Havelock London's Beddall: Where can I find a shoeshine boy?
Overcoming FOMO in markets
It was the winter of 1928 when JFK's father, Joe Kennedy, was said to have received a stock tip from a shoeshine boy: "Buy Hindenburg".
The story goes that Joe went straight to his office and sold everything, reasoning that it must be time to sell when the shoeshine boy gives you stock tips.
Valuation concerns as investors clamour for short-term certainty
Markets are often characterised as being driven by fear and greed, something that is formally recognised by the field of "behavioural economics".
As the coronavirus pandemic took hold markets were indeed overcome with fear - fear that a massive economic shock would wreak havoc on investors' portfolios.
Central banks acted swiftly to appease these fears - "injecting liquidity" - by purchasing financial assets with newly printed money. These actions to stabilise markets were, in my view, the responsible thing to do.
However, can you have too much of a good thing?
We are in the middle of the worst economic shock in post-war history and yet many stock market indices are close to their all-time highs.
How is this so? Bar Stool Dave is making headlines, telling his "trader bro" followers to remember that "stocks only go up". More seasoned market commentators are reasoning "don't fight the fed".
While the most cerebral pundits tell us that low interest rates mean that future corporate cashflows are worth more in today's money because we can look far into the future without heavily discounting them.
They tell us that these high stock prices are now mathematically justified (failing to mention that this logic relies on corporate cashflows both not seeing large declines and on us correctly forecasting them into an ever more distant future).
It is not just pundits who are telling us to have no fear. Nancy Pelosi, the speaker of the US House of Representatives, went so far as to say: "But let's just go to the heart of the matter: the stockmarket, there is a floor there. You know that the Fed and others are pounding away to minimise the risk in the stock market, and that's a good thing."
Perhaps all that is left is for the government to pass legislation to mandate that stock prices must always go up?
It is thus we are in an environment where the fear of missing out (FOMO) seems to be the dominant risk for many in the markets. This thought leaves me wanting to get my shoes shined - in the hope of having my own Joe Kennedy moment.
I am yet to find a shoeshine boy (or girl) where I live in rural Oxfordshire and have not had any more luck in the streets around our Marylebone office. Perhaps the 21st century equivalent is watching "Bar Stool Dave" on YouTube?
BMO's Green: Three reasons why shunning value funds is dangerous
Am I foretelling an imminent crash in markets? I am not - that type of punditry is not for me. What I do see is that there appears to be an absence of risk aversion in markets that I believe can lull investors into a false sense of security, which increases the risk of unpleasant surprises.
As a "card-carrying" value investor I believe that no matter how great a business is, it will only make for a great investment at the right price and that the fear of missing out encourages people to invest at any price.
The value-growth debate is now long in the tooth. We have seen a decade of growth-style investors outperforming their value-brethren, and so proclamations from the latter "sore losers" that "the end is nye" for growth quite reasonably fall on many deaf ears.
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