What caught my eye this week.
I debated a Tweet of Morgan Housel’s this week, after that excellent financial writer retweeted President Trump’s suggestion that Boeing should rebrand its 737 MAX after two fatal crashes. Morgan thought this good advice from the President. I wasn’t convinced.1
Here it is as a screenshot (I’m not sure if you can embed conversations from Twitter):
Morgan replied to me with the example of Arthur Anderson, the scandal-struck Enron accountancy firm that was ultimately renamed Accenture.
A snappy riposte that eight people Liked – including me!
A couple of people Liked my subsequent comments, but really, I mean literally a couple. On the numbers, Morgan had won.
Here’s the thing though. I am right.
Whenever I wonder what my presumed source of edge is as an investor, ten minutes on Twitter puts me right.
It reminds me people prefer to be outraged. People prefer to be melodramatic. People emphasize the recent and close at hand to an insane degree.
Super well-read Morgan knows all this of course, and he could easily have written my reply to him on another day. But I suspect many of his followers cycle from one 24-hour crisis to another, every day watching the world come apart at the seams. Apparently.
So as I say, I’m right – people forget.
A few examples:
- In 2015 the US Mexican food chain Chipotle saw its shares crash from around $750 to around $250 in the wake of several E Coli outbreaks. Sales fell because people didn’t want to get poisoned. I heard numerous analysts repeatedly write the stock off as dead money. But last year’s revenues were Chipotle’s highest-ever, and it’s smashing expectations again. People forget.
- After being revealed to have cheated emissions tests, Volkswagen was condemned as having not just trashed its own brand but also that of German manufacturing writ large. It was a scandal! There’d be boycotts, big fines, maybe a restructuring. Yet 2018 was Volkswagen’s best year for car sales ever. People forget.
- In 1989 we had the Exxon Valdez oil spill in Alaska – one of the worst in history – which trashed the environment and saw Exxon receive additional criticism for its slow response. Never mind, by 2006 it was the most valuable company in the world. People forget.
- Or how about the terrible behaviour of all the Wall Street banks in the run up to the financial crisis? So bad it almost brought down the global economy. You remember, that guy wrote that book they made into a film. Never again! The big banks had to be broken up! Even I ranted! But were they subsequently taken apart for their sins – by disgusted customers if not by regulators? Yeah, not so much. The biggest Wall Street banks are far bigger than they were before the crisis. People – boom – forget.
I could go on and on – these are just the examples that first popped into my head.
In fact it’s harder to think of companies that didn’t recover from a public relations scandal!
I know what you’re thinking – there was the Ratner jewelry debacle in the early 1990s, when the CEO Gerald Ratner told a business conference that his products were cheap because they were “total crap”. Hundreds of stores were closed in the aftermath. You won’t find a Ratner-branded shop on the High Street today.
True, but that’s because the company was rebranded Signet in the 1990s. It’s now listed in New York and is valued at well over $1bn. So it didn’t die – but it did feel the need to rebrand. I guess we can chalk this one up as a win for Trumpian thinking.
I’m not saying companies don’t fail. They do, all the time. But in my experience it’s rarely because of a one-time issue. They fail because their products or practices become out of step with their markets.
We have to remember survivorship bias – doubtless I’m forgetting companies that did disappear because they, well, disappeared.
But the general point stands – much of the time people forget. They forget the terrible thing that happened a few years ago. They forget who it happened to. They even forget bull markets follow bear markets, as the Of Dollars and Data blog explained well this week.
They forget that they forget.
There are many things eroding edge in the financial markets, but the collective wisdom of Twitter isn’t one of them.
Debate: Should you count your own home in your net worth ‘number’? – Monevator
[Nearly 1,000 of you have voted in the debate and at the time of writing Yes is winning with 52.7%, versus No’s 47.3%. I know, uncanny numbers! Perhaps we could hold a second EU referendum on the cheap on Monevator. 😉 ]
From the archive-ator: What you need to know about risk tolerance – Monevator
Note: Some links are Google search results – in PC/desktop view you can click to read the piece without being a paid subscriber. Try privacy/incognito mode to avoid cookies. Consider subscribing if you read them a lot!2
Why almost every adult in the UK could receive a payout from Mastercard… – BBC
…but how likely is it that you’ll get the touted £300? – Guardian
Defaults rise ‘significantly’ on unsecured loans in first quarter of 2019 – P2P Finance News
Half of England is owned by less than 1% of its population – Guardian
UK retail sales smash expectations in March due to shoppers splurging on food… – ThisIsMoney
…but house price growth slumps to lowest level since 2012, with London down 3.8% – ThisIsMoney
“Why I went viral on Twitter after talking about being evicted on Sky News” – Guardian
A deep dive into the financial planning requirements of younger people – Kitces
Products and services
In praise of the flexible ISA – Simple Living in Somerset
Free trading apps: Investment freedom or false economy? [Search result] – FT
M&S cuts prices on 500 popular items in price war, but Lidl is still cheapest – ThisIsMoney
Ratesetter will pay you £100 [and me a cash bonus] if you invest £1,000 for a year – Ratesetter
Online platform connects the dots for aspiring landlords [Search result] – FT
Portfolio Charts has beefed up its asset coverage, so go have a play – Portfolio Charts
Acorn Income Fund: Small caps with an income twist – IT Investor
Homes with stained glass windows [Gallery] – Guardian
Comment and opinion
Retiring from retiring – YoungFIGuy
The unbearable lightness of money diaries – WireCutter
Consider doing what you really want to, especially when you’re young – Bone Fide Wealth
The real benefit of being rich – Mr Money Mustache
Larry Swedroe tracks and scores [typically woeful] economic ‘sure thing’ forecasts – ETF.com
Overcoming a reluctance to spend in retirement [Mini podcast] – The Compound Show
10 behavioural advantages that amateur investors have over pros – Behavioural Investing
Unloaded – Humble Dollar
How to value a pot stock – Bloomberg
Investing in a Danish alternative energy company – DIY Investor UK
Michael Mauboussin: Looking for easy games in bonds [PDF] – Blue Mountain Capital
Warren Buffett’s Berkshire Hathaway as an alternative to multi-factor funds – Factor Research
Jonathan Pie: The rise of the right [Video] – via YouTube
What it’s like to debate Brexit [Short silly video] – via Twitter
Amazon Kindle and Spring Sale bargains
How to Have A Good Day by Caroline Webb – £0.99 on Kindle
Eat Well for Less by Jo Scarratt-Jones- £1.99 on Kindle
Mortality by Christopher Hitchens – £1.39 on Kindle
What You See is What You Get by Alan Sugar – £0.99 on Kindle
Amazon’s Spring Sale touting TWO free audio books with its Audible trial – Amazon
Off our beat
A selection of ironic London ‘rental opportunities of the week’ – Vice
Let nature heal climate and biodiversity crises, say campaigners – Guardian
Why we’ll never all be happy again – A Wealth of Common Sense
New Ways of Seeing: Can John Berger’s classic help decode the digital age? – Guardian
Impermanence – Seth’s Blog
More Pie: On the Extinction Rebellion protests [Video] – via YouTube
Bedroom confidential: What sex therapists hear from the couch – Guardian
Dogs who chew holes through blankets – via Twitter
“Sceptical investors make their money when the bookie is mispricing the horse’s chances. In other words, where the market gets the odds wrong.”
– John Stepek, The Sceptical Investor
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- Aside: Wow, how little of that paragraph would have made sense a decade okay? Tweets, retweets, public debates, Boeing having a safety problem, and – yikes – President Trump. [↩]
- Note some articles can only be accessed through the search results if you’re using PC/desktop view (from mobile/tablet view they bring up the firewall/subscription page). To circumvent, switch your mobile browser to use the desktop view. On Chrome for Android: press the menu button followed by “Request Desktop Site”. [↩]