What caught my eye this week.
Today would be embarrassing if Monevator was an old-fashioned print magazine (as opposed to an old-fashioned ‘weblog’!)
I’d be scurrying past the newsstands. Trying to avoid my cover story – already written by Wednesday due to magazine print deadlines – about the bull market disguising how last year’s mega-winners had cratered in 2021.
That post looks less topical this Saturday morning. Because in case you hadn’t noticed – in which case, collect your merit badge from The Accumulator by the door – markets were roiled on Friday by fears of a new Covid variant that seemingly has just been spun-up in someone’s body-lab in South Africa.
This ‘Omicron’ variant has more mutations than a Chernobyl-era chicken, and on the surface a transmission rate that makes Delta look about as speedy as an epistolary 18th Century love affair.
The City fears it’s seen this movie before. So traders have dumped first, and will ask questions over the weekend. At least the potential for a speed bump in that bull market, then.
To only rub salt into the wound, this was also the week I decided that the ‘Covid corner’ section of our weekend links had run its course. Oops!
Turn, turn, turn
In some ways though Friday’s reversal of fortune amplified the point I was set to make. Which was that nothing – ever – lasts forever in the markets.
If you’re a halfway active investor, you’ll remember that lockdown darlings like Zoom Video and Peloton were recently all the rage. Their shares skyrocketed while fund managers and everyday traders were using their products every day.
But as Will Hershey on Twitter recounts via a handy table [1], such shares – lauded as inevitable winners of a work-from-home revolution – have since crashed 35-70% from their highs.
On the Compound Advisors blog, Charlie Bilello makes [2] the same point, adding:
after a year like 2020, [stock picking] almost seemed easy.
Had you purchased virtually anything in the high growth/tech/IPO/SPAC space, you would have outperformed the S&P 500 by a wide margin.
Right on, Charlie. I walloped the market in 2020.
But in 2021? Not so much!
Anyway, on Friday some of these 2021 reversals then reversed themselves again. At one point Zoom was up over 13% on the day, Peloton soared, and vaccine maker Moderna ended the session 21% higher on the not-unreasonable assumption that it might be busy retrofitting its vaccine for the new party pooper.
Some of those spikes were short-covering, I think. But it was also a reality check for investors that the pandemic was far from over.
Eight miles high
I’ve been following markets closely for 20 years. Even so I’m still amazed at how apparently unshakeable narratives crumble over time.
You had to own dotcom stocks in the 1990s. You were an idiot for believing in the Internet by 2003. UK private investors only cared about small cap oil and gas shares by the mid-naughties. Nobody should own equities in 2008 and 2009 – investing was all a con. The market was pumped-up and inflated by 2015. Retail share trading was finished by 2019 and we were all going to index – and then along came RobinHood and meme stocks. Government bonds could only crash said many Monevator commentators six weeks ago. They’ve since spiked higher. And so on.
Much of this stuff is only apparent if you’re naughty active investor [3]. At the index level you tend to see broader, steadier moves.
That’s certainly not a reason to abandon index tracker funds – indeed for 99% of people it’s another great reason to own them. (If you want to keep enjoying sausages, never visit a sausage factory.)
Nonetheless, passive investors will someday face their own narrative shift. The market will crash and it won’t bounce back for a good while. “Buy and hold is dead!” we’ll hear. We’ve been through that cycle at least twice in the lifetime of this website alone.
And then that in turn will pass. In investing, never say never again [4].
Have a great weekend everyone!
*Horace, via the dean of value investing Ben Graham [5].
From Monevator
Why you should think about your legacy and write a will – Monevator [6]
How much should I put in my pension? – Monevator [7]
From the archive-ator: Reasons to rent instead of buying a house – Monevator [8]
News
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!1 [9]
HMRC issues tax scam warning to self-assessment taxpayers – Which [10]
Leaseholders fury at being charged £450,000 for new intercom – MSN [11]
Pandemic-era shortages come for yachts and planes – Axios [12]
WHO names ‘Omicron’ a variant of concern… – BBC [13]
[14]
What we know about the new variant [Search result] – FT [15]
Countermeasures mooted as Omicron reaches Europe… – Guardian [16]
…meanwhile markets fall sharply as variant spooks investors – Sky News [17]
Products and services
Investec launches a one-year fixed interest account paying 1.36% – ThisIsMoney [18]
Travel bans are back. Who offers the best Covid travel insurance? – Which [19]
Firms team up to bring 40-year mortgages to the UK – Yahoo Finance [20]
Want to test your testosterone, cholesterol, Vitamin D, and more – all from home? Get £10 off when you try Thriva via my affiliate link [21] – Thriva [21]
Smartphone pensions: should you switch? [Search result] – FT [22]
With Bulb RIP, what should you do if your energy firm goes bust? – ThisIsMoney [23]
Open a SIPP with Interactive Investor and pay no SIPP fee for six months. Terms apply – Interactive Investor [24]
The rise of the many in consumer fintech [US but relevant] – A16z [25]
Buying shares in physical classic cars – ThisIsMoney [26]
Homes for sale with statement staircases, in pictures – Guardian [27]
Comment and opinion
Sir Steve Webb: Annuities deserve a fresh look [Search result] – FT [28]
Fees are your foe – Humble Dollar [29]
A cap-weighted index fund offers wide diversification at a low-cost – Allan Roth [30]
Closing time [On retirement] – Finding Joy [31]
Adversity is the pain you don’t see coming – Portfolio Charts [32]
100% off – Maximum Gratitude, Minimal Stuff [33]
What if the Bank of England isn’t in control of inflation? – David Smith [34]
Career seasons: choosing a job based on the life you want – Ramit Sethi [35]
Finding enough – Indeedably [36]
People are overly panicked about inflation [US but relevant] – The Bellows [37]
Paths to success – Humble Dollar [38]
Keeping up with the crazy mini-special
The golden age of grift – Young Money [39]
This will not last – Of Dollars and Data [40]
The Age of Funcertainty – The Reformed Broker [41]
A billion dollars isn’t cool – The Irrelevant Investor [42]
Wise and timeless words on investor behaviour – Novel Investor [43]
Naughty corner: Active antics
The S&P 500 as seen through various valuation lenses – Factor Research [44]
The US Grayscale Bitcoin Trust is a poster child for inefficient pricing – Morningstar [45]
Betting against Warren Buffett [on time horizons] – Behavioural Investment [46]
Crypt o’ crypto
Is crypto bullshit? – Model Citizen [47]
Tokenize everything – Dave Nadig [48]
Web3 breakdown: Bored Ape Yacht Club [Podcast] – Invest Like The Best [49]
US firm experiments with mortgages on a blockchain – ThisIsMoney [50]
What’s with all the decimal places when you trade crypto? – Bloomberg [51]
Will crypto protect against inflation? – Morningstar [52]
Exploring valuation models for digital assets… – CAIA Associates [53]
…and a rationale for Bitcoin at $120,000 and more – Institutional Investor [54]
How could all the new crypto wealth disrupt US politics? – Joseph Wells [55]
Kindle book bargains
The Everything Store: Jeff Bezos and the Age of Amazon by Brad Stone – £0.99 on Kindle [56]
Talking to My Daughter: A Brief History of Capitalism by Yanis Varoufakis – £0.99 on Kindle [57]
Exponential: How Accelerating Technology Is Leaving Us Behind by Azeem Azhar – £0.99 on Kindle [58]
Happy Sexy Millionaire: Unexpected Truths about Fulfillment, Love, and Success by Steven Bartlett – £0.99 on Kindle [59]
Environmental factors
Scope 3 [carbon emissions] under the microscope [PDF] – Lindsell Train [60]
Breeding heat tolerant corals at the Great Barrier Reef – Guardian [61]
Switching 100% to electric vehicles is no longer a fringe idea – NPR [62]
Off our beat
Work from home works, until you need time off – The Atlantic [63]
“I earned more than 40 million air miles” – Guardian [64]
Scary realistic entry-level CGI faces are nearly here [Video] – via Twitter [65]
Yes, the super-rich are as miserable as Succession makes out – Guardian [66]
The real-life quest to cook all 74 Stardew Valley recipes – Wired [67]
Facebook and Google fund global disinformation… – MIT Technology Review [68]
…while also serving up surreal divisive claptrap – The Atlantic [69]
And finally…
“Focus on being productive instead of busy.”
– Tim Ferris, The 4-hour Workweek [70]
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