If you invest
like a man possessed
you’ll lose the nest
The Slogic Oracle, 4,230 BC
I spent much of last Monday night and early Tuesday morning bashing the Skype float. As professionals in first Europe, then the US and then Asia left work, I asked a tiny but valued number of them nothing more specific than “What’s your mood about the global economy now?” None of the feedback was particularly surprising; I would call it educated confirmation of gut feel rather than startling new information. But what it confirmed is, in and of itself, crucial: that is, there is an ever-more yawning gap between The Official Line and The Sharp End Experience.
The investment professionals I spoke to have one overriding thing in common: they’re tired. It’s not fatigue as such…they’re just tired of broken promises and balm and increasingly contrived interpretrations of inevitable outcomes.
This represents a significant shift from where they were last February, when I took my own SIPP out of exposure to the markets and stuck it in a ring-fenced bank account. At that point, their majority opinion was that I’d lose out on some short-term gains….and they were right. But as the markets are today 16% lower overall than they were just over a year ago, I’m not complaining: of course I’d have done better to make that move last August, but hindsight is a wonderful thing – were I still exposed the markets today, I’d have lost 28% of my pension value.
The big change in attitude I discern among the pros is that many of them have now morphed into cons. This was summed up best by one bloke based in Spain:
“The bottom line is that Yellen, Draghi, Carney and all the other CBs from Japan to Frankfurt keep insisting that x, y and z is going to happen, and they don’t. Lots of promise, no results. Broken promises lead to loss of faith. It’s the same in every walk of life, and ours is no different.”
That view was reflected by the comment of a very conservative institutional investor interviewed by Bloomberg today:
“You know, I keep hearing predictions about outcomes as if we somehow had more cards in the deck to play here. Truth is, we don’t. I think there’s gonna be a clearout, not a bounce. Why would there be a bounce…?”
Leading from the core criticisms of central bankers, there is also a strong conviction that economists in general are “as usual” viewing progress down the road from the vantage point of their rear-view mirror. Said a Hong Kong source:
“How many times can you tell economists that QE is the new factor without them taking that on board? The answer is ‘forever’ because they don’t seem able to take it on board. They are all for it on the one hand, but they don’t want to acknowledge it’s effect.”
But perhaps above all, respondents seemed fed up to the point of frustration with apologism and understatement. An analyst in New York told me:
“I saw you blogged about ‘the narrative’ recently, but actually what we have right now is the daily invention of new vocabulary in a bid to hide something’s real identity. It’s a totally fictional narrative, like you get in a war, you know? Bearish commonsense becomes “uncertain volatility”. There’s nothing volatile about bear markets until idiots start pissing into the wind to control the insistent natural bearishness”.
The syntax of which he complains is obvious on business channels -and business slots on BBCNews, France24, CNN and so forth – where one hears, on an hourly basis, statements like:
“Yes, Iranian oil coming on stream may make the oil glut worse and could lead to even lower prices”
“I think central banks are pushing back on rate hikes”
“It’s fair to say that mining companies are facing a challenging market back-drop”
“Well, the consumer would once again become the lifeblood of the British economy if only, you know, salaries could pick up a bit”
There is no ‘may’ or ‘could’ about Iranian oil. Central Banks are reneging on rate hikes, not ‘pushing back’. Miners of raw commodities are staring down the barrel of extinction. UK salaries are not going to ‘pick up’ – they’ll continue to fall as Camerlot depresses both hours and remuneration, while counting each job created as equal to all other jobs . The King is in the altogether, the altogether, the altogether.
That’s the new market sentiment, red in tooth and claw. These people live by it, and they are going to die by it.