Glass half full or half empty?

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I seldom find recent news about Peter Lynch (Warren Buffett – yes. But not Lynch).

Peter Lynch went to work for Fidelity Investments as an investment analyst, eventually becoming the firm’s director of research, a position he held from 1974 to 1977. Lynch was named manager of the little known Magellan Fund in 1977 and achieved historic portfolio results in the ensuing years until his retirement in 1990.
So in gist, he was successful early, and retired early.

Nowadays people tend to describe him as a philanthropist working with his wife to give away a good part of the fortune he amassed as a top mutual fund manager.

So it came as a surprise to me to read some recent news about him talking about investing. (read here, here and here).

He has a way of putting things in perspective:

  1. I have no idea what the market’s going to do. Historically we’ve had about a 10 percent decline every 18 months. We’ve had a 20 to 25 percent decline every five or six years. I don’t know when they’re going to happen. 
  2. I think you have to put it into perspective. China, in economic terms, you talk about the second-largest economy in the world, (but) China is about equal to (the economy of) a Florida and a California. I don’t know whether China’s going to slow down or come back. I’m not downplaying it. You just have to put it in perspective.
  3. One percent of our exports go to China, less than one percent. Our largest export partner is Canada, number 2 is Mexico. Only 10 percent of our economy is exports,
  4. I think housing is way below where it should be. Existing housing is a huge market – people buy drapes, they (remodel) the kitchen, they buy furniture.

 

Now contrast that with what Marc Faber (publisher of “The Gloom, Boom & Doom Report) says (read here and here):

  1. Marc Faber predicted a 40 percent drop in stocks, and an impending recession in the next six months. Faber said he believes China’s economy is heading toward a recession as well. (All these, he pointed out in July 2015)
  2. An economy like China is not like a car where you just drive around the corner. The Chinese economy cannot be stimulated meaningfully for the time being—it will take time.
    And any negative news out of China will eventually hurt U.S. companies.
  3. When the weakness in China becomes so evident, it also affects all its trading partners and China is the largest trading partner of 124 different countries in the world. The new point of view is that [China’s economic growth] is nowhere near 7% and more likely closer to 2%, if any growth at all.
  4. We don’t know exactly why China began to weaken its currency. It could be because of massive capital outflows. It could also be a warning signal to the world that if the world, notably the U.S., doesn’t treat China fairly—and they have some reasons to believe that certainly from their perspective, that they also can embark on economic and financial warfare.

 

On the one hand you have the realist who does not predict, and on the other hand you have a pessimist who predicts. I refrained from calling Lynch an optimist, because he neither predicts a good or bad market nor whether the economy is slowing down or not. He just states the fact that corrections and crashes are normal, and about the relative size of the Chinese economy, inferring that the China issue is overblown.

  • Yes Chinese Economy is big. But how big?
  • Yes US economy will be affected by Chinese slowdown – but in relative terms – how much does US export to China?
  • Yes market corrected, but what is the drop in relative to the past few years rise? How often do we get it?

Anyway I am not an economist. There are multiple ways to view a single event.

Whatever the outcome, it is beyond our control. Just invest in the sum you are comfortable with for the long term.

 

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About apenquotes

Born in 1976. Married with 2 kids (a boy and a girl). A typical Singaporean living in a 4 room HDB flat.
This entry was posted in Portfolio. Bookmark the permalink.

2 Responses to Glass half full or half empty?

  1. giraffevalue says:

    Thanks or sharing. Really hard to find Peter Lynch stuff online. He looks old now compared to the 1994 lecture video on YouTube.

    Like

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