Broomer's Blog

From the category archives: Global

Global

This Time It’s Different

It is often said that the most dangerous words in investment are that 'this time it's different'. The phrase resonates through stockmarket history as experts pontificated that old rules of valuation no longer apply and the current crisis/situation bears little similarity with what occurred in the past. The words were widely echoed during the 1990s tech boom, as they were during the depths of the bear market of 2008. Since the days when it was first formally identified by Graham & Dodd, the value philosophy has proved its worth and presented investors with one of the few reliable ways to earn super normal returns, since valuation levels typically revert to the mean. Indeed such is our respect for its power, it plays a principal role in Square Mile's tactical asset allocation process.

Reasoning that things are different this time is typically an expensive mistake. So, I almost fell off my chair the other day when I read that no less an authority than Jeremy Grantham was postulating that valuations may be reaching a new, higher plateau and that "it can be very dangerous indeed to assume that things are never different".

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Two Cheers for the Global Economy

There has been a marked change in the tempo of global growth. For the first time since the financial crisis, we are finding synchronised growth in all the main global economic blocks. China is benefiting from a relaxation in credit controls, the US & UK appear to be in a cyclical uplift as savings rates level off/begin to fall. Whether consumers are genuinely happy with their balance sheets or just fed up of their self imposed austerity remains to be seen. The markets are hoping that Trump will provide extra impetus to the trend. The UK of course still faces Brexit costs, whatever they might be, but from a global stand point its progress matters little. Elsewhere, some perennial head winds are turning to something like tail winds. Europe is profiting from the ECB's easy monetary regime and in Japan, while growth is minimal, it is at least no longer detracting from the global aggregate.

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Protesting with Trump

In the run up to polling day, one commentator rather cheekily suggested that a vote for Trump is actually a vote for Pence. This is on the basis that it will not be long before Trump is impeached and that his Vice President assumes the role. We would not be as glib as this but the overnight news is definitely a surprise. Trump has led a confusing campaign and it is not clear what he stands for but he has successfully convinced the majority of American electorate that he at least stands for them. I guess this is what democracy is all about.

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Who Trumped?

It is difficult to parody Donald Trump. More flop haired, more outspoken and more of a buffoon than our own Boris. Even by the standards of politicians, he appears to hold such a high opinion of himself that any criticism just bounces off. Worryingly, this is a combination that seems to be working and his popularity in the States seems to be growing by the day. This is a man who leaps to make racial stereotypes, suggests building a wall along the Mexican border and calls for a ban on Muslims entering America. 

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