FT columnist John Authers says the S&P never got really cheap in the recent bear market and that this is why ‘market historians’ fear it will retest the low. We reckon the March 2009 low was an historic extreme but that does not mean it will not be retested – that is just not predictable.
read more Commentary by Stuart FowlerWe are not economists but we need to rely to some extent on economic insights in order to advise families on finance or manage their portfolios. Sometimes, economics are not necessary and all the information is in asset valuations. Not this time: seeing this bear market coming was all about economics. So how did we do? Pretty well, actually. Because we share our views with blog readers, our record can be scrutinised. In this post, I have linked some of Stuart’s past blog items to examine our record, starting with our investment strategy as we spelled it out in October 2006.
read more Commentary by Stuart FowlerInvestors who thought the credit crisis spelt a certain bear market must be wondering why the UK stock market is only 5% below its peak last year and 15% above the low reached at the time of the rescue of US broker-dealer Bear Stearns. Other major markets invite the same surprise. Apart from a reminder that market timing is far less obvious than private investors naively believe, what has occurred so far may be a specific warning that asset markets for many years may defy analysis, as the full significance of the debt problems is hard to take in and the profile and duration of the rehabilitation is poorly predictable. In this analysis, we should not take it for granted that the business cycle will describe a clear trend of either growth or decline; or that the equity and property markets will describe a clear bull or bear trend. After all, one of the lessons from Japan’s lost decade is that the darkest hour was just before another false dawn.
read more Commentary by Stuart FowlerFans of absolute-return investing claim it represents ‘the future of asset management’, its attackers that it is just a fad. Most investment fads are intellectually lazy: they describe concepts but appeal to emotions. The most appealing of investment concepts are versions of the free lunch: the ‘something for nothing’ culture. For absolute-return products, the claimed USP is that you can generate much more upside return than you risk in absolute loss and that this is more efficient and rational than harvesting long-term risk premiums from volatile assets by accepting large interim losses.
read more Commentary by Stuart FowlerFans of absolute-return investing claim it represents ‘the future of asset management’, its attackers that it is just a fad. Most investment fads are intellectually lazy: they describe concepts but appeal to emotions. The most appealing of investment concepts are versions of the free lunch: the ‘something for nothing’ culture.
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