FOOL'S EYE VIEW
There's Nothing New In Investing

By Stephen Bland (TMFPyad)
September 24, 2001

The attacks on the US have generated a large number of messages around TMF. A lot of these appeared on boards unconnected with financial topics but I am concerned here today with the views expressed by some readers on those specific share strategy boards which I follow, namely the high yield and value ones.

Anyone who has followed markets for any length of time, and I have been studying them for something like thirty years now, will be aware of the kind of movements that characterise them. Long meandering periods of seemingly going nowhere; across the board upward or downward moves; occasional unsubstantiated booms in sectors followed inevitably by crashes of the same sector and so on.

These patterns repeat forever, being based on human nature and until the latter changes, the former never will. I know this with absolute certainty. I myself have been around long enough to see all of these typical market moves more than once. When the movements become unusually powerful, at every such occasion we get the pub talk about reasons for the movements, those who predict the end of the world or warn of bubbles, this time it's different and all that stuff. This has been exacerbated by the internet and the presence of bulletin boards on the web, including TMF of course. Now, instead of sounding off to a few mates you can get your message across to as many people as read the board, which may be quite a substantial number in some cases.

It always bothers me though that many small investors ignore, or appear not to know, that it has all been done before and then comment on current events which they believe influence the market to suggest that we are in some sort of new era for investing as a result. There is absolutely nothing that happens in the market that is new. Nothing. The market has seen virtually everything that humans or nature can possibly throw at it, as have many individual shares.

After the recent events in the US, I urged long-term high yield share investors to see the fall as a buying opportunity to lock in a higher income forever. In fact I intend to look at the high yield portfolio in this Friday's value article. Similarily, I urged value investors to seek out crisis plays. Some readers found this objectionable but I fail to see how buying a high yield share for the long term, or buying an oversold insurance share as a very short term crisis play, is in the slightest immoral. If the victims had been damaged, or the perpetrators aided, by some small investor buying or selling a few shares then the objectors have a point. But I don't see how this could be.

If anything, as any market pro knows, the important thing is to get back to normal as soon as possible. Doing so does not imply in any way at all that one has some sort of lack of sympathy with the victims. It is no accident that in New York, the NYSE reopened for business as soon as practicable but more than this they were clearly very proud to be able to do so, which was evident to anyone watching the ceremony on TV. Opening a market means that they want people to trade, long or short, shares or derivatives, ultra short term or ultra long term, anything.

Similarly I saw someone from NASDAQ telling people that they could continue trading because their market is a computer based system and this was located elsewhere, unlike the physical presence of the NYSE. But he said this with evident pride in the fact. This guy was, in the face of the disaster, pleased to be able to say that they had not been put out of business. These are Americans, much closer to the attacks than us in the UK, and they want us to trade. They see nothing incongruous in this.

Markets fluctuate and, historically at least, in the very long term they tend to rise. The reasons for these fluctuations should be almost irrelevant to an investor. The fact that they exist is reason alone to invest. Markets are there to serve investors who should take advantage of every opportunity to exploit them, depending on the individual's style, no matter what events may be occurring outside. Making money in this way can only benefit yourself and society as I see it.