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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.

“Investing is complicated by the fact that doing dumb things and losing money are not very strongly correlated”. Evan Bleker, tweet, 1st March 2017. Like the Greek debt crisis, furniture store sales promotions, and Arsenals hopes of winning the Premiership, some situations are doomed to be repeated, almost endlessly. Once again, a potential US debt crisis has resurfaced, with March 15th (coincidentally the date of the Dutch general election too), the focal point of renewed angst, as some are now openly talking about another Government shutdown.

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.

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…