There's a lovely line in The Greatest Showman (our family's current favourite film). Accused of being a fraud selling nothing but fakes by a humourless journalist(!),PT Barnum responds: "Men suffer more from imagining too little than too much". The original quote is a little more cumbersome: "Persons, on the whole, are humbugged by believing in nothing, than by believing too much". It's a criticism you could easily turn on many of today's investors.
This week, you'll find John advocating value investing, Bill rejecting the romance of owning a stately home in Ireland and Max King and I both backing a firmly contrarian investment trust which, today, means firmly rejecting much of the tech sector as airy-fairy and looking at banks and commodities instead. Are we all imagining too little?
I suspect not. Bill's lack of interest in buying a ruin doesn't mean he doesn't think they look great just that they are nicer to look at (and bed and breakfast in) than to own. The same goes for us and many of the more expensive companies on the market. In my conversation with Alasdair McKinnon, he talks about the bizarre business models of today's well-known firms in which they subordinate revenue and profits to the pursuit of market share, with the idea that once they dominate their sector, profits will follow. That won't necessarily happen, he says.
Subscribe to MoneyWeek
Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE
Sign up to Money Morning
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
First, governments, quite rightly, hate monopolies and will step in with a slew of trying regulation that will cap (or prevent) the huge payback investors expect. Second, cheap money won't last forever as interest rates and thus opportunity costs rise, investors may be less inclined to invest on imagination alone. Readers might be better, then, to look at these firms in the same way that Bill's wife Elizabeth is trying to make him feel about vast houses.
We should thank their shareholders for stumping up the cash to keep the show on the road, and take advantage of their cheap products for as long as we can. So get a Tesla (there is a good-looking seven-seater in this week's magazine); get value from Amazon Prime by ordering compost with free delivery; and watch as much Netflix content as you can at today's prices.
The latter, as John Authers notes in the Financial Times, gives its clients a service they love. But it also has negative cash flow and a price-to-earnings ratio of 230. Do you want to own that, or a nice Japanese bank with more cash on its balance sheet than it knows what to do with? Perhaps the real triumph of imagination is to be able to set aside your prejudices about Japanese finance and take the latter. (Matthew Lynn doesn't agree!)
Finally, on the matter of imagination, turn to this week's cover story. The accepted view on population growth is that it is a very bad thing. It doesn't have to be (and the world's period of very fast population growth is almost over anyway) Alice Grhns explains why.
-
Trouble brews in B&M as bargain shops take a hitOpinion Once a stock market darling, B&M's share price has slumped. What has gone wrong for bargain shops?
-
US and China reach a ceasefire in their trade war after talks in LondonThe US and China's trading relationship – the most important one in the global economy – is back on track. Will the truce last?
-
How capitalism has been undermined by poor governanceEditor's letter Capitalism’s “ruthless efficiency” has been undermined by poor governance, a lack of competition and central banks’ over-enthusiastic money printing, says Andrew Van Sickle.
-
The biggest change in the last 17 years – the death of the “Greenspan put”Editor's letter Since I joined MoneyWeek 17 years ago, says John Stepek, we’ve seen a global financial crisis, a eurozone sovereign debt crisis , several Chinese growth scares, a global pandemic, and a land war in Europe. But the biggest change is the death of the “Greenspan put”.
-
Things won't just return to normal – that's not how inflation worksEditor's letter You might think that, if inflation is indeed “transitory”, we just need to wait and everything will return to “normal”. But this is a grave misunderstanding of how inflation works, says John Stepek.
-
Car hire and the strangeness of the post-pandemic economyEditor's letter A global shortage of hire cars and unusually high hotel occupancy rates sum up the post-pandemic global economy in a nutshell, says Merryn Somerset Webb, with enhanced demand meeting restricted supply.
-
Everything is getting more expensive – including moneyEditor's letter Investors are about to start feeling rather more pain, says Merryn Somerset Webb – from the rising price of money.
-
We may be heading for recession – and it will be no ordinary recessionEditor's letter Just as the downturn in 2020 was not a typical recession. the next downturn could be very different too, says Merryn Somerset Webb.
-
What companies should be prioritising this decadeEditor's letter In a world beset by uncertainty, companies should be prioritising slack over efficiency, says Merryn Somerset Webb.
-
Inflation could soon start to hurtEditor's letter Inflation is not going away. And with people's wages not keeping up, things are going to start to hurt, says Merryn Somerset Webb.
