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  • Writer's pictureMonmouth Capital

Q3 2019: Broken Record

Does anyone under the age of about 40 know what a broken record actually sounds like? I’m (just) old enough to have fond memories of carefully sliding a black disc out of its sleeve, the hum of the turntable and the art of gently finding a groove with the needle. Records don’t “break” on Spotify or Deezer. As if to prove how ancient my 1980s memories are, vinyl may actually be back in fashion.

Modern life has changed beyond recognition since those days. But humans have not. And that, in short, is why I sound like a broken record.

So if you have read my previous articles, you could save yourself some time and go and do something else. If you do read on, then I will do my best to say what I’ve said previously in new and interesting ways. I just won’t be saying anything you haven’t heard before.

Balanced diet

Successful entrepreneurs (our clients) will usually, at some point, have had to make a big decision to go all-in on one idea, potentially risking ruin, in order to yield spectacular yet improbable results.

Our mission is to turn this on its head: to disperse risk across many ideas to achieve an outcome with a high degree of probability over a very long period of time.

Yes, I know, it’s dull. It’s like me telling you to introduce more vegetables into your diet and cut down on desserts and alcohol. Nobody wants to hear that.

If you want the sugar rush and false promise of jumping from one horse to another, if you want explanations of what this Tweet or that survey means for this week or next month, we are not for you. (The good news is that, if you are looking for this kind of service, there’s an endless, revolving, fast food, all-you-can-eat buffet out there to choose from.)

Our clients’ risk-taking, hard work and good fortune paid off. We ensure that the wealth that followed secures their financial freedom for the next 20, 40 or (in some cases) 60 years. Not this week, month or year.

I love thinking about the next 60 years. We think of portfolios as mini sovereign wealth funds for our clients: pools of capital which not only underpin their lifestyle but, in the process, will fund other businesses and entrepreneurs for decades to come. Fixating on the recent past, as most financial commentary does, will not help with a journey measured in decades.

Financial fasting

I laughed out loud at this market snapshot the other day:

Markets down 1%! “Hammered”! It could be the title of a history of financial journalism; other contenders could be “Plunged”, “Crisis” or “Plummeted” (with apologies to the many fine writers at the Financial Times, The Economist, the Wall Street Journal and elsewhere).

The history of financial markets is broadly good news (bottom left to top right) yet the majority of reporting on it focusses on the less frequent instances of bad news and, such as in the example above, attempts to sensationalise.

There’s simply no way of being sure, in a dynamic, liquid market that “global economic gloom” (whatever that is!), “US manufacturing shock” (was it a shock?) or “poor factory surveys” had any effect on the supply and demand clearing price for financial assets in the short term. But it’s so easy to paint a simple picture for time-poor readers looking for a quick explanation and subconsciously seeking to feed their fears.

So, if only bad news is “news”, what are we to do with it? Surely being better informed all the time is the best possible approach to making investment decisions?

Plenty of new scientific research suggests that fasting can promote anti-ageing processes within our bodies. It is counter-intuitive: you need food to live, yet depriving your body of food might be good for you. I wonder if the same principle applies to financial health: cutting out news might help your portfolios to live longer.

- FS


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