The Investability Podcast – season 3, episode 1: A Mad Month

It’s investor meets trader once again as John and Michael return for season 3 of the Investability Podcast.

In the month they’ve been away markets have continued their not-so-merry dance with inflation, leaving investors in Read more

Fundsmith’s defining moment

The bear market is putting Terry Smith's quality growth strategy to the test - is he right to be defiant as value outperforms?

Photo by Anne Nygård

Terry Smith, the fund manager, has spent more than a decade outwitting the market with his particular brand of ‘quality’ investing. Buying highly profitable, cash generative, financially stable firms without overpaying and then sitting tight has paid off handsomely for the Fundsmith Equity Fund. After 12 years since launch, it’s currently sitting at a size of about £22+ billion.

To keep reading sign up for an annual or monthly subscription here. If you're already a subscriber log in here.

Portfolio Update June 2022: A month of two halves

The spectre of recession and less aggressive monetary tightening rescued the portfolios from an even worse performance in June.

Photo by Izuddin Helmi Adnan

May’s market horror continued into June as worries over inflation and the Fed’s course on rates persisted, only to reverse around the middle of the month and end back where they started.

In any normal circumstances that reversal will have come as a relief. Except these are not normal circumstances, because in any sane world the prospect of a savage recession would hardly be encouragement for buyers to return; the stock market IS the economy, even if the timing is sometimes off.

To keep reading sign up for an annual or monthly subscription here. If you're already a subscriber log in here.

Triumph of the Pessimists

The long history of the stock market suggest it pays to be an optimist – but investors in individual equities have reason to be a little more gloomy

Photo by Kind and Curious

It’s often said that to be a successful investor you need to be inherently optimistic. In other words, you have to believe that whatever crisis we are living through, over the long term the market will prevail and you’ll make money if you’re in it. It’s something I’m hearing a lot on Fintwit right now as markets tank.

To keep reading sign up for an annual or monthly subscription here. If you're already a subscriber log in here.

The Investability Podcast episode 16: Deep Dive Deja Vu

John and Michael look back over their weekly company deep dives

On this week’s Investabilty Podcast John and Michael look back over 4 months of company Deep Dives to see how our calls have stood up … Read more

Crypto: no country for old men

My long-held view that crypto currencies are little more than 21st century tulips is proving on the (fiat) money - and I won't be buying the dip

Photo by olieman.eth

The sun may be shining outside, but for crypto winter has well and truly set in. Having hit $3tr on November 21, the total cryptocurrency market capitalisation slipped below $1tr this week, with more than half - $1.2 trillion - of that loss coming in the last 77 days.

The falls have been prompted by major collapses of most altcoins, not least the failure of so-called stable coin Terra Luna, which lost its investors $40bn. According to data from CoinGoLive, 98.5% of the nearly 13,500 cryptocurrencies are down more than 90% from their top, and 95.9% have lost 99.9% of their peak value…zero, effectively. Industry experts are predicting that many will collapse altogether, along with the exchanges and hedge funds that have sprung up around them.

Crypto platform Celsius – which amassed $20bn offering its clients interest rates on crypto holdings as high as 18% - has already frozen withdrawals - and rumours are circulating that crypto hedge fund Three Arrows Capital is facing margin calls. Nasdaq-listed crypto exchange Coinbase – which once boasted 98m users – has laid of a fifth of its workforce, with its shares down 80% this year.

Even bitcoin, which accounts for roughly two-fifths of the entire crypto’s market value, is collapsing, down by a fifth in the last few days, taking its total drawdown to 70% from the $69,000 top, while NFT currency Ethereum is down 80%. Data suggests bitcoin miners are sending coins to exchanges in unprecedented volumes, suggesting selling pressure is high.

In short, it’s a meltdown. But just as there were many crypto cheerleaders encouraging people to buy on the way up, so there will be many telling people that the falls are a great time to buy the currency of the future.

I’d be the first to admit that the crazy world of crypto has always scared the hell out of me. Maybe I just don’t get it…perhaps, even, I am too old to get it. As I march through middle age I wonder if maybe my brain isn’t what it used to be, and that the world has moved well-beyond my comfort zone.

On reflection I may have been too hard on myself, though - there is a lot more in it now than when it was a flexible sponge, and I’m fairly sure I know how to see when things don’t add up. And, however alluring the narrative – fiat money debasement and monetary equality primarily – the case for cryptocurrency often seems a case of 1+1+=3. It doesn’t work as a store of value, as daily swings in price show, and hardly anyone owns it because you can barely spend it – as Adam Smith once said, “money is like muck…useless unless it is spread.”

And while there is a case to be made for blockchain technology as a way to replumb the web more democratically, questions over reliability and energy efficiency still mean any widespread usage is a long, long way off.

Whatever the arguments in its favour, it is hard to hide from the fact that crypto’s popularity is largely because it has been seen by many as a way to get rich quickly, thus creating a feedback loop that shot prices higher – the inevitable result of which is that they have come crashing down again. In other words, crypto has been a high beta play on risk. I lived the dot com boom and there are many similarities, not least the cult-like fervour with which crypto enthusiasts defend their actions.

It’s really that simple – that speculative assets, whose fundamental value is impossible to determine, will wither in the heat of a risk-off world. And that’s why we won’t be writing about it again, and why I’m not remotely tempted to BTFD. If you want crypto in your portfolio and want to read about it, that’s fine, lots of people have lots to say and bridges to sell you.

But we like the boring bit better – get rich slowly with shares, with real businesses and economic value behind them. My old man’s brain can make sense of that.

To keep reading sign up for an annual or monthly subscription here. If you're already a subscriber log in here.

To Trade or Not to Trade

Why it might pay to follow the Nick Train mantra of “if in doubt, do nothing”

Photo by Artem Beliaikin

We’ve been hearing a lot of late about buying the dip (aka BTFD), displacing sell the rip as the prevailing mood. Fintwit is awash with people calling the bottom, suggesting that, after 8 weeks of falling – or, as some like to put it, oversold - markets and 1 week of gains, the bear market is over.

To keep reading sign up for an annual or monthly subscription here. If you're already a subscriber log in here.