Can anyone predict a share market crash?
Share market crash

A strange thing happened in the financial world last year. An event so unusual, that I can’t ever recall seeing similar in my 25 years in the advice industry.  And what was this mysterious event?   Well, a fund manager actually closed down a fund and returned all money’s to the investors.

Now I have certainly seen managed funds close before. And yes, I have seen plenty of them return money back to investors. But in all those cases, it was always because of management incompetence and failure rather than the reason cited for this closure. And that was?  Fear!  That’s right, you read it correctly, fear, just plain old everyday fear.

The Chief Investment Officer for Altair Funds management, Mr. Philip Parker cited his reason for the closure of their flagship fund as a genuine fear of an impending financial calamity. It seems the calamity would have been so great that he expected it to destroy share and property prices by up to 50%.

And because his greatest responsibility was to protect investor wealth, his best course of action was to simply pull up stakes and “get out of town” (my words not his).

I must say, it’s a truly strange world when a fund manager ‘loses it’ because of a perception that markets are extremely overvalued and is terrified of the consequence. And apparently, it was a consequence so concerning that he decides to close his ‘bread and butter’ and risk his reputation into the bargain.

Share markets fall
Share market fall

Call me old-fashioned but one would think the whole reason for using a fund manager, was to have someone else navigate the stormy waters of the Investment Sea, so we simple folk don’t drown. It appears not to be the case.

I do hope this doesn’t start a trend in other professions. I would hate to think my surgeon suggesting halfway through a life saving operation that it was getting really scary, “so let’s sow him up and go home”.

So, was this fund manager right about a calamity? Well, not as yet to my knowledge, and the dire prediction was almost one year ago. Happily, there’s been nothing even close to a major correction, let alone a calamitous event akin to what was predicted. Phew!

So even the perceived experts, with all their research and analysis, can and will get market forecasts spectacularly wrong. And I can assure you, there are always plenty of similar predictions issued every year. Although never with the same hullaballoo.

And as an investor, it is sometimes very hard to ignore them all, because professional money managers would seem like a pretty reliable source. But these guys can’t even predict if it will rain in a few days, let alone predict a gigantic market crash in a months time.

So don’t be fooled by all the ‘Nostradamus’s’ that seem to inhabit the investment world. There are many reasons to issue dire forecasts than to just warn the investing populace of impending doom.  Publicity being chief amongst them. 

For a small, boutique fund manager, the gravitas of a few column inches of dire predictions, splashed across the finance pages of a daily newspaper can do wonders for brand recognition and consumer perception. 

But I must say, Altair Funds Management did take it a step further by actually acting on their own advice! oops.

So don’t get too hung up on dire predictions and warnings of impending market crashes. They are more than likely issued by someone who is wanting the notoriety rather than any great service to humanity.

Remember, as a long-term investor, share market falls are ‘par for the course’, and are just another obstacle to navigate on your investment journey. They will happen, that’s for certain, when they’ll happen is the bit open to debate. 

Thanks for reading and see you next time. Home Page 

Update 12/10/18:  For those reading this with the backdrop of the recent Dow Jones falls as well as global markets, we are not experiencing a calamitous event, but rather a standard market correction.

Of course, events such as this may lead to a bear market (which I doubt very much it will on this occasion)  but it’s certainly not the end of share trading as we know it! Time to look for some bargains, that’s all.

Update 25/11/19: Not only have markets recovered one year on, they have powered to record levels!

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