An Interview with The Market

June 29, 2019

On
the last week of June 2019, on Saturday morning for a late breakfast than the
time I’m accustomed to , I was able to catch up with The Market, best known for
generating capital for several companies across the world while simultaneously
bringing joy and misery to countless of investors. Millions of people observe
and follow The Market every day, and many complain about the irrationality and
unpredictability of The Market’s outcomes. I sat down with him to get his side
of the story, and he was very open and candid.

Charles:
Now more
than perhaps any other time in history, the spotlight shines brightly on you as
people across the world are watching your every move. What are your thoughts on
this?

The
Market:
I
totally understand why the focus is on me. Look, the world is deeply
interconnected, and investment and economic policy decisions made in one part
of the world influence how investors approach another part of the world. For
instance, there is this blonde guy who has been tweeting a whole bunch lately
and talking about sanctions which has caused quite a disarray for me and my
operations especially in the Emerging and Frontier spaces. Then you also have
central banks influencing monetary policy through their decisions on the
direction of interest rates which greatly impact asset prices. With all these
decisions and actions being taken, no wonder I often feel like I’m under a
microscope.

Charles:
Interesting.With your broader influence, why are investors jittery especially now?

The
Market:
I hate
to break it to you Charles, but investors are and will always continue to be
jittery as long as they are humans. I am the culmination of human beings who
are driven by greed, fear, panic and euphoria. I’m widely successful due to
these very characteristics and since most people will remain irrational, I’ll
continue minting money for eons to come.

Charles: What do you mean by
irrational?

The
Market:
Good
question, I was wondering when you’d start asking one…First let’s define
rational investors. These are people whose investment decisions are simply
driven by facts rather than emotional responses. They take a long-term approach,
tend to be independent of thought and invest based on the fundamentals of the
investments they are evaluating.

The
opposite of these people are irrational investors, who tend to largely follow
the crowd and whose decisions are driven by emotions, beliefs and stories.
These are the same folks who usually buy into fads or get-rich-quick schemes which
lead to bubbles and subsequent busting of those bubbles, case in point the
global financial crisis of 2008. However, the interesting bit of this is that
most investors don’t consider themselves irrational. In fact, their perception
of being rational is what’s been so adverse for them and beneficial for me.

Charles:
Seems a
significant portion of investors are irrational. Does that solely explain why
there are very few investors who’ve been consistently at the top in delivering
superior returns and beating you over a long period of time?

The
Market:
Unfortunately,
I have to admit some investors have gotten the best of me, but I wouldn’t
attribute it solely to irrationality. There is an element of luck especially
for those investors who beat me intermittently. 
For the investors who’ve beat me consistently over the long run, hats
off to them as they’ve remained disciplined and rational in the face of immense
biases and noises.

You
told me you’re an analyst at an investment company, so I’m sure you’ve heard of
Warren Buffet. There is a reason he is the richest investor in the world. What
is he now, the third or fourth wealthiest individual in the world, these lists
change so often nowadays especially with these garage tech billionaires popping
up right, left and center. Anyway, I digress. But his investment acumen is
worth studying.

Charles:
Thanks for
the recommendation. Shifting gears, a bit, what is your view on Africa and
especially on the capital markets?

The
Market:
I’ve
done some big business in Africa. Started out in Egypt in 1883, then worked in
Johannesburg from 1887 and currently operate in 27 other exchanges. The Africa
rising story is encouraging with improving political climate, resource
mobilization, a growing and educated demographic and increasing investment
capital inflows from across the world.

Most
of those factors I’ve mentioned are what you and most of your colleagues read
on your desks from the vast number of economic reports being published about
Africa. Though, in reality, these factors will remain prospects at best unless
proactive measures are taken by both government and the private sector.

Touching
on the capital markets, especially Kenya since I happen to be visiting here,
the entire stock market is driven by 5-8 companies at best. Over 70% of the
daily market turnover is driven by foreigners. The market’s corporate bond
market has dried up since the collapse of the two local banks in 2015. The last
significant equity IPO was who knows when…I know when but I’m making a point
here, so bear with me. In my opinion, a lot must be done by both the local
institutional and retail investors to revive and make vibrant both the equity
and debt markets. Investor education and awareness about the clear benefits and
risks of investing in capital markets is a good place to start and I’m seeing some
encouraging action especially in the social media space including from the camp
you work for Charles.

Charles:
I echo
your sentiments on our responsibility as Africans to create more vibrant
capital markets. What’s next for you as we head for the second half of the
year?

The
Market:
Same
old, same old.I’ll continue doing my business regardless of all the
news, noises and so-called shocks across the world, through generating value for
the very few investors who are rational and providing a source of capital for
companies and governments.

Charles:
It’s been
nice chat. Thanks for your time and looking forward to touching base with you
next year.

The Market: (With a grin on his face) …If you invite me to a better restaurant, I’ll perhaps consider meeting up with you again.

Article by Charles Miano – Investment Analyst Nabo Capital