By Mark Donovan
There are few phrases extra drained, easy, or persistently confirmed false than the assertion that “this time, it’s completely different.” And greater than 85 years after Sir John Templeton recognized these because the 4 most expensive phrases in finance, the one change has been the explanations cited to clarify why one market increase is any completely different or extra rational than the market cycle that preceded it.
Within the 1980s, the junk bond-fueled LBOs had been presupposed to revolutionize how shares had been assessed and valued; within the 1990s, the dotcom increase was premised on a misbelief that metrics like P/E ratios not mattered; and the speculative excesses that led to the 2008 monetary disaster had been set in movement by advanced fixed-income derivatives that supposedly de-risked the credit score markets. Nowadays, the “TTiD” crowd will cite digital disruption or the rise of passive investing to help new claims the previous guidelines don’t apply.
Given the clockwork-like cyclicality of those pronouncements, although, it may be worthwhile to recurrently revisit investing’s 5 foundational ideas.
Mark Donovan is co-CEO and portfolio supervisor, Boston Companions
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