"MY MAMA TOLD ME THERE WOULD BE DAYS LIKE THIS" Van Morrison
Today's my last day in the office before heading to Ibiza for a break. "Ibiza…at your age? You're too old for all that clubbing? Party island eh, nudge nudge." Now where do you get all that from? Ask if they've been there and you get one of two answers. Either it's …well no, or it's ….yes but it was years ago when I was young and stupid. Young and stupid teenagers are like that anywhere. Well if you were like me that is.
Fact is those who link Ibiza with noise, drugs and clubbing form their conclusions from media reports. And don't tell me….. you've seen it with your own eyes on the Telly…. Ibiza Uncovered remember? Yes I do. Know what happened? Film production outfit gets permission from Ibiza's Governor to film showing the island in all its beauty. Instead they pay drunk teenagers to be as outrageous as possible and follow them around pre-planned events. Fact.
Remember my advice over the years …Nullius In Verba….. don't take their word for it ….check for yourself.
And that brings me briefly to the weather, or Climate Change as it's called these days. In my young and stupid days one of my pals was Alex Blackwood. Went to school and the Scouts together. Alex now lives in Adelaide close to the Barossa Valley wine growing area. It's hot there and has been for goodness knows how long which is why they make world class Shiraz wines. Well worth a trip.
This morning he emailed photos of snow, ice and hailstones there. It wouldn't surprise me if Climate Change gets the blame. Last Sunday experts reported Global Warming will raise sea levels and as a consequence 1 billion people in cities including New York will lose their homes. But they weren't sure when. Well in 1988 "renowned experts" were more inaccurate…. it would occur by 2008. Here's an excerpt… " the West Side Highway (which runs alongside the Hudson River) will be under water…….."
On Monday there was a Scotsman article on Climate Change or El Nino to be precise. "Experts" predict El Nino will create extreme weather conditions this winter, worst since 1997/8. Usual story …hurricanes, storms, plummeting temperatures etc, etc. As lovers of snow will say…you get the drift. They've been saying this for the last 17 years every 5 years since the last El Nino. Hasn't happened.
But thanks to a report 5 years ago from "renowned climate experts" in the US predicting El Nino causing extreme low temperatures in Northern Europe and Canada/US I bought a 4x4. Later I asked local gardening expert Dougal Philip what he thought about the oncoming winter. He said it would be unusually benign. How come I asked? Well he said… "we've run out of snow shovels already and everybody's buying 4x4s".
(Google "Watts Up With That" and have a decko at the Big List Of Failed Climate Predictions". There's 107 of them. Read what No 93 says quoting the BBC report on the 7th Nov 1997 on expected El Ninos. Ha!)
And that brings me to August's Stockmarket volatility. A pessimist's dream. Nice quote before I forget, from the prodigious output of Anon…. "If it weren't for the optimist the pessimist would never know how happy he isn't".
Now it's a fact that since the late 1800s that main Indices like the S&P and the FT All share fall by around 20% every three and a half years on average. It's as natural as night following day. From my calculations we haven't had a fall of that size since 2009. We did get a 15% plus fall in Autumn 2011 which brought out an army of negative soothsayers, or as they're better known in the media "Renowned Experts."
Here's what "thought provoking prophet" Albert Edwards had to say in 2011….. "stockmarkets are 50% to 60% overvalued and shares could fall by 70%". He'd predicted "an equities bloodbath" the previous year. In January 2012 he warned it would be "the final year of pain", and that "China would collapse". Now he's saying he's only "99.7% certain this is the end". Last year it was "Sell everything and run for your lives".
In 2013 he said "A massive market crash is on the horizon and Gold will climb" ( double wrong)…and later in 2012 he predicted "another Ice Age" (wonder if he bought a 4x4 too?) adding " Expect the S&P 500 to decline below its March 2009 low"….. which was 666 by the way, and right now after "volatile stockmarkets it's at 1978 having fallen from over 2100 it reached in the Summer. Some collapse.
Marc Faber is another much media loved "renowned expert". He like Edwards is often introduced as "it's refreshing to hear a respected bearish strategist share his doomsday predictions"….. No kidding that's what was said. He's consistently quoted predicting at least a 20% fall in stockmarkets and for the last few years recommends buying Gold. You may have noticed it's been dropping like a stone for 3 years and more.
Here's some common sense from a US Investment Officer… "Imagine you pick a million people round the world every day, some days 51% will be in a good mood for whatever reason and 49% will be in a bad mood. The next day it's the opposite. Other days random choice could mean some are really pissed off for no reason. Basically that's what a stockmarket is on a day to day basis." One day late in August when shares were falling somebody said that "the losses were caused by a mix of geopolitical instability, shifting uncertainty patterns, a risk off atmosphere, and an imperfect storm between alpha and beta"…..…whatever that means.
My advice? Expect terrible things to be in the headlines. Over the last 70 years the US Index the S&P 500 (which contains most of the world's world class big businesses) has risen, including reinvested dividends, 1000 fold. Think about what went wrong over all these years. Twenty stockmarket crashes of 15% plus occurred, fifteen of which exceeded 20%.
Message- don't listen to the pessimists…world renowned or not. Go chill instead… open some Barossa Shiraz or maybe a nice Ribero Del Duero Tempranillo ……Salud.
This letter is the personal view of Alan Steel. Please check the appropriateness to your individual position with your adviser before taking or refraining from any action.