The psychology behind panic selling

“The fault, dear investor, is not in our stars — and not in our stocks — but in ourselves…” – Ben Graham

One of the greatest sources of edge is the one and only thing you have any power over – your own behaviour. If you can keep your head, while everyone else is losing theirs, then you can be there to exploit the mistakes of others and scoop up what is being left on the table.

Behavioural biases are the most persistent source of advantage in financial markets. Yet they are the most difficult to exploit. These biases have always been present and always will; human nature doesn’t change after all. We may think that we have evolved into smart people, capable of coldly calculating the odds of a market crash occurring and bailing out before the first signs of trouble. Unfortunately, our brains are still running with the same software that our ancestors had, thousands of years ago. read more

Investors have a new way to help the environment

How can investors make a credible, technology agnostic and profitable difference to climate change?

Up until now the only way that investors felt they could make a difference to the environment was to divest their holdings from companies thought to be responsible for climate change. Divestment, as its known, might look good, and it might make shareholders and employees feel better about themselves, but it does nothing to influence better environmental outcomes. In fact, it can make actually things worse, especially if less ethically conscious private capital fills the void. read more

Food security risks soar as prices breach critical threshold

“Every society is three meals away from chaos” ~ Vladimir Lenin

Violent protests in North Africa and the Middle East in 2011 – commonly known as the Arab Spring – as well as earlier riots in 2008, coincided with sharp increases in global food prices. A decade later global food prices have once again breached a critical threshold, above which food price riots are thought much more likely to occur.

In late 2010 researchers from the New England Complex Systems Institute in the United States examined the relationship between global food prices and the frequency of food riots. The research indicates that higher food prices alone do not result in riots, however when they rise above a critical threshold society’s contract with the incumbent political system starts to break down: read more

How to hedge against deflation

Falling consumer prices? It doesn’t even seem conceivable where we are today in the midst of an energy crisis.

But look 12-18 months into the future and its not such a difficult thing to imagine.

But first, where have we seen deflation in the past? Consumer prices tend to be quite sticky in the sense that higher prices tend not to reverse. It is very uncommon, at least in modern times, for the overall price level to swing between inflation (a period of rising prices), and deflation (a period of falling prices). read more

A growth business: An introduction to fertiliser markets

Fertilisers play an essential role in crop development.

They have been the single most important catalyst in improving crop yields over the past 40-50 years, enabling farmers to produce enough food to support global population growth.

As this article shows, fertilisers are highly energy intensive requiring huge amounts of fossil fuels. Higher energy prices directly feed into an increase in fertiliser prices. Fertilisers make up a significant share of the costs involved with agriculture, and so any increase in cost is likely to be passed onto the next stage in the supply chain and eventually onto the end consumer. read more

Is it time to short the ‘shortage economy’?

One thing that is not in short supply are stories about shortages.

The BBC leads with “Shortage problem: What’s the UK running low on and why?”, meanwhile The New Yorker has, “The Supply-Chain Mystery: Why, more than a year and a half into the pandemic, do strange shortages keep popping up in so many corners of American life?”, the Nikkei covers the angle in a different way, “Japan’s COVID emergency is over. Labor and chip shortages are not”, and last but not least of this small sample selection, The New York Time goes with “The World Is Still Short of Everything. Get Used to It“. Meanwhile, The Economist and Barron’s magazines both lead with a major feature on shortages. read more