It is an (almost) known fact that investors are nervous people of the species Homo Nervousus. This specises hates uncertainty most of all. When uncertainty is up, they flee and shares are down. Since we cannot predict the result of the British referendum next week, as we could not last summer predict the actions of the Greek minister of finance or the outcome of their sudden referendum in July, it influences the markets. Uncertainty is up and shares are down.
The past days the press have reported investors stacking cash, or buying gold, or state bonds – and fleeing shares. A newspaper reported the German 10 year interest rate is below 0 for the first time ever. Europeans shares have lost 1,000 billion dollars the past week as poll indicated that the British would vote for leave.
Somehow, though, something happened after the murder of Jo Cox, a Labour MP killed while campaigning for stay. Shares went up and the risk of Britain leaving the EU seems somehow to be smaller.
However, are the share markets dominated by Homo Nervousus, the nervous man? To some extent, yes. And even tough, it may seem rational at to sell because everybody else is, it resembles on an (ok, controlled) state of panic. Everybody rush for the exit and the ‘winner’ is the first to sell.
In the best of all worlds Homo Sapiens, the thinking man, would set the order of the day. As opposed to Homo Nervousus he has a degree of phlegm. He, does not panic over would-be’s as Britain leaving the EU. He can stay calm, and has the ability to sleep well even during negotiations with Greece on their debts.
Luckily, most investors are in fact phlegmatic and sleeps well – and with good reason. In real life, millions of European companies are unaffected if Britain leaves the EU. My last post was on Recyctec, a greentech company with a process able to clean used glycol for renewed use. Their main business driver is the global megatrend of preserving the environment. For them the membership or non-membership of Britain has absolutely no impact on their ability to grow or to earn money. Nevertheless, their share went down, too. Other companies have other business drivers as health concerns, growing urban population, climate change, etc. None of them unaffected of the result of the British referendum.
The inner Homo Nervousus
Personally, I see myself as both an optimistic and a risk-taking investor, but sometimes even I, can wonder if I should join the panic and flee my shares. The past week the value of my shares are down 8-10 %. For a day or two, I could feel my inner Homo Nervousus trying to climb out of his hide and persuade me to sell the lot and stack my cash as other investors do. On the other hand, I have a strategy based on share picking and a long-term perspective – and I only sell if a share makes a sudden unexplainable move. Otherwise, I stick to my strategy, do not panic, sleep well at night – and keep my shares! And fight my inner Homo Nervousus!