STREET DOGS

As emotion is wrung from the stock market, it tends to look forward to what the economy looks like on the other side of a virulent downturn. Eventually we will have a Covid19 vaccine, which will also boost our ailing economy.

Additionally, central banks are unlikely to raise interest rates for years to come – how many countries can afford to pay a higher rate for their burgeoning national debt? For better or for worse, we believe central banks have set the stage for inflation in risky assets, and since we can’t tell you when the show starts, we have to be in our seats in advance. This may mean greater volatility – but we see little alternative as we look out five to 10 years. – FPA Crescent Fund Management

Volatility is a fact of life in markets. We make no effort to dampen volatility. We do not hedge in any meaningful way, nor do we favour holding significant amounts of cash.

We think attempts to mute short-term price swings are ultimately counterproductive, leading investors to earn too little of, or get shaken out of, great companies simply because their share prices are volatile. We want to earn strong growing businesses — market fluctuations be damned. We will often step in and buy great companies when the share price volatility is at its highest. For an investor with a long-term time horizon this is undoubtedly the best way to maximise returns.

And while stock price volatility affects every company, those that are obscure, complex and illiquid see more than their fair share; they can become downright unhinged in times like these. But this volatility does not bother us. In fact we welcome it, to the extent that by stomaching it we are able to invest in strong businesses at huge discounts. — Lightsail Capital Management