Good reads from around the Web.
Regular readers will know I’ve long warned people not to get scared out of equities over the past few years.
With the emblematic US Dow Index touching the “psychologically important” (i.e. headline spouting) 14,000 level on Friday, I can’t help remembering some of my own articles:
- Why I buy in bear markets (January 2008)
- Who isn’t buying the market right now? (March 2009)
- Why shares could be set for a decade of 20% returns (May 2009)
- Steep yield curve means equities could fly (December 2009)
- Greeks gift us a buying opportunity (May 2010)
- Five things to remember after the market’s latest fall (September 2011)
- Reasons to be optimistic about stock market returns (November 2012)
Today everyone claims to have predicted the rally, despite the fact that tens of thousands of hours of interviews on CNBC and Bloomberg say otherwise.
Indeed I wish I had some sort of comparison machine to prove how unusual my take was compared to the prevailing comment of the era.
So am I a market timing guru?
I don’t expect anyone to go back and read those articles, but if you do you’ll discover I didn’t predict that shares would be at five-year highs by February 2013.
My point was for most of the past 3-4 years, shares have looked like fine investments for the long term. So if that was your investment horizon – and for most of us it should be – then it was time to be a buyer.
All you can do is balance the risks and rewards on offer.
You’re on your own
Another point I’ve tried to get across is that commentators have continually made bold and gloomy predictions over the past few years not because of any certain insight, but because of a combination of recency bias (i.e. fighting the last war) and because, in the case of the media, bad news sells.
If I’d been spouting terrible warnings about imminent European meltdown, gold heading to $5,000, and rampant financial chicanery, this blog would have a lot more readers – and it would be much more useless to you.
So I won’t blow my own trumpet any more. Firstly, because my joints aren’t as flexible as they were (guffaw!) and secondly because Ermine over at Simple Living in Suffolk has done a too-generous job for me this week. (I’m incredibly flattered and also chuffed to think Monevator has made a difference).
More to the point, this blog is about you taking control of your finances and making your own mind up – not blindly listening to anyone.
Some of the risks of the past few years were very real, and the markets could now be at half the level where they stand. Equally, they could begin to slide tomorrow. Nobody knows, and it’s up to you to judge whether they look good value when it comes to meeting your own needs.
You’re accountable to nobody else – and nobody cares as much as you do.
Finally, I’m also in the fortunate position of knowing how utterly wrong I can be.
Like the servant employed to follow the all-conquering Roman general and whisper “Memento Mori” into his ear to remind him he was mortal, I have the London property market to remind me daily of my own buffoonery.
Again, long suffering readers will remember that I am short one house in London. I have been renting since 2004 expecting a property crash.
How wrong can you be?
Very. From the FT today (search result, the article is listed at the top):
Houses in London’s 10 most expensive boroughs are now worth as much as the property markets of Wales, Scotland and Northern Ireland combined, underlining the extent of Britain’s growing wealth divide.
As my old dad used to say in a bizarre Italian accent:
“What a mistake-a to make-a.”
From the blogs
Making good use of the things that we find…
- Famed valuation expert opens online course – Musing on Markets
- Selling Magnums in the Philippines [On Unilever] – iii blog
- Are Cranswick’s sausages as good as the market thinks? – Expecting Value
- Does gold protect UK savers from inflation? – Retirement Investing Today
- Let loose the dogs of bore [on the rally] – The Reformed Broker
- Sales advice from Warren Buffett – Jill Konrath
- Pension, Schmension! Retire on your own terms! – Mr Money Mustache
- Beware the financial gurus – Objective Wealth
- Hedge fund fist fight retrospective – Investing Caffeine
Book of the week: In his new book Think, Act, and Invest Like Warren Buffett, one of Monevator’s favourite authors – Larry Swedroe – enlists one of the greatest stock pickers of all time in a quest to spread the word about passive investing. Cunning!
Mainstream media money
Note: Some links are to Google search results – these enable you to click through to read the piece without you being a paid subscriber of the site
- Long-term investing: Keep it simple – CNN Money
- Are active investors really doing so badly? [Search result] – Merryn/FT
- Short selling: Evil, or necessary evil? – Swedroe/CBS
- Quantopia brings algorithmic trading to the masses – Fortune
- The trouble with bond yields [Search result – deep dive on bonds] – FT
- Why the world’s biggest hedge fund missed big in 2012 – CNN
Other stuff worth reading
- The point of low return – Part 1 and Part 2 from The Economist
- FSA launches review of poor annuity pricing – The Guardian
- UBS to reclassify conservative bond owners as ‘aggressive’ – Fox
- How to get the most from Poundland – The Telegraph
- Why inflation is important [Video] – CityWire
- Jared Diamond’s guide to reducing life’s risks – New York Times
Product of the week: The Guardian has a useful review of music streaming services. (I’m a Spotify man myself, and don’t understand why anyone is crazy enough to buy CDs nowadays).
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