On the Money
Fear is a terrible thing, but don’t let it scare you
LET IT SNOW
“Oh, the markets these days are frightful
And our economy’s hardly delightful
But to all the pessimists just say ‘No’
Let it snow, let it snow, let it snow….”
(Apologies to Sammy Cahn)
“Optimist – Someone who figures that taking a step backwards after taking a step forwards isn’t a disaster, it’s the cha-cha.”
Having been in North Tenerife for the last 10 days I must report that not one person there ever mentioned Brexit, global slowdowns, tariffs or stockmarkets. There were no funny pointy sniggers aimed in our direction at breakfast-time, even though our blue-white skin colour and Tesco bags would’ve given the game away that we were from Brexitland.
We’re surrounded by bad news (aka fake news) so it’s no wonder that fear is so turbocharged amongst consumers and investors these days.
In the blink of an eye we’ve gone from 2017’s record breaking benign stockmarket conditions, with hardly any moves up or down beyond 1%, to an Alton Towers-like rollercoaster with investors screaming as daily moves in the Dow Jones Index go from 500 to 800 points down to 300 to 500 points up, in ever-accelerating stomach-churning fashion.
Fear is a terrible thing in life. Mark Twain once said: “I am an old man and have known a great many troubles but most of them never happened”. It’s also worth repeating (at times like this) his words: “Life does not consist mainly, or even largely, of facts or happenings. It consists mainly of the storm of thoughts that’s forever flowing through one’s head”. And finally what he said about fear.. “Courage is resistance to fear, mastery of fear, not absence of fear”.
I wonder how many readers remember the Hitchcock inspired “Psycho”, possibly the scariest movie ever made. Filmed in early 1960 even by 1967 it had become a classic. That winter, three other students and I, after a few pints in Edinburgh’s Teviot Row Union, decided to celebrate an afternoon off by attending a matinee showing of Psycho at the old Caley cinema on Lothian Road. Four of us, all alone in an empty pitch-black circle.
Despite bladders full to the gunnels with beer not one of us would dare attempt a visit to the loo. Petrified we were. That’s what fear does. Even with a full bladder. And it intensifies with others around. The bigger the crowd the more extreme the fear. Mind you, it happens when euphoria takes over too, which is why some stocks got so over-valued.
‘Perm-bears have been gloating about predicting the gloom but have been wrong for ten years’
In the main in stockmarkets here and over in the US it’s the worst start to a December since 1980, apparently. Perma-bears are at long last gloating over their “accurate predictions of gloom”, conveniently ignoring they have been utterly wrong this last ten years.
Take John Hussman, for example, (there’s plenty of others too)…he was recently in the news again calling for “a stockmarket crash bringing indices down by 60% or more”. He’s been saying that over and over again this last 10 years.
Which probably explains why his “Strategic Growth Fund” has fallen from almost $7billion in size to around $300 million, and his “returns” over ten years have averaged minus 5.56%pa, as the main US market doubled every 5 years. Doh.
Thanks to instant reaction to bad news in our digitally obsessed life today we forget to think in longer time frames. Warren Buffett said the best investor was Rip Van Winkle who would invest and then go to sleep. Even just sleeping for five years and waking up today before looking at your portfolio should be a positive experience. What Brexit? What tariffs? Trump who??
Our “sleep at night” portfolio with its share of goalkeepers (such as Sebastian Lyon), and its defenders (like Carl Stick) and the odd striker up front (like Terry Smith) has still produced growth double that of the FT All Share Index Total Return over the last five years, despite November and December’s disappointments. (But past performance isn’t a guide etc etc , I have to tell you!)
We have a drawing in our client rooms showing what could be an Alton Towers’ rollercoaster, and at the peaks it reads “Buy High”, and in the troughs it reads “Sell Low”, and adds “Repeat until Broke”. So do go and chill. Turn off the telly. Open the vino. And please have a worry-free Christmas.
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.