Crushed by cash (12/08/2014)
Roger Montgomery is the Founder and Chairman of Montgomery Investment Management. Roger has over three decades of experience in funds management and related activities, including equities analysis, equity and derivatives strategy, trading and stockbroking. Prior to establishing Montgomery, Roger held positions at Ord Minnett Jardine Fleming, BT (Australia) Limited and Merrill Lynch.
This post was contributed by a representative of Montgomery Investment Management Pty Limited (AFSL No. 354564). The principal purpose of this post is to provide factual information and not provide financial product advice. Additionally, the information provided is not intended to provide any recommendation or opinion about any financial product. Any commentary and statements of opinion however may contain general advice only that is prepared without taking into account your personal objectives, financial circumstances or needs. Because of this, before acting on any of the information provided, you should always consider its appropriateness in light of your personal objectives, financial circumstances and needs and should consider seeking independent advice from a financial advisor if necessary before making any decisions. This post specifically excludes personal advice.
Ian R
:
Interesting comments – the area I struggle with is timeframe. How long does one stick to what they believe whilst the dancers make “hay”.
Can an investor become too worried about “being right” and miss good opportunities.
Maybe time to re-read my investment plan and shut out the increasing noise around the markets (stocks & property).
Thanks for the insights.
Wayne A
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An excellent point well made Roger. For all the other noise going on in markets at present, this pricing of cash by the worlds central banks is perhaps the most significant influence over recent years.
You were very discreet in your wording, but there is a clear truth is for those of us who have been watching the markets for years. We are being subject to an experiment in monetary policy on a grand scale for which no one, including the perpetrators, can possibly predict the outcome. Financial security for informed folk who have attempted to take a cautious, valuation based approach to the management of their personal finances is being undermined, in favour of the relatively irrational who continue to benefit from a “dance while the music’s playing” approach. The latter group are the ones left looking like the greater intellects, for the time being. Fortunately for them they have long been playing a game strongly tilted in their favour, while the rest of us are left looking like whingers.
Those running this experiment may have more information at their disposal to assist them in making their decisions, but their neutrality is also under pressure from every political, corporate and banking entity with an agenda. Ultimately they are unable to predict the future any better than you or I. It is an out and out gamble. Scary times.
Roger Montgomery
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Wayne, on this subject you have articulated it best: “The irrational who continue to benefit from a “dance while the music’s playing” approach are the ones left looking like the greater intellects, for the time being.”
zoran arnautovic
:
Hi Roger
If this goes on for another 12-18 months,and you are almost 50%in cash ,how will this affect Mongomery Funds and their “poorer” return than usual.
Cheers
Roger Montgomery
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SHall we dance while the music keeps playing? Or should we grab an early cab home, and well before the revellers come out and find there are no cabs around.
zoran arnautovic
:
Well said Roger.
Maybe we can compromise and “dance near the exit door”.
Nick Dragovic
:
Well said Roger, that is what always drew me towards value investing ever since I was first taught it. It is not about focusing on returns but preserving the capital first and foremost. I think it was either Buffet or Graham who said “rule number 1 don’t lose money and rule number 2, never forget rule number 1”. Adhering to the value investing principles is to focus on the process not the outcome, and even then apply a margin of safety to protect yourself from the bias or miscalculations we humans are prone to.
As things are going, it will not be about who has achieved highest returns but who has lost the least which in turn will provide the greatest power to take advantage of opportunities when the music eventually stops and panic ensues. If I may add to your analogy above, I see it along the lines of taking an early cab home and then driving back to the party in a Tarago (obviously not under the influence of alcohol).
Roger, can you please share your thoughts on physical gold and whether you think it is something that investors should keep an eye out for? The reason I ask is that Warren Buffet is strongly opposed to holding gold as he considers it speculation, while Ray Dalio and Seth Klarman are looking at it from a hedging perspective.
Thanks,
Nick
Roger Montgomery
:
If there is a perceived need for the world to consider it as a currency, there might be some merit in gold but really the only reason for buying it is to bet on what you think other people are going to pay for it in teh future and that, in turn, must be based, on guessing what they are going to think or guess. In essence you have to guess what other people might guess.