HAVING spent over 40 years in the financial investment industry, you became aware of cycles caused by human reactions.
People operate the same way in every generation and most people understand, often too late, that the sins of the fathers are usually repeated by the sons in the following years.
It doesn’t need to be that way, but our education system either doesn’t accept that fact or doesn’t see the need to deliver it for the next generation.
Inexact science maybe.
The major one I lived and advised with was a seven-year cycle.
We were also aware of an annual cycle created when income tax was due after 30 June.
Many investors sold stock, usually after Easter, creating a fall in prices.
Even a weekly cycle was evident, much of the time when enthusiasm was generated over the weekend when investors had time to have a cuppa and read the weekend press, so got ready to buy on a Monday.
Because in those days information often changed on a Friday night, the nervous investors or traders would regularly sell stock on a Friday so as not to get caught by information that might affect their holdings over a two or three day weekend. The answer for aware investors was to sell on a Monday and buy on a Friday afternoon, which was the opposite or best reaction to the market followers.
Whilst people talk about gutter to gutter in three generations, the investment industry saying was “boom to bust in seven years”.
In the 150-plus years of investment cycles that were available for us to provide information with, the seven-year cycle was clearly evident to most of us, so we used it.
With the world now moving faster and more radically, the new economic cycle in people’s minds has a duration of three to five years.
In my view that is less manageable and less reliable than the previously prevailing view.
But investors are now less tolerant and more volatile than those I lived with and in fact the even younger would-be investors think their computers will do it all for them.
Who knows?
The next set of experts might believe that AI is the answer to their investment needs.
With everyone using that same source for their advice, I’m glad that I will not have my money involved in that mess.
By John BLACKBOURN
You can help your local paper.
Make a small once-off, or (if you can) a regular donation.
We are an independent family owned business and our newspapers are free to collect and our news stories are free online.
Help support us into the future.
