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“Life is really simple, but we insist on making it complicated”. Confucius. “There is no investment so good that there isn’t a fee large enough to kill it”. – Cliff Asness (AQR Capital Management). Fund flows are a well-established method of watching for trends in investment strategies. They tell us what the majority are thinking (or not thinking) at any given time. They normally arrive with a lag of several weeks or even months, so it is dangerous to use them for timing purposes, but they give a good steer on investment sentiment, particularly within Institutional investors.

The major worry on the horizon for the political elites in Europe has been the French Presidential election. The success of Marine Le Pen in ditching some of the more “controversial” policies of her father, has put her into the reckoning for the Head of State position in the second most powerful nation on that continent. Having been consistently dismissed by bien pensent class, the success of Brexit, and then Trump has forced a reconsideration, which has excited both fear and loathing in the corridors of power. The recent Dutch election, which showed a rise in support for Geert Wilders’ PVV party (+5 to 20 seats) versus the ruling VVD party’s 33 seats (-8), was nevertheless presented as a defeat for the PVV and led to a relief rally in markets. But the French election is a much bigger test, with far more wide-reaching implications possibly for the Continent as a whole. After all, a Le Pen victory could lead to a break-

An analyst one sunny morning was searching for something in front of his house. A passer-by asked him what he was doing. ‘Looking for my watch,’ he said. After some time looking around, the perplexed onlooker asked him if he was sure that he lost it there, to which the analyst replied “No I lost it in my shed, but it’s too dark in there to find it.’ When you ask an equity salesman whether stocks are “cheap”, the answer follows without hesitation (and it’s always in the affirmative). The most popular justification over the last 20 years has been that shares are “cheap” relative to bonds, and they often point to the Fed Model to emphasise this point. As the chart below shows, the track record between 1980 and 2000 has been impressive.

This saying may be true, but sometimes it too hard a temptation to resist. Standard Life is a HUGE company]. According to it’s Website, it directly runs £269 billion in funds, and several hundred billion in third party money, as of June 2016, which is more than the GDP of Scotland, from whence the company came.

“It’s far better to buy a wonderful company at a fair price than a fair company at a wonderful price”- Warren Buffett. It is always helpful to focus on what a share actually represents- it is a claim on a stream of long term cash flows to which shareholders are entitled over time. Given that the price one pays has a strong relationship with future returns, (the higher price one pays, the lower the expected return will be), a method of valuing these cash-flows would seem a sensible starting point. The future being what it is, however, it is not an exact science. Whether it is by design or malice, analysts often get their projections badly wrong. One of the reasons may be to do with their methods of analysis, or more precisely their mindsets when doing said calculations.

“Wouldn’t economics make a lot more sense if it were based on how people actually behave, instead of how they should behave?” ― Dan Ariely, Predictably Irrational: The Hidden Forces That Shape Our Decisions Conventional Finance theory has long assumed that Investors/Consumers etc. are rational, risk-neutral wealth maximisers, but the experience of the Dot Com bubble, the mortgage bubble and so on has led many to question this premise. Thus was born the field of Behavioral Finance, which posited that people make irrational decisions in a large number of situations, partly due to hard-wired psychological impulses that we find difficult to control.…

Despite oceans of liquidity, zero (or sub-zero) interest rates and all the politician’s exhortations, Companies appear unwilling to invest. Thus, despite the best efforts of Carney, Yellon, Abe and Draghi, the global economy continues to stagger along, with only stock markets showing signs of strength (and even here, it appears that Investors and Traders are fully invested – and absolutely terrified!) Uncertainty rules, with a myriad of “problems” ahead that could end the bull market in an instant (“could” is emphasized here, for good reason). But what is clear is the Reagan’s “Trickle Down economics” has not happened, with the Gini Co-efficient (a measure of in…