The price of everything

Our survey said

 

“It is because the public are a mass – inert, obtuse and passive – that they need to be shaken up from time to time so that we can tell from their bear-like grunts where they are – and also where they stand. They are pretty harmless, in spite of their numbers, because they are fighting against intelligence.”

- Alfred Jarry, ‘La Revue Blanche’, 1897.

What – if anything – can we conclude from the latest Bank of America Merrill Lynch Global Fund Manager Survey ? The survey was conducted between March 4th and March 10th among 209 panellists managing an aggregate $591 billion in assets. Most types of investment life forms participated, including pension funds, insurers, hedge funds and mutual funds. (Somewhat disconcertingly, the single largest cohort of investment managers described their investment time horizon as “3 months or less”. That sounds less like disciplined fund management and more like speculative trading.)

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Kings of the wild frontier

 

“Simple but not easy”

- The title of Richard Oldfield’s book about value investing.

It has a young, highly educated population. 60% of its people are under the age of 35. It has a literacy rate of over 85%. Almost a quarter of a million new engineers graduate from its universities every year. And its stock market trades on a price / earnings multiple of just 5.5 times, with a dividend yield of 13%. Welcome to Iran.

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The most dangerous word in investment

 

“China’s surplus capacity in steelmaking, for example, is bigger than the entire steel production of Japan, America and Germany combined.”

- The Economist magazine, February 27th, 2016.

What is the most dangerous word in investment ? Is it a name, perhaps ? “Krugman.” “Wolf.” “Yellen.” “Draghi.” “Carney.” “Goldman.” “Sachs.” Crowded field, admittedly. Could it be a phrase ? “Smart beta”. Or the acronym “ETF” (a.k.a. “Just get me in at the top of the market, for God’s sake, and lock me in 1:1 all the way down, just as long as my annual management fee is relatively low”). These are all plausible candidates. But we think it’s a one-word answer: “extrapolation”.

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