Archives

I recently went to see the latest James Bond film to watch Daniel Craig’s last appearance as the British superspy. It was Craig’s fifth outing since his introduction in 2006 and the latest release marked a rather explosive end of an era in the latest storyline of 007. In our slightly less glamorous world of investment management, might we be facing an end of an era moment too? Since 2010 inflation in G10 countries has averaged 1.5%, below the typical 2% central bank target. This year we have seen inflation move sharply higher and whilst much of the narrative has suggested these moves are transient in nature, events in the past few weeks have posed a valiant challenge to this view.

The ability to explain a concept or subject to someone else is a challenge. It requires you to both understand the topic you have been asked to discuss, but also communicate it in a way that is understandable to the listener or reader. Listening and reading are two of the most important activities in our industry. After all, we have two eyes and two ears, but only one mouth.

When it comes to risk management, a little bit of paranoia is probably a good thing. This applies when managing your finances, but history tells us that it is even more critical in the field of aerospace engineering. On the morning of 28 January 1986, the crew of the Space Shuttle Challenger tragically fell victim to one such failure as their spacecraft disintegrated a mere 73 seconds after launch. The cause of the accident was a seemingly insignificant faulty part, namely the rubber O-ring. These O-rings were a mere 7.1 millimetres in diameter, yet the malfunction had the gravest of consequences.

This week, an innocuous announcement from BP about temporarily closing a handful of its petrol stations due to a driver shortage caused panic buying and fuel shortages across the UK. In March, I wrote a blog called “Why we are all hard wired to be bad investors”. This week’s events are a good example of some of the behavioural inefficiencies highlighted. It is worth looking at the psychology of panic buying events and how these behaviours read across to stock market movements.