Oct

1

SprocketThe composition of an amateur cycling peloton is random. You find butchers, City Hall employees, doctors, dentists, real estate contractors and — why not? — financial advisors and traders. But the financial advisors and traders are greatly outnumbered by the others, because it is easier find new clients on a golf course or at the racket club than in a sweaty, panting bunch. In turn, it is one of the ultimate reasons I prefer bicycle racing to other sports. It allows you to get a fresh, new perspective on the motivations of folks, friends and, indeed. investors. Yesterday though, before the end-of-season race (the results will be delivered only under torture), I was eavesdropping on a competitor trying to capture valuable racing secrets (shame on me!). To my surprise though he was talking to a friend about trading tips, the tippee being a barber and father of fellow cyclist. The financial advisor suggested:

  1) Stay long commodities (Basic materials)
  2) The stock market will keep going up
  3) You can keep buying Fiat shares (mow trading  23, recent low  4.5 in 2004) because market talk has it at 30
  4) "For G-d's sake stay away from bonds"
  5) If you really need to go long interest rates, only monetary instruments will save you.

To these arguments the barber answered he totally agreed with him and he was about to unload when the green lights would start blinking on his broker's online screen. I had a bit of a shiver down my spine . Not for the race. The last time I listened to similar comments was during  winter holidays and few were talking about snow conditions or slopes, but almost everybody was into "buy media stocks and sell autos" chat. We were then at the end  of February 2001. Subsequent events proved that there were too many longs in the market and too high expectations of newly-born companies. I don't think we will  have a similar opportunity to 2001, but, still, one cannot be too carefull when investing clients' money, so I will add some bonds to my portfolios, just in case the rosy scenario described by the racing advisor proves to be a contarian indication of future economic activity.


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