The price of everything

Boom

“Facts do not cease to exist because they are ignored.”

• Aldous Huxley.

 

There’s a telling quotation in Howard Marks’ latest memo to clients (highly recommended, as always):

We established long-term relationships with many important strategic partners, including America Online, Yahoo !, Excite, Netscape, GeoCities, AltaVista, @Home and Prodigy.

It’s from Amazon’s 1997 annual report. As Marks goes on to ask,

How many of these “important strategic partners” still exist in a meaningful way today (leaving aside the question of whether they’re important or strategic) ? The answer is zero (unless you believe Yahoo ! satisfies the criteria, in which case the answer is one).

Every generation of investors has its darlings. The baby boomers had the Nifty-Fifty. Generation X had the first dotbombs. Millennials – those actually in possession of any savings in a world of QE and ZIRP – have the global mega-caps and the FANGs. But after a nine-year stock market rally that has perversely become one of the most hated in history, the tide may be starting to go out.

To read more, Download Boom

Ask the FT

 

“Thankfully, a great many in my industry remain deeply committed to the cause of telling the truth, and media such as the Financial Times remain determined to practise impartial analysis and reporting.”

• Gillian Tett, The Financial Times, 14 July 2017.

 

Dear FT,

Now that the UK referendum to leave the EU has given us a conclusive verdict of ‘Leave’ and Article 50 has been implemented after approval from the UK courts, what is the best way for businesses to adapt to a post-Brexit commercial environment and all the trading opportunities that might come with it ?

• Curious in Coventry

Dear Curious,

..I sat at my desk wringing my hands, transfixed by the tragic slapstick of British politics..

We are in the biggest domestic political crisis of my life..

 

To read more, Download Ask the FT

Popularity is overrated

 

 

“Remember what has happened. In an unnecessary referendum, a small majority chose an option they could not understand, because it had not been worked out.. The UK has become so ludicrous because the issue of the EU is so deeply felt by a significant part of the body politic. The Brexiters are the Jacobins of UK politics. Their ideological intensity has devastated the Conservative party and reduced British politics to its present shambles. There is, as a result, neither a comfortable exit from Brexit nor a plausible way of managing it smoothly. Whom the gods wish to destroy they first make mad. So it now is over Brexit.”

• Martin Wolf, ‘Britain is incapable of managing Brexit and calamity will follow’, The Financial Times, 13 July 2017.

 

“Pity the BBC’s attempts to deliver objective and neutral coverage of a politicised issue such as the British referendum on leaving the EU.”

• Tim Harford, The Financial Times, 1 April 2016.

 

It is difficult to buy what is popular and do well. Fortune Magazine, for example, published a now notorious article on 14 August 2000 entitled ‘Ten Stocks to Last the Decade’. The Fortune list contained the following stocks:

Nokia

Nortel Networks

Enron

Oracle

Broadcom

Viacom

Univision

Charles Schwab

Morgan Stanley

Genentech.

The bloom had already started to come off the dotcom rose by August 2000 (the Nasdaq peaked in March of that year), but that didn’t stop Fortune from loading their list with technology, media and telecoms stocks. How did they fare ?

To read more, Download Popularity is overrated

The best funds in the world ?

 

 

“What causes #poverty ? Nothing. It’s the original state, the default and starting point. The real question is, What causes #prosperity ?”

• Tweet by @PerBylund

 

“Imagine if the economy as we know it was built on a myth. Imagine if that myth was the foundation stone on which the mainstream financial systems that control the global economy have been erected – the great bazaars of stock markets, bond markets, fiendishly complex financial instruments, credit default swaps, futures and options on which the fortunes of billions rest. Imagine if the myth was the key cause of the global crash in 2008 – and if its perpetuation today threatened another catastrophic crash in the future. We don’t have to imagine. The myth is Efficient Market Theory.”

• David Harding, ‘Efficient Market Theory: when will it die ?’, Winton Capital Management, February 2016.

 

A few years ago, a friend crunched some numbers to try and establish the best performing funds in history. His criteria were challenging. Firstly, he wanted to see audited figures going back at least 20 years. Secondly, he wanted to see average annualised returns of at least 20 percent. Eleven funds made the final cut.

 

To read more:

Download The best funds in the world

Borrowed time

 

 

“Remainers who wish to reverse the vote should go live in a banana republic, where reversing undesired vote outcomes is de rigueur.”

• Tweet from Deon Opperman; @deonopperman6

 

“Radiohead crowd left red-faced after applauding three minute guitar tuning, mistaking it for new song..

Tens of thousands of Radiohead fans embarrassed themselves at Glastonbury festival this evening after mistaking the band tuning their guitars for new material.

Many tweets were sent from members of the crowd during the incident, some claiming it to be the band’s best work since OK Computer. One fan described it as ‘minimalist, but also complex, emotionally raw, but still able to push the boundaries of what music can do.’”

• Story from the BBC News website.

 

There are a number of things you don’t want to hear a central banker say. One of those things just popped out of Janet Yellen’s mouth – “I don’t believe we will see another financial crisis in our lifetime.” That has to be up there with Irving Fisher’s deathless observation from 17 October 1929 that

Stock prices have reached what looks like a permanently high plateau

or John Maynard Keynes’ comparably adept forecast from 1927 that

We will not have any more crashes in our time.

So far, so anecdotal. How about some data to back up the thesis that, as Thorstein Polleit puts it, the Super Bubble is in Trouble ?

 

Download Borrowed time