bull markets, bear markets, crashes and bubbles,” Wall Street veteran and market psychology pioneer, Bob Farrell, wrote his Ten Rules of Investing. 

Here’s two of them for you to think about: 

Rule 4 “The public buys most at the top and the least at the bottom.”

Rule 5 “Fear and greed are stronger than long-term resolve.”

So, where might you think there’s a possible bubble brewing right now in the cauldrons of investing? 

Do you believe it’s in the popular, fear-consensus driving Gold and Bond investing?

Or is it in the much unloved areas of the stock markets? 

And which sectors do you think have “put a spell on the herd?”  

And if you like what you’ve read, want to talk about it, or would appreciate some help, do get in touch. 

Some say we’re wizards at finding tomorrow’s winners!