Two years in a row we’ve had Platinum’s Kerr Neilson talk at Intelligent Investor roadshows. Two years in a row I’ve found it somewhat disjointed and difficult to follow. Presentation skills to one side, though, the man is a genius. The more I reflect on the things he said, the more impact his thoughts have on me.
Last year it was the concept of ‘the gap’. Don’t just understand that there is a gap between a company and its competition, understand why that gap exists and whether or not it is sustainable.
In Melbourne this year he took a moment to reflect on tapering. He repeated the word, ‘tapering’, but rolled it around his mouth like a drop of fine wine. “Tapering. I suspect it will be a lot less significant than most people think”.
He was using it to illustrate ‘availability bias’, the psychological pitfall that causes us to overweight the information that is immediately available to us and underweight that which is not. I had a good chuckle at the time and thought about it again this morning.
For the past six months everyone has been panicking about this new financial word tapering. The chart below plots the number of news articles mentioning the word.
So what happens when Bernanke finally announces the much feared tapering is about to begin? Stock markets go up, not down, of course. Kerr Neilson, pure genius.
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Forager Funds is a boutique fund manager specialising in a value investing approach. We offer an ASX listed Australian Shares Fund as well as an International Shares Fund both aimed at delivering returns for long term investors.