Investment insights

History is repeating itself

James Hambro, Partner, Chairman
James Hambro, Chairman, James Hambro & Partners

James Hambro, Chairman, James Hambro & Partners

Sixty years ago, on 1 May 1958, Noel Coward wrote in his diary: “It is hard to imagine, considering the inherent silliness, cruelty and superstition of the human race, how it has contrived to last as long as it has. The witch-hunting, the torturing, the gullibility, the massacres, the intolerance, the wild futility of human behaviour over the centuries is hardly credible… With all this brilliant scientific knowledge of atom-splitting and nuclear physics, etc., we are still worshipping at different shrines, imprisoning homosexuals, imposing unnecessary and completely irrelevant restrictions on each other… The skies can be conquered. Sputniks can whizz round and round the globe and be controlled and guided. People are still… persecuting other people for being coloured or Jewish or in some way different from what they apparently should be.”

He went on to list the countries where war was being waged, but managed to end on a cheerful note: “God, for millions of people is still secure in his heaven, and My Fair Lady opened in London last night.”

Plus ça change?

The grim realities of war and persecution remain with us. Around the world there are currently 20 ongoing armed conflicts that have claimed over a thousand lives each in the past 18 months – including Myanmar, Iraq, Afghanistan and Syria (where the death toll is over 50,000). Homosexuality is still a criminal offence in 72 countries and in eight of them it can result in the death penalty.

And what of world economies?

Protectionism: In America, the president is revisiting the folly of protectionism, apparently oblivious to the lessons of history. Back in 1930, the Smoot-Hawley Act was introduced by one of his Republican predecessors, Herbert Hoover, raising tariffs on over 20,000 imported goods. The rest of the world retaliated and a trade war ensued that –­ in the eyes of many experts – helped prolong and deepen the Great Depression.

Speculation: Bitcoin is about 40% lower than it was at the turn of the year – it may represent new technology (blockchain certainly does) but from an investment perspective it is worth remembering what author Charles Mackay taught us in 1841. In his entertaining Memoirs of extraordinary popular delusions, he recounted the stories of the Mississippi Scheme, the South Sea Bubble and Tulipomania, warning that men “think in herds… go mad in herds, while they only recover their senses slowly, and one by one”.

Economic cycles:The current bull market has entered its tenth year and is one of the longest on record. It has been an unusually arduous climb out of recession. Slow recoveries are a characteristic of long bull markets so this one may still have a way to go. Markets are concerned with protectionism, rising interest rates in the US, the correct valuation of the mega technology companies (FAANGS – the S is for Spotify) and the increasing competition from China. The risks have grown since the start of the year and there is greater reason for caution.

Albion: In the meantime, the British are having their traditional difficulty in agreeing on the relationship they want with their European neighbours – whether to appropriate (Crécy 1415), ally (Entente Cordiale 1904), marry (EU Accession 1973) or co-habit (Brexit 2016). Equally, the Europeans are having problems deciding how to live without us. Both outcomes are going to be painful in the short term.

I don’t think that My Fair Lady is showing in London at the moment, but knowing the theatrical world’s habit of recycling, it’s only a matter of time before it is. Plays, like markets, repeat themselves.

Jamie Hambro

Posted 3 May 2018

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