Is the door open or closed?

Sometimes we stare so long at a door that is closing that we see too late the one that is open,” Alexander Graham Bell

In 1979 there was a Business Week magazine cover titled “the Death of Equities”. This came after a 13 year sideways market in the United States. Though the market went sideways for another 18 months after this cover, that marked the beginning of a 20 year bull market.

Having been around for a few years and seen the ebb and flow of markets and acquired a few grey hairs (thanks kids!) I am beginning to get a real sense that the “equity cult” is slowly dying. Globally, equity fund flows are drying up, everyone is looking for safety and certainty. Veterans of the equities industry are saying “I have never seen it like this”. Some of this is the natural reaction to what has taken place over the last few years. But, the problem with being overly focussed on one idea “safety and certainty”, is that this will lead to a total disregard for a potential opportunity.

I don’t mean to say pin your ears back and there are no risks. I am saying that many are closing their eyes to an asset class, that is building some fundamental strength, it’s strength is “value”. We can measure this in many ways, but simply, the lower the price an investor pays for a given stream of future cash flows, the higher the long-term return earned by that investor.

I suspect I will be early, which means there may be some more downside to come, but let me pose the question: “Which door are you staring at”?

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