Curiosity@Intelsense
Weekly dose of learning
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Here is the recording for those who may have missed the investor meetup last month.
1.
Dealing with investment uncertainty
Despite the discomfort that uncertainty causes investors, we do have a tendency to make things worse for ourselves. By engaging with markets too frequently we exacerbate our feelings of helplessness. We seem to believe that interacting with markets more will give us that elusive sense of control. Unfortunately it has the opposite effect. The more we immerse ourselves, the more likely we are to be captured by its ingrained unpredictability and amplify the behavioural risks we face.
There is no way to remove the uncertainty inherent in financial markets but we can adapt our behaviour to better deal with it.
The most important step is to value principles far more than predictions. A focus on sound investment principles such as diversification, long horizons and the power of compounding rather than inaccurate forecasts about an unpredictable future is essential.
Robust investment principles do not remove uncertainty (particularly over the short-term), but make us more resilient to it.
2.
Bubble in the US markets
The US accounts for nearly 70 per cent of the leading global stock index, up from 30 per cent in the 1980s. And the dollar, by some measures, trades at a higher value than at any time since the developed world abandoned fixed exchange rates 50 years ago.
America’s share of global stock markets is far greater than its 27 per cent share of the global economy.
This is not a bubble in US markets, it’s mania in global markets. At the height of the dotcom bubble in 2000, US stocks were more expensively valued than they are now. But the US market did not trade at nearly so vast a premium to the rest of the world.
Talk of bubbles in tech or AI, or in investment strategies focused on growth and momentum, obscures the mother of all bubbles in US markets. Thoroughly dominating the mind space of global investors, America is over-owned, overvalued and overhyped to a degree never seen before. As with all bubbles, it is hard to know when this one will deflate, or what will trigger its decline.
Pic of the Week
Thought of the Week
“The irony is that this is a money game and money is the way we keep score. But the real object of the Game is not money, but it is the playing of the Game itself. For the true players, you could take all the trophies away and substitute plastic beads or whale’s teeth; as long as there is a way to keep score, they will play.” -Adam Smith
Video of the Week
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