Charlie Munger, along with investment partner Warren Buffett, built a strategy around good assets that had been underpriced. With a little of Munger’s discernment, investors and regulators might have avoided much pain over the likes of FTX and Binance.
A look at search trends suggests the narrative focus is no longer on Israel or Hamas but on Gaza and the rapidly developing humanitarian crisis. The enduring narrative of the Gazan people’s suffering suggests a potential long-term threat to Israel’s security as memories of the last month will die hard.
Chinese leaders are wary of worsening the economy’s structural imbalance, but if light-touch measures continue to fail to lift business and consumer confidence, it could be only a matter of time before they take firmer action.
Weakness in Hong Kong’s property market is good news for buyers but bad for those who own real estate and might want to sell. Investors need to have confidence that the weakness in China’s stock market implies a phase of recovery, which in turn will benefit Hong Kong.
The last quarter was dominated by narratives of rising interest rates and inflation, yet consumers are spending, job vacancies abound and house prices are firm. What to make of this is unclear, but Markowitz’s work would suggest a robust, long-term portfolio of equities and bonds, perhaps rebalancing every few years.
The world’s economic leaders are responsible for this biggest misstep in our recent economic history. The authorities blame rising food and oil prices or war – when the real cause is poor monetary and fiscal policymaking.
SpaceX casting its rocket’s failure in a positive light and the US Federal Reserve’s insistence that inflation was transitory are examples of attempts to gloss over bad news. Meanwhile, the advent of ChatGPT, which convincingly mixes truth with falsehood, means caution should be the watchword.
Amid systemic failures and fear of contagion, the authorities acted quickly and sought to protect depositors. But the challenge remains to ensure moral hazard, such that the people who make financial mistakes pay the price.
Narratives like ‘zero-Covid’ or ‘Russian invasion’ act as powerful forces on markets; mining them for key data can help investors stay on top of trends. Even using internet tools to monitor the frequency and correlation of key words found within news narratives can give investors clues about their future impact.
Historical data shows global warming and extreme weather are nothing new. Climate activists are fighting the wrong battle by focusing on temperature targets – much better to reduce human impact on the environment by cleaning up after ourselves better.
This year may prove less disastrous for bond and equity markets than 2022, but the need to bring down inflation by raising interest rates has not gone away. While the outlook is confusing, there are some useful gauges to keep within sight, including interest rates, employment levels and property prices.
Being stubborn on a matter of principle can be costly for politicians and policymakers. They need to remember the wisdom of crowds rather than ignoring the markets, as Liz Truss and the Bank of Japan have.
US policymakers, who were wrong about inflation last year, are now telling the world to expect ‘some pain’. With serious recession around the corner globally, all asset prices will fall, but investors must be patient and hold the course, with ‘preservation of capital’ as the maxim.
Hong Kong is inevitably taking on mainland characteristics as a sovereign part of China, but we have an unique skill set that will serve us well. The city might be diminished as a global financial hub, but that does not threaten its future as a hub of finance and investment.
The 2009 financial crisis, dramatically named the Great Recession, was followed by a swift recovery; so too were the pandemic-induced recessions. This time it’s different, thanks to a long-term and uncertain shift in global geopolitics. Investors will need patience and the ability to play the long game.
An East-West split of the banking giant risks leaving it hollowed out, but more worrying is what such a move could mean for globalisation. It is the latest sign of growing restrictions on the freedom of movement of capital and people that has defined the global economy for 30 years.
Even as the Covid-19 pandemic and the war in Ukraine continue, expect the global transition to high inflation and rising interest rates to shape the market narrative. The threat of stagflation and recession loom on the horizon, but there is still time to fix things.
Emotion appears to have overtaken Putin’s reasoning, opening his country to unforeseen destructive effects, while Hong Kong struggles to deal with the consequences of its pandemic policies. For investors, the key defensive mechanism is diversification and unemotional risk assessment.
Geopolitical tensions are not always bad for stock markets, which have a history of going up in times of conflict. Inflation, higher interest rates and reductions in central bank liquidity will do more damage to economies than a territorial war in Ukraine.
The stock market will fall once the Fed finally raises interest rates, but it is not yet time for the next big monetary collapse. While there are many reasons to be cheerful, events are still building to a crescendo of worsening conditions in 2023.
As pandemic-inspired price rises ripple through economies worldwide, the focus is shifting to supply chains, money supply and slowing growth. With classical finance all but useless, the need to identify stories in modern finance has never been so important.
This year saw markets recovering from the shock of Covid-19 fuelled by low interest rates and massive monetary stimulus. The virtuous circle will turn vicious – eventually.
While medical experts say they don’t know enough yet about the new variant of concern, politicians, vaccine company bosses and economists haven’t shied away from airing their views. Markets and news stories tend to overreact to shock news, but investors should look carefully at the evidence.
No matter how bad the geopolitical issues seem between China and the US, business and trading relations are likely to remain active and cordial.
Investment in cleaning the effluent from burning fuel, reusing waste heat and regulating domestic waste disposal will lead to sustainable environmental advances.
Stung by the Afghan war, the US will turn isolationist after a century of globalisation. This will cost the world its economic growth and, more importantly, put peace at risk.
The recent hit on Hong Kong stocks from Beijing’s wide-ranging regulatory crackdown is a reminder of how closely tied the city’s benchmark index is to the fate of heavyweight mainland stocks.
Age is the last bastion of workplace discrimination, and it is not just the government’s job to put it right but that of all employers. We owe it to the economy to entice older talent back to the workplace, given Hong Kong’s low birth rate and ageing population.
Akin to travelling by plane mid-century, investors today experience long periods of intense boredom separated by short periods of sheer terror. And the ride is likely to persist.
The increased scrutiny of Didi Chuxing is just the latest tale in a global movement against monopolies. Monopolies being broken up are not always bad news for investors, but the actions taken by governments suggest scant regard for the rights of shareholders.