Vincent’s Blog: Fashionable Investing: “Monkey See, Monkey Do”

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Ciao Tutti! It is carnival in Venice, the sun is out, the costumes are amazing and the beautiful city is sighing under the strain of its old age. The costumes are intricate, elaborate and it must take quite some time to get dressed for the tourist crowd on San Marco. What a sight, really worth a picture and so different from the carnival outfits you see in Northern Europe, the Caribbean, Brazil or at Halloween parties in the US. Walking along Riva degli Schiavoni on the San Marco waterfront promenade, the view is magical and you see thousands of people capturing the moment with iPhones, iPads, GoPros and all sorts of “old fashioned” digital cameras. On the small bridges it is a hassle to sidestep the fake Gucci sunglasses and copy LVMH handbags and hey… something new, selfie sticks!

Copy Paste
Copy Paste
Copy Paste

Why do we do this to ourselves? We all seem to want the same, why? Is the human race one giant copy machine with a few exceptions to fuel the next thing to copy? Are we natural born copycats? Yes, we are and it has been a big part of our success as a human race. Can you imagine a world where you would have seen a spear killing a buffalo, a hook catching a fish or planting seeds growing a cornfield? Walking away without copying it would have been a disaster. There would not be seven billion people roaming earth today. Copy that!

We are all copycats. To copy is to be, just accept it. We do it as babies, in fashion, with the food we eat, the diets we follow, the studies & careers we choose and… with the investments we make. As copycats we don’t lead a cheap life. I know this sounds counter intuitive but it is true, copying costs money. You pay full price to be fashionable and everything in high demand is likely expensive. Copy that!

In the late sixties and early seventies it was quite fashionable to invest in a group of stocks called the Nifty Fifty. These were a loosely defined group of companies which were supposed to be bullet proof and you were supposed to do great if you bought them and held them forever, guaranteed success! They were called “one-decision stocks”. General Electric, Coca Cola, IBM, Xerox, Eastman Kodak and Polaroid were a few names among them. Nifty Fifty investing was so fashionable that valuations became very stretched and investors copy pasted them straight into a bubble. The bubble burst and many Nifty Fifty investors lost out badly in the bear market that followed.

It will not come as a surprise to you that I did not see a lot of people in Venice capturing their Kodak moment with analog Kodak film. Neither did I see a lot of people shaking it like a Polaroid. You see, most “one-decision stocks” went badly out of style and you would not be caught dead with them in your portfolio. Copy that!

Beware of the copy paste crowd when it comes to investing. Passive index investing is very much in style. Buy and hold, one decision, brainless investing. Success guaranteed! Take a picture; use your newly bought selfie-stick (you have one right?) and put yourself in the same frame as the S&P500. You likely framed another fashionable bubble and you are in it. Copy that!