Investment noise versus useful information

A “MUST read” e-mail hit my inbox, as it does every year. It contained the views of a fund manager who achieved notoriety for his correct call on the 2008 financial crisis. This commentary arrives like clockwork yearly from the same client. The views are well-articulated and thought-out, with plenty of data and charts outlining the author’s conclusion. In many cases, they are also entertaining, with interesting stories and analogies.

There is only one problem: The investment outlook has been wrong for 15 consecutive years. This fund manager maintained his negative stance on the stock markets since 2007, refusing to abandon the view that made him famous. His fund’s performance massively outperformed in 2008, but has lost two-thirds of its value from 2007, while global equities gained 249 per cent including dividends.

The most recent outlook argued that Fed rate cuts are often a precursor to negative stock market returns, concluding (as he has done every year since 2009) that valuations are unsustainable and that the current scenario now resembles the period before the 1930 depression. I stopped reading.