Invest Now? Things Might Not Be What They Seem

14th of October, 2019 

Many years ago, there was a farmer who owned a beautiful homestead on a picturesque piece of land that was enriched with the greenest of pastures. One day while out attending to his farm he sighted a beautiful white stallion. The wild stallion was the envy of everyone in the village, but no one had been able to capture the animal.

So, the farmer set about capturing the majestic animal and after many days of trying he was victorious and proudly led the animal through the town to the admiration of the villagers.

All his neighbours gathered to congratulate him: “How fortunate you are.  So blessed.” They cried, to which the farmer responds, “We’ll see”

The next day the farmer’s son saddled up the stallion and attempted to ride it. The white stallion reared and bucked eventually throwing the farmer’s son to the ground, breaking his leg.

All the neighbours who had gathered to watch the spectacle were shocked and said “Oh my, what a shame. Your poor son, how terrible for him.”  to which the farmer responds, “We’ll see”

The very next day soldiers came to the village to enlist every able-bodied man into the army.  Because the son had a broken leg, the soldiers left him alone.  The neighbours gathered to congratulate the farmer: “How fortunate for your son to have broken his leg. And you are so lucky you are able to keep your son safe at home with you.”

And so the story continues……

Often things are not what they seem.

A firefly is not a fly – it is a beetle.

A prairie dog is not a dog – it is a rodent.

Indian ink is not from India – it is from China and Egypt.

A lead pencil does not contain lead – it contains graphite.

A Douglas fir is not a fir – it is a pine.

So, I ask you, is any event really good or bad?

There is no way to know because what looks bad (or good) on any given day might turn out to be just the opposite in the following days.

So, think about this little tale as you agonise over the recent falls in the share market. $45B is a lot to wipe off the values of the ASX in a couple of days. The Australian Financial Review said “ASX whacked amid global stock rout.”

Like the Farmer’s “We’ll see” attitude, at Calnan Flack we see opportunity here amongst the blood and anxiety on the street.

Fears abound of a looming recession. The RBA like other central banks around the world are in a death-defying spiral of continually cutting interest rates. Trump is taunting China like a school yard bully and BREXIT, well enough said there.

However, it is important to view things within context. Remember the Aussie market just rallied nearly 1,500 points in a vertical manner off the December 2018 low. It is probably reasonable to expect some sort of retracement?

When the market gently drifts down 500 points that’s seen as OK by the public. But when a 500 point drop occurs in a couple of weeks, well there is only one thing to conclude. “Another GFC is upon us…”

Just maybe what appears like the beginnings of the next financial market disaster might turn out to be just the opposite in the following weeks.

“We’ll see”…