Fears for souvenirs

“A pessimist is one who sees a disaster in every opportunity. An optimist sees opportunity in every disaster”
- John D Rockefeller, (1925, aged 85, while playing a round of golf after a poor start on a difficult hole)

“Few outsiders think new stores, no matter how well-conceived, will get Apple back on the hot-growth path. Maybe it’s time Steve Jobs stopped thinking so differently”
- Business Week- ‘Why Apple Stores Won’t Work’ May 21, 2001.

“Those who dance are considered insane by those who can’t hear the music”
- George Carlin

“The world wants you to be typical….don’t let it happen”
- Jeff Bezos, Founder of Amazon     

“There are 3 kinds of economists: those who can count and those who can’t”
Sir Eddie George, 2003, BoE Governor.

I managed to grab a wee holiday this month. Alas for the first time in 43 years not to the warmth and sunshine of Ibiza, but to the risk of hypothermia thanks to a few days in St Andrews. The weather was kind though. There was only the one shower. It started on the Monday we arrived and kept going. Only joking! It had been forecast to rain all week but like economists’ predictions on GDP, Interest and Inflation rates etc, the forecasts were completely wrong. On the basis we were to expect 5 days of downpour I took a few books with me hoping they would inspire me in writing this LfL. I’m told by my colleagues that many of you, especially over the last 12/14 months of ‘lockdown’, are keen to have my suggestions on interesting non-fiction books. So let’s get the book recommendations out of the way first.

If you haven’t read any of Tim Marshall’s books I highly recommend them. His latest ‘The Power of Geography’ is fascinating. Covering the history and future prospects of countries including the UK, China, the US and Greece, Tim demonstrates how every nation’s choices come down to its geographical location in the world and are linked to Nature in the shape of mountains, rivers, seas and concrete.  Like a book I once read on the history of glue I couldn’t put it down.

Next up was recommended to me by an old friend and globe-trotting client (all the way from Kirriemuir to Sussex via Adelaide) also as a ‘can’t put down’. If you’re keen to learn who has been bank-rolling all the rogue world governments despite UN Sanctions and the like, your flabber will be gasted by what the co-authors Javier Blas and Jack Farchy disclose in ‘The World For Sale’, subtitled ‘Money, Power and the Traders who barter the Earth’s Resources’. 

For those with Scots’ blood in you, and therefore preferring the ‘value for money’ of downloading on to Kindle, or a Kindle App, and if you fancy being simultaneously entertained and upset, I recommend Thomas Payne’s ‘Uncommon Sense’ in which in alphabetical order he happily rants away at a wide range of subjects from Afghanistan, through Finance, Political Correctness and finishing off with Vitamins and Minerals. Here’s a closing paragraph …. “And in conclusion, there’s a hell of a lot wrong with Britain at the moment, but on the other hand there’s also a lot about the country which is still good, despite the best efforts of the political correctness lobby, social workers, a police force that has lost its way, teachers who don’t teach and, of course, the current crop of corrupt and incompetent politicians and spin doctors” I’d imagine quite a few of us would agree with Thomas. Thing is though, he wrote that in 2012.

In March I recommended Steven Pinker’s “Enlightenment Now”. I took that along with me too to cheer myself up. It is much better than reading newspapers or watching Bad News at Ten these days. He mentions the findings of data scientist Kalev Leetaru in ‘Sentiment Mining’ which is his analysis of the number of negative v positive words used since 1945 in articles in the New York Times and from articles and broadcasts from 130 countries until 2010. No guesses as to what is now in the ascendency between the two extremes. I never thought I’d live to see the day when being positive is considered bad and testing negative is desirable. 

Instead of 24/7 reports of gloom on the death/cases stats why don’t journalists mention some good news like the story of biologist Karl Landsteiner (I hadn’t heard of him either to be fair) whose work on blood groups is estimated to have saved one billion lives? That in the last 50 years poverty in the US has fallen by over three quarters? Or that since 1970 when the Environmental Protection Agency was formed, the US has slashed its emissions of air pollutants by over two thirds, while its population grew by 40%, people drove twice as many miles and were two and a half times richer? 

As I’ve mentioned on numerous occasions I stopped following ‘daily news’ back in March 2020 because apart from anything else the only thing I take seriously in a newspaper these days is fish and chips. And even that I take with a pinch of salt. However now and again I do like following my old pal Ian Cowie who writes a money column in the Sunday Times these days. And I’m old fashioned so I prefer the actual newspaper to these new-fangled digital doodahs. And it’s handy for lighting the fire which is still needed up here these last couple of months of record breaking cold temperatures.

In an article next to Ian’s on the 16th of March was a cheery piece headed “Why it’s Oil that you need to worry about when it comes to Inflation” peppered with the usual scary words like ‘spooked investors’, ‘fears’, ‘spelt bad news’ and so on. You get the drift. The bad news for stockmarkets referred to in the article included that the FTSE100 had fallen 4.08% Monday to Thursday, and the S&P500 had fallen 3.9%. What wasn’t mentioned of course was that three weeks earlier the FTSE100 was exactly the same level, and that it had gone up 34% since the Covid panic in March last year. In the US the S&P500 had gone up 76% since the March 2020 low. Just in case you hadn’t noticed.  

Our great friend Mike Williams over in Sarasota sends us reports every few days which outlines sentiment data and contrarian advice from his own experiences since 1982 when he first started out. He put a video together which we’re hopeful we may be able to share with you soon once IT gurus can find a way for it to be on our website (google - Alan Steel Asset Management). It’s laughable how many times over only the last six years that talking heads on US TV money programmes always mention scary words like ‘volatility’, ‘crisis’, ‘calamity’, ‘divisive politics’, ‘panic’, ‘investors are nervous’, ‘economic slowdown’, ‘panic mode’ and then recycle them every few weeks attached to the latest ‘problems’. Currently it’s Inflation and the price of Oil, though Covid hasn’t gone away in more ways than one. Before that it was China, or Greece or North Korea, or Bird Flu or Ebola. When I started in the 1970s it was ‘Stagflation’. Where did that go?

Interestingly enough on searching through my archives for some inspiration for this Letter I came across a BBC article from ten years ago about the Davos World Economic Forum. It quoted the CEO of ‘a large asset management firm’ (no not us !) who when asked how often did the economists advising him get it right, shrugged his shoulders and replied “At best, about 3 or 4 times out of ten”. And you ask yourself, “if that’s the case why not just toss a coin?” It’s much cheaper, more accurate and you won’t be as miserable every month. 

Going back to the quote above about Apple in Business Week exactly 20 years ago, they weren’t alone in dismissing their retail prospects. But before the Covid pandemic hit the world economy last March the Apple Store was a raging success with over 500 stores in 25 countries. And Apple was the fastest retailer to reach $1 billion per year in sales and in just over 10 years from launch was hitting more sales per square foot than any other retailer.  Four years ago they generated over $5500 a square foot in sales, twice as much as their closest competitor, Tiffany’s.

Yogi Berra said “It’s tough to make predictions especially about the future” which is an excellent reminder of how difficult it is when extrapolating the past into the future. The technological progress affecting our lives has been phenomenal this last twenty years, especially these last few years. Genuine ground breaking products and services have popped out of nowhere and changed the world. The iPhone, Amazon Prime, CR codes and millions of Apps have all in one way or other also changed the rules of the investment game. Not that it’s a game, although the influence of social media + Apps + money created out of thin air by Central Banks have encouraged thousands of  inexperienced young bloods into get-rich-quick-no-lose schemes. Now when did I see that before?  Argghh.

Somehow we need to step carefully through the financial minefield that could be 2021. While the talking heads on telly are  pouring out the same negativity they’ve poured out on all sorts of ‘problems’ for the last forty odd years, the speed of every new problem taking centre stage has accelerated enormously in this new virtual world. Experts like Paul Krugman or Nouriel Rubini are never far from predicting doom. Arch-pessimist Albert Edwards has suddenly reappeared now that it’s rumoured that Inflation will finish the job that the pandemic started last March.

Back in 1982 the consensus of economists and other ‘experts’ was that we had no chance of a successful future. Inflation was rife and in the US nine and a half million were unemployed. The Dow Jones Index when Mike Williams started was 901 and it had gone nowhere for 13 years or more. It has gone up 38 times since though!  So what happened to help this recovery? The much maligned Baby Boomers, the biggest ever generation cohort came of age with their positive impact on the economy, aged as they were between 21 and 36. But now as they head into retirement our gloomy experts predict economic woes as a consequence. But hang on a minute…..

In the US at least, and elsewhere in the world including Emerging Asia, there’s an even bigger generation hitting that economic sweet spot. Generation Y is bigger and wealthier than the Boomers were back in the 1980s. As they settle down, buy property and earn more, it’s probable that the future for goods and services is bright, not dark. However we can’t get away from the fact that we are in unprecedented times. So it makes sense to steer a middle ground. Try to spot new trends while at the same time go canny. A client told me only this morning as we competed at the Tesco bottle bank for the Deposit of the Week Award … “I’ve always meant to thank you and your colleagues for holding my hands during the worrying times last March and for the stunning recovery since, but what do we do now that everybody’s worried again?”

What I think is it’s a time for balance. Legendary investor Peter Bernstein called it ‘Uncomfortable Diversification’. Putting it differently I’d like to share this piece of advice given to me long ago- “Joining a consensus never ever makes sensus”

Finally I should tell you that because it’s really hard writing these letters every month and keep them interesting, I plan to take a wee break next month. Give my ancient brain a rest. And my back too which aches terribly as I spend hours hunched over a keyboard. But if something happens out there that I think you should know about, I’ll try to rattle out a quick memo.

And thank you to those who respond positively to these Letters. You have no idea what it means to me.