talking directly with customers
Before the financial crisis, equity portfolio managers rarely talked directly with retail customers. The central marketing concept was to create “third-party endorsements” by appearing on financial television programs. Oddly, in my view, but I’m confident it’s correct, retail clients were more powerfully convinced to invest by a portfolio manager’s appearance on CNBC than by a fundamentally sound approach, a strong analytic staff and a long record of outperformance,
That strategy no longer works. I’m not sure about the dynamics, but in today’s world the talking heads fancy themselves to be the real experts, even though few if any have ever been professional investors and they all by and large spout nonsense as far as I can see–entertaining nonsense, but still nonsense.
What I find interesting about the current market decline is that I’m seeing mutual fund and ETF providers conducting online presentations/client meetings with their fund holders. I think this makes a lot of sense. It may turn out to be one of the (many, I think) fundamental business changes that occur as a result of our current unusual circumstances.
reading stock prices
When I started my second job as a portfolio manager, Australia was the area I was responsible for. Every morning my boss would call me into her office and grill me about the course of the market overnight. She would say a ticker symbol. I had to tell her the high/low/close; the volume if it was unusual; the brokers (and clients, if possible) most involved; and whether or not the movement was in line with other names in the relevant industry or not. If not, why not.
It was pretty awful. And the practice lasted until I knew more than she did about what was going on. But I learned a valuable lesson–that many times the prices talk.
The US market is big enough that no one can listen to all the prices. But I think there are times when the prices are unusually informative. This is one of them, in my view. What I see is that the market is trying to separate post-pandemic winners from losers. My read is that weak stocks now are expressing the market’s first pass at what will continue to be weak from here on.
market cliché of the day
The cliché: when the market recovers from a serious decline, the old leadership is left by the wayside and new leadership emerges.
The “old” leadership is multinational firms without extensive manufacturing located in the US, tech and especially software, in particular.
Will this happen now? My guess is no.
That’s the way it usually works. The market bottoms the first time (the consensus seems to be forming that that’s what’s happening now) at the time of the utmost bad news. It then rises for six weeks or so …before returning to “confirm” the bottom by touching the former low, or maybe a tad lower, before motoring ahead for good.
I’ve written about this process now and again, including just recently. But I’ve heard and read so many predictions of a double bottom–“don’t buy now, wait for the second bottom”–that I’m beginning to think that won’t happen this time. I have no idea, though, what might take its place.
Hi. Great blog. But what do you mean by your last sentence? Do you think market will either go even lower or go higher from hereon? Thanks
Thanks for your comment. I’ll write more about this in a day or two. The very short answer about that last sentence is: in my experience whatever the stock market takes to be conventional wisdom almost always turns out to be wrong. So if it’s conventional wisdom that we’ve made a first bottom and we’ll go up for six? weeks before turning around and retesting the lows, then something different is very likely to happen. What that something different is, I have no idea. I also think it’s a mistake for an investor to become too focused on calling market ups and downs, so not knowing doesn’t bother me too much.