DEON GOUWS: Two-timing the market
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Let me tell you about Tom*. He is a client, a high net worth individual who has been an entrepreneur all his life. He’s a self-made man.
Tom is a smart guy; when he talks, I listen.
He does lots of business with China. He travels there at least once a year.
Tom has taught me a lot about the country though I have never been there.
At the end of January, Tom’s business in Europe started to experience stock shortages when its Chinese counterparts first defaulted on deliveries.
The Hubei province (where some of the factories he deals with are based) had gone into lockdown. Other regions were soon to follow.
At the time, I had no real understanding of what lockdown meant (or any inkling of the fact that I would experience one of my own less than two months later — in London, of all places).
If anyone understands how important China is to Western supply chains, Tom does. He did some thinking, put two and two together, and came up with the conclusion that the global economy was in deep trouble.
More importantly, stock markets around the world were sure to crash and burn.
Tom called. He told me what he was seeing in China and hearing from his contacts over there on a daily basis. As a result he wanted to sell all his shares.
I told Tom what I would tell any client in this kind of conversation.
First, I don’t believe in market timing. I’ve had similar discussions many times. The context may differ, but the substance is always the same: whether the risk du jour is swine flu or bird flu or SARS or Ebola or the millennium bug or a fiscal cliff or Grexit or Brexit or Donald Trump or Jeremy Corbyn.
People always find stuff to worry about, but the market seldom goes down anywhere near as much as they fear (if at all). Over time, it has always paid to stay invested, to roll with the punches.
As Peter Lynch once said: "Far more money has been lost by investors preparing for corrections, or trying to anticipate corrections, than has been lost in corrections themselves."
Having said all of that, the last point that I made to Tom was that this was his money after all, and if he really wanted to sell, that’s what we would do.
He ...
Tom is a smart guy; when he talks, I listen.
He does lots of business with China. He travels there at least once a year.
Tom has taught me a lot about the country though I have never been there.
At the end of January, Tom’s business in Europe started to experience stock shortages when its Chinese counterparts first defaulted on deliveries.
The Hubei province (where some of the factories he deals with are based) had gone into lockdown. Other regions were soon to follow.
At the time, I had no real understanding of what lockdown meant (or any inkling of the fact that I would experience one of my own less than two months later — in London, of all places).
If anyone understands how important China is to Western supply chains, Tom does. He did some thinking, put two and two together, and came up with the conclusion that the global economy was in deep trouble.
More importantly, stock markets around the world were sure to crash and burn.
Tom called. He told me what he was seeing in China and hearing from his contacts over there on a daily basis. As a result he wanted to sell all his shares.
I told Tom what I would tell any client in this kind of conversation.
First, I don’t believe in market timing. I’ve had similar discussions many times. The context may differ, but the substance is always the same: whether the risk du jour is swine flu or bird flu or SARS or Ebola or the millennium bug or a fiscal cliff or Grexit or Brexit or Donald Trump or Jeremy Corbyn.
People always find stuff to worry about, but the market seldom goes down anywhere near as much as they fear (if at all). Over time, it has always paid to stay invested, to roll with the punches.
As Peter Lynch once said: "Far more money has been lost by investors preparing for corrections, or trying to anticipate corrections, than has been lost in corrections themselves."
Having said all of that, the last point that I made to Tom was that this was his money after all, and if he really wanted to sell, that’s what we would do.
He ...
