Invest-ability daily: 17/09/21

Welcome to, free-thinking, plain-speaking insight into the world of investing from Phil Oakley and John Hughman

It seems a long time ago that I left the publication that shall remain nameless after nearly 15 years, and only a very short time since Phil and I started to put our entrepreneurial ambitions into effect and began building I am amazed by what, thanks to the wonders of the web, we have been able to do in just a matter of weeks: building websites, setting up mailing lists, podcast hosting, limited companies, business bank accounts and all the other stuff that budding media barons need to do – including a lot of writing on Phil’s part. It’s fair to say that it has been a steep learning curve, and we are incredibly humbled by the interest and words of encouragement many of you have given us. Thank you (and apologies in advance for any technical glitches you may experience).   

As any of you that follow me on Twitter may have noticed, I have also been busily turning an old Suffolk clapper barn into a beautiful events venue and helping establish a holiday let business near the Suffolk Heritage Coast. But manual labour has not proved enough to silence the call of the markets I left behind several months ago, and it’s good to be back, not just writing but investing my Sipp as well – more on this in the portfolio section of the site soon, but for now you can see Phil’s Sipp and two other portfolios to give you some ideas

Surprise to say, not much has changed: there is still a whiff of madness in the air (meme stocks anyone?), and more than a whiff in crazy crypto land (or am I just getting old?). I have largely avoided the news over the summer, mainly because it is usually so awful – and yet markets have continued their march onwards and upwards in a way that one has been left wondering if anything can ever stop them. As an amusing cartoon I recently saw described Wall St, “a magical never-never land that is unaffected by events in the real world.”

Something will, of course, stop them at some point . There are certainly many ill winds blowing that add up to a lot of risk for investors to stomach, not least of which is the spectre of a sustained bout of inflation, as Phil writes in his latest Quality Shares Weekly. Central bankers have been doing their best to talk down the recent data as a temporary spike, but the market seems increasingly discinclined to believe them as supply chains and labour markets seemingly grind to a halt everywhere. 

Still, these are the markets we have, and getting through them intact is what we must do, which is hopefully where Phil and I come in – proper, old-fashioned analysis to help understand, exploit and manage those risks. It is clear, of course, that there are things going on in and around today’s financial markets that have rather overwhelmed the old art of analysis – not least huge stimulus and rock-bottom interest rates driving both momentum and volatility in asset prices. As one Twitter wit put it recently, profits don’t seem to matter any more, and nor it seems to the ratios that should tether asset prices to economic reality – look no further than house prices for just one example. And more than a decade in the making, and with little sign that the punchbowl is running dry, this backdrop is unlikely to change soon.

But it would be foolish to sit sulking on the sidelines until the big sell off comes, just because markets aren’t behaving like you want them to. It makes more sense to go with the flow, but without throwing caution to the wind, as it seems so many investors – and I use that word loosely – often do, forgetting that shares that rise on nothing more than bullish hot air can find the weather quickly turns against them. Like our new venture, investing is always a leap into the unknown. But in that uncertainty there exists opportunity as well as danger – and weighing those two things off against each other and making risk work for you is what good investing is all about, whether it’s in your own business or someone else’s.  

That, in short, must be the plan – ride the equity markets but always keeping a lookout for trouble ahead. A company’s figures offer many navigation aids, but to be fully understood need to be read against a nuanced view of the industries and political economies in which they operate. That’s what we’ll be doing on, because that’s the way we think you can spot which companies will be better positioned to survive whatever twists and turns come next – and the way to be long-term successful in equity markets.

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