The instinct for survival is a curious thing. Some people faced with extreme pressure collapse alt...
The instinct for survival is a curious thing. Some people faced with extreme pressure collapse altogether and accept whatever fate cares to throw at them. Others, after a lifetime of following, suddenly demonstrate astonishing leadership and innovation. But a few brave souls thumb their nose at fate. Marooned on a desert island, they guzzle all their food rations in one day, confident they will be rescued before they have to eat washed-up sea slugs.
Similarly, in the current climate of market uncertainty, some investors' gut reaction is to retrench. They move wholesale into defensive stocks, avoid anything but the purest blue chip companies, and won't contemplate business with anyone other than a triple-A rated outfit.
Such a retreat manifests itself quickly in the corporate world. Progressive practices adopted with fanfare are summarily ditched. Dress-down Friday is abolished, alongside the managers' monthly "my door is always open" after-work drinks invitation and the habit of calling the chairman by his first name. Corporate giving dries up, alongside other socially responsible initiatives, unless, like the "go green" drive, it reduces costs as well.
Some investors faced with a sharp downturn hang on grimly to what they've got, paralysed by fast-moving events and failing to understand that doing nothing is a decision in itself. They tend to want a clear confirmation of the trend or the report back of the officially appointed enquiry. When it arrives, in two years time, they will wait a little longer to act, in case they are accused of inconsistency. For them, "buy and hold" means "til death do us part".
But inactivity is not typical. Tens of thousands of private investors are signing up for night classes, investment clubs and online tuition in how to read the market. While financial astrology becomes ever more popular, others are putting their faith in figures. One website is offering a 45-minute workshop in charting techniques.
But it is the behaviour of the real "out there" oddballs that is most intriguing. These investors survive primarily by intuition and luck, caring little for regulations and even less for precedent and principles. For them, risk is not a four-letter word. Irritating though it might be to mainstream operators, it is this band of adventurers which is making serious money right now.
Which was the best performing asset class through the first quarter of this year, corporate bonds or property funds? No, it was fine wine, and plenty of it. And a top performing stock market this year? Zimbabwe, where despite a collapse in law and order, industrial shares have surged in local terms to a record high. Analysts joke that investors are deserting Wall Street for Harare, the "ultimate counter-cyclical market".
As pension fund trustees, fund managers, consultants and advisers get trussed up by guidelines, codes and requirements, these investors are in (and out) before you can say "opportunity cost". Many are thoroughly politically incorrect. Sure, UK homebuilders and utilities are attractively priced, but the real stars this year have been BAT and Huntingdon Life Sciences.
With many investors still locked into dangerously volatile markets, committees are urgently conferring on investment styles and skills and when the next big chance to run or fight will occur. In the US, millions of mutual fund investors have decided that discretion is the better part of valour and have sold up. For the players at the edge, that is a real buy signal.
Paul Bruns and Elaine Parkes
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