Thursday, April 09, 2009

The idle investor

I've recently started reading a book called How to be Idle. The title should be enough to ensure its success as more and more people have unemployment thrust upon them.

However, the main idea behind the book - that doing less is more - is extremely pertinent for anyone now thinking of dipping their toe in the stock market.

Over eight weeks ago I recommended buying stocks and selling bonds. It just so happens the US stock market is at exactly the same level today as it was then.

In between the S&P 500 fell by 20% and then rose by 25% (unfortunate rule of investing: things need to rise by more than they fall to get back to where they started).

If you were caught out by this sudden fall and rapid recovery in the stock market, don't worry, you weren't alone.

In fact you were in very good company indeed.

Most, if not all, of the the greatest living (and still active) investors have remained confident throughout the past 18 months, and especially at the end of last year, that the stock market was past the worst.

While most of us are fed up watching the stock market fall (and the rest just don't want to look at the stock market at all) there is something very interesting happening at the moment: a turning point.

Turning points are the hardest things to predict and almost impossible to identify in real time. This is why the current situation is so favourable to the investor who is willing to wait. In other words, be an idle investor.

By doing less, you will earn more.

Find a market you like and leave your money there for a year.

You will be amazed at how productive doing nothing can become.

Wednesday, February 04, 2009

Investment recommendation: buy stocks, sell bonds

Whenever you see anyone on TV or in the press offering free investment advice, three questions should come to your mind:

1) What are they selling?
2) What is their past performance?
3) Why are they giving away free advice?

Firstly, I am not selling anything. I was working for an investment bank but now have enough time on my hands to be able to sit and home and write this blog, without any fear of conflict of interest between myself and my employer.

Secondly, I have not invested my own money in any financial market for months. Since last summer I have been invested in either cash or bonds and most recently, entirely in cash.

Thirdly, I am giving this advice away for free as I have nothing to lose in doing so and everything to gain, in terms of reputation.


There are a number of reasons why now is the best time to buy equities and sell government bonds. Apart from the obvious fact that this is what the current direction of both markets are suggesting (the most common reason why people recommend what they do), there are a number of very compelling reasons for doing so:

- We now know that global equity markets halved in value months before the start of the global recession.
- Global equity markets always rise before the end of a recession
- As global equity markets become more and more attractive, global bond markets will become less and less attractive.
- The strength of every downward trend is always followed by an upward trend that is equally as strong.

The only way is up (in the long-run) for equities...

Government bond yields are unlikely to go much lower

It is important not to underestimate the length and depth of the sell-off in global markets for risk. This has accompanied a process of deleveraging that has recently taken the most visual form: job cuts.

Unemployment is the last resort for any company and almost every company in the world has been forced into taking this decision.

Borrowing money from the government is one option, drawing down inventory is another, but once workers are made redundant either they never come back or new workers require training to do the job. This is a very expensive process which is weighed against the benefit of saving money from not paying wages. This process cannot and will not last forever.


Before any good news arrives on the economy, equity markets will have to rise.

Time is running out before the appetite for risk returns.

The fact that the "safety" of government bonds has disappeared makes risky assets look the most attractive in a decade (and more importantly, than throughout this entire financial crisis).

The question of whether interest rates are low enough and when a strong recovery in equity markets will take place this year is less important for long-term investors. The most important decision is that something is done sooner rather than too late.

Tuesday, January 20, 2009

Barak Obama's alternate inauguration speech

My fellow citizens:

Thank you so much for coming out today, many of you waiting for hours in the freezing cold, to hear me deliver this, the forty-forth Presidential inauguration speech in American history.

Today is a very special day for many of you, especially those with African-American families. With you, I share in what has been a most historic of victories. With so many, including myself four years ago, not expecting me to even run for office, the fact that I stand here today ready to take on the most powerful job in the world must seem like a fairytale.

And indeed it is a story that will be told to children up and down this great land for generations to come. How one man stood up to all those who were ready to do everything in their power to prevent him from achieving his dream. It should, and will, inspire many to do the same in future.

My life is a shining example of why you should never stop working to achieve you dreams. Dreams are there to be realised one day, not to wonder what it might be like if they came true. Dreams can come true. Look at me, standing here in front of millions of people and billions watching on their televisions at home all over the world. Hello to everyone out there. We are here and we are ready to do business with you. AMERICA IS OPEN FOR BUSINESS!

Now, many of you may be asking, what do I have planned for the coming weeks, months and years. Well, let me tell you first off, everything is on the table. I will rule nothing out. The only thing I will insist on is that anything we do is affordable.

These words may not sound inspiring but they will make a difference to this country in the long run. Yes, my fellow Americans, the next few years will be painful, they will involve tremendous sacrifice. Jimmy may have to wait for his new train set and Sally will not be going to summer camp this year. And Bob, you will have to see about that new car you've had your eye on for months. It's all gotta be put aside for now. From now we will be prudent!

Can we prudent with the public finances? YES WE CAN!

When we start to learn about what it means to live within our means, then it will be possible to re-build this great nation upon the value which made it so great: innnovation, education and affordable healthcare!

I think you will come to understand that government finances are important, just as your own finances are important. If you want to borrow money to buy something, then from now on you will have to borrow directly from government-owned banks!

This is an exciting time for our country, the country we all hold dear. We will not be indebted to the Chinese for the rest of our lives and depend upon the Saudi's to ship us oil each day. Oh no, those days are numbered, and from today I will make it one of my (many) top priorities to see to it that we will not make the same mistakes that so many of my predecessors have made. BELIEVE IT OR NOT, IT WILL BE DIFFERENT THIS TIME!!

I bless you and bless America.

Barak Obama's wordle:

Monday, January 12, 2009

Open letter to the Financial Times

Even though the Financial Times has seen fit not to publish my letter, sent (e-mailed) on January 5th, the beauty of the internet means that I get to post it on my blog whenever I want!

Below is the original letter.

(N.B. Since Janaury 5th, the US stock market has fallen by 7%.)


From Mr. Wesley Fogel

Sir, Anthony Bolton appears to have had his "Buy American, I am" moment in his column last weekend "How to spot the market’s turning point" (January 3).

Just as fellow-veteran investor Warren Buffett, who endorsed buying American stocks in October only to see the S&P 500 fall a further 20%, Mr. Bolton still has faith in his ability to do what nobody else can: identify a turning point in the market.

However, the three factors which Mr. Bolton uses to determine such a turning point and the one he does not should reveal why his advice will prove at best unhelpful and at worst damaging to investors in 2009. Contrary to his argument, it will be improved visibility on the state of the economy and not the performance of markets relative to the long run or some other technical factors that will help define a turning point. Whilst it may seem foolhardy to challenge the views of either Mr. Bolton or Mr. Buffett, neither gentleman would be at odds with the principle that past performance is no indication of future returns. Now is not the time to see who is right and who is wrong, just who is solvent. The same rules apply to them as they do to us.

Wesley Fogel,London SE10, UK