On the Money
Markets brave another storm warning
Well that last piece of mine in mid-February was great timing, eh? Here’s me rabbiting on about Februarys being more famous for weather extremes than stock market traumas, and before you can say “climate change” along comes the Beast from The East.
Worst storm for 100 years, cried experts in the Daily Depress and Bad News at Ten. And as a consequence shoppers panicked and fought their way through blizzards to empty breid and milk shelves in record time.
You may have noticed that the “worst storm in living memory” blew by in about three days, and we now bask in sunshine. Unlike the weeks of frozen snow and freezing conditions us Baby Boomers experienced more than a few times including the awful winter of 1962/3, not forgetting 1982 or even 2010/11. My Auntie Irene tells me none of them compared with the awful February of 1947 when she was 16 and I was cosied up in the Elsie Inglis Maternity hospital. Ah the good old days.
Or were they? In the ‘60s and ‘70s experts were just as obsessed with weather as they are today. The only difference being their obsession then was the “oncoming Ice Age”. Global cooling if you prefer. And true to form the mainstream media lapped it up.
Front page stuff it was in Time and National Geographic as well as broadsheets (if you’re old enough to remember them). According to the man-made cooling theories of the time, billions of us should be dead by now, thanks to crop failures and nae milk.
In 1970 a “leading” ecology professor in California predicted the world would be 11 degrees colder by 2000, twice what it would take to engineer an ice age. That was followed a year later by Paul Ehrlich’s claims that the UK would be by 2000 “a small group of impoverished islands”. Brrrrexit? Then in the blink of an eye they all changed their tune. Oops. Sorry. They really meant global warming all along. Not cooling. Doh!
In 1986 James Hansen, for three decades the head of NASA’s Goddard Institute, predicted that a warming “greenhouse effect” would raise the Hudson River level by so much that the West Side highway in New York would be under water by 2000.
Others including Princeton professor Michael Oppenheimer in 1990 predicted that by 1995 whole swathes of North America and Eurasia would be desolate, “causing crop failures and food riots”. Though no mention of breid and milk shortages.
Closer to home in March 2000, “experts” appeared on telly and “proper” newspapers like The Independent predicting the end of snow for us in the UK.
A “senior research scientist” at the University of East Anglia (which should have been by then under water) was widely quoted saying “within a few years snowfall would become a rare and exciting event” in Britain. “Snowfalls are a thing of the past” and “children aren’t going to know what snow is” are other gems of prediction. Aye right.
So what’s this got to do with investment? It’s a way of demonstrating that all consensus “expert” opinion is well worth challenging. It’s the same in “money matters”.
Those with gloomy investment predictions (ignoring their failures) get more column inches than the minority with positive views. Not picking on anybody in particular, perma-bear Albert Edwards is well worth a mention. At least various mainstream news media channels clearly think so.
Every year since 2009 he has predicted stockmarket bloodbaths. Two statements in particular stand out. August 2015, “99.7% chance we are in a bear market”, and January 2016, “If I’m Right the US stock market will fall 75%”. As the doctor said to the man complaining he couldn’t pronounce the letters f,r,and t… “well you can’t say fairer than that”.
The end of the stock market Bull that started on the 6 March 2009 has been predicted by the usual dismal suspects every year since. Perhaps one of the reasons that millions of worried news watchers have billions of pounds wasting away in deposits, cash ISAs, and newish boring oddities called Targeted Absolute Return funds. Absolute crap, if you ask me.
The great thing about weather forecasts, an old name for “climate change” is you can check how accurate “expert predictions” tally up with what happened. The same’s true of market predictions.
Warren Buffett, who you can bet doesn’t pay any attention to headlines, and like me probably doesn’t own a “smartphone” to distract him from common sense, shares the view of his wise partner Charlie Munger: “investing is where you find a few great companies and then just sit on your ass”. Check out their investment record.
Last words to US investor Morgan Housel….. “Hearing that the world is going to hell is more interesting than forecasting that things will gradually get better over time, even if the latter is accurate for most people most of the time”. Well said.
Alan Steel is chairman of Alan Steel Asset Management
Alan Steel Asset Management is regulated by the Financial Conduct Authority. This article contains the personal views of Alan Steel and should not be construed as advice. Do check your individual circumstances with your advisers.