European morning TV shows tell you all about life and its mysteries. Of course, most of the lessons learned are by no means those intended by the producers. Even hard-to-grasp topics like stock market euphoria are tackled and, in my experience, German ‘breakfast TV’ does this best.
- If betting against ‘everybody and their dog’ was so rewarding, ‘everybody and their dog’ would do it. In times of exuberance, we suggest becoming more selective instead.
In Germany, the stock market is commonly seen as a diabolical scheme to evaporate people’s hard-earned savings. Instead, it is thought better to hold cash at zero rates in savings accounts and have inflation and taxes gnaw on it. But today was the day when a stock market blogger explained the beauty and risks of equity investing to the German breakfast TV public. Stunning! Boom? Euphoria? Exuberance? ‘Everybody and their dog’ is in stocks by now. Time to ‘sell ’em all’?
I was quite relieved that the sympathetic young man was advising viewers to only invest small amounts that could be spared and by no means to buy into single titles, but rather stick to low-cost passive vehicles and diversify globally. This does not sound like a dot.com bubble, does it? Besides that, if betting against ‘everybody and their dog’ was so rewarding, ‘everybody and their dog’ would already be doing it. It just underpins our hard-earned experience that the indicator that worked wonderfully last time will exactly fail you this time.
Identifying risks using the World Economic Forum’s (WEF) Global Risks Report
That said, my favourite indicator for identifying the most material risks in the world failed me (of course) in 2020. I have been using the World Economic Forum’s (WEF) Global Risks Report for years as the most profound risk assessor in the world. It nailed the Great Financial Crisis of 2007/2008 and the euro crisis in 2010 before they happened. However, it did not see the pandemic coming. Yet another hard-earned insight of mine is not to dismiss an indicator just because it failed you once. Last week, the WEF released the 2021 edition. Unsurprisingly, infectious diseases are the top-ranked risk for now, followed by many environmental risks.
So we decided to get a bit pickier instead of clearing the decks and tweaked the ratings for a bunch of single stocks.
Number of the week
’Keystone XL’ is a planned 1,179-mile (1,897km) pipeline running from the oil sands of Alberta, Canada, to Steele City, Nebraska, where it would join an existing pipe. It could carry 830,000 barrels of oil each day. It would mirror an existing pipe, also called Keystone, but would take a more direct route, boosting the flow of oil from Canada.
What is going on in the markets? Julius Baer’s experts share their views.