AW NAW, WHAT’S UP NOO ?
How are you all surviving the latest End of the World? What with tariff wars going on between Trump and everybody else, yet another worst-ever Hurricane in living memory, recession talk dominating the conversation at dinner parties and food banks, and now the longest running farce since Brian Rix’s Whitehall frolics…. the Muppet Show courtesy of all our Westminster politicians.
Night after night the TV News gets increasingly bizarre, a curious sombre and hysterical mixture. So much so that my 86 year old Auntie who’s been ensconced in darkest British Columbia for over 60 years, phoned me to ask if she should be sending us food parcels and if we were managing to survive the Scottish heatwave she keeps hearing about. Pity she got these new hearing aids.
Mind you she says if it wasn’t for her TV news she wouldn’t have anything to worry about. A few years back it was the Californian earthquake that had her properly worried given I was on holiday in Florida at the time. And as she put it, “that’s no far awa’ ye ken”. Well I don’t know about your knowledge of US geography, but I’d imagine they’re apart by 3 thousand miles or so. Doesn’t matter about the distance she said, thanks to it being a “bad yin, it measured 5.8 on the rectum scale”. (that was before the new hearing aids).
No matter how many times I tell her not to pay attention to the ever increasing bad news on her telly she ignores my advice. Fortunately most our clients do listen. One old chap….well actually he’s the same age as me…. is a self–confessed natural worrier having been a lawyer in a previous life. Only the other day, given the latest aw-naw twist in the continuing Brext hoo haa, before he departed for a trip to some Pacific sun-drenched paradise, he phoned asking if he should be cashing in his pensions pot and moving to “safety” like Cash or even better “these negative yielding bond things that’s all the rage”?
So I talked him through all his fund holdings. Last 6 months, last 12 months, last 5 years. And he actually laughed. And I reminded him of the consensus of grim predictions of an economic and stockmarket Armageddon back in the beginning of 2009, then 2011, 2014, 2016 and last November/December. All made headline news on telly night after night. All made him worried. All were wrong.
I saw a response on antisocial-media from an investor to yet another pessimist telling us to sell everything and shelter in a bunker. I’d never heard off him before, but he made perma-bear Albert Edwards look like a stand-up comedian. The response went along the lines of “If I’d listened to your warnings I would have been sitting in cash for 10 years” Ouch. But true.
If in early 2009 I’d have told you the following would be the case in 10 years, you’d have probably locked me up and thrown away the key. Actually some Daily Telegraph readers suggested as much in rude emails to me at the time.
- The US unemployment rate is 3.7% , down from 10% then
- Inflation is virtually non-existent despite unprecedented QE
- Government Bond rates at record lows, despite explosions in deficits
- Oil price down almost 60%
- Trillions of negative yielding bonds around the world
- Now in the longest-running economic expansion in modern history
- And had you invested in US equities you’d be up fourfold. (Nae tax either in a Pensions pot)
Here’s something else to think about. Since World War 2 the average recession lasted 11 months with a median average GDP decline of only 2.4%. 85% of the time the economy was in expansion. Only 15% of the time it was in recession. Yet people spend 85% of their time focussing on “stuff” that happens on average only 15% of the time. Disnae make sense eh?
I tell you what does make sense, in my experience of over 50 years in this industry-- Keep your eyes peeled for investor euphoria. What’s really popular. Where the crowd is piling in to, or panicking out of. No matter how painful, do the opposite, take a deep breath, keep your nerve, switch off the telly and stop looking every 5 minutes at the bubble gum on yer so-called smartphone. Now you can jump on that plane and relax on your sun-drenched Pacific island.
Chances are, in 5 years’ time, you’ll be flying back there First Class.