Investors are often spectacularly bad at investing. Alan Greenspan, the former chairman of the US Federal Reserve Board, coined the phrase "irrational exuberance" back in 1996. He was, famously, talking about investor behaviour during an overheating market, when everyone keeps on buying an asset even when all the signals point to a bubble waiting to burst.
And it's not just retail investors who make mistakes. Studies of the performance of the best-paid market professionals, such as analysts and fund managers, show that they mostly get it wrong when predicting markets.
However, all hope is not lost for investors looking to profit from superior insights into the possible future direction of the markets.
Some basic and very simple tools can help investors to piece the puzzle together and make rational investment decisions over time. Here are some of our favourites.
1 Understand the historic price movements of any assets you want to buy.
It is critical to have a good impression of historical price movements. We are not strong followers of technical analysis, but some basic techniques can very quickly provide useful insights.
For example, if a share price has rallied strongly in recent weeks or months, it is normally prudent to wait for a period of more stability before making the investment.
How do we know the right time to buy? The economist E S C Coppock developed an excellent, if slightly morbid, indicator of long-term price movements.
Coppock wanted to identify buy signals for the Dow Jones index following a downturn. His insight was that stock market downturns are like a bereavement, both of which require a period of mourning.
So Coppock did some research and found that most people in bereavement will recover after 11 to 14 months.
While he applied this research to the Dow Jones index in New York in the 1960s, it has since proved useful in understanding other stock markets.
Current readings on the Coppock indicator for the Dow Jones already point to an extreme oversold position, though not quite as bad as during the 1930s.
2 Perform some basic valuations.
Many a poor investment would have been avoided if the investors spent a little time analysing the fundamental value of the asset. With hindsight, it is often easy to spot the major pitfalls.
For example, the Saudi equity market in early 2006 traded on a price to earnings ratio of 44 times (compared with a long-term average of around 12 to 15 times).
Or take the NASDAQ index in early 2000, trading on a earnings multiple of 100 times plus.
During these periods, many investors are convinced that it "will be different" this time. It rarely is. Current valuations for regional and international stock markets seem fair, compared with their long-term averages, although one has to caution that, in times of extreme uncertainty, profit forecasts become very difficult.
And that obviously makes market and stock valuations equally difficult.
3 Study the macroeconomic and political environment.
This is often the most difficult aspect to get right, not only for professional analysts but also for part-time investors.
The future is unknown, and it is often difficult to establish a reasonable outlook beyond extrapolating the most recent past.
A top US fund manager once capitulated with the admission that "we do not know what tomorrow will bring, we therefore might as well think that it might be nice".
We have found that markets often get the major turning points right, leading macroeconomic developments by somewhere between three and 12 months.
Take recent developments in the US housing market. A comparison of the movement in the S&P Homebuilders Index with the Case-Schiller physical home price index shows that the market prices of listed home building companies in the US started to turn down at least six months before the prices of houses began falling.
Today, a range of global stock and bond markets are relatively strong. If we take this as an indication of the future direction of the real economy, one has to be somewhat optimistic that a recovery in the global economy is not too far away.
Closer to home, we have also noted the very strong performance of real estate and financial stocks on the Dubai and Abu Dhabi markets. The market is telling us that better macro news is heading our way.
4 Protect your downside risks.
We can attempt to strike a balance between risk and reward, but in the end we cannot be certain that our estimates will be correct. Therefore, we should look at some downside protection.
Very often the cheapest and best protection comes through proper diversification, but even that approach will not protect against the "iceberg" or "black swan" events when they come around.
As such, we should consider employing proper downside risk management techniques, such as buying out of the money put options where appropriate.
5 Study the sentiment of other investors.
We consider it extremely important to watch the actions of other investors, not necessarily to find out what they are doing - although we may get some good ideas - but more to gauge the market sentiment.
Sophisticated software can now provide counts of the time that certain keywords such as "recession" are used in newspaper or magazine articles.
Less sophisticated but equally useful is to listen to other investors to find out what the latest "hot tip" would be. That is more often than not the one to avoid, especially if it gets repeated often.
In the words of the famous investor Sir John Templeton: "Bull markets are born on pessimism, grow on scepticism, mature on optimism and die on euphoria. The time of maximum pessimism is the best time to buy and the time of maximum optimism is the best time to sell."
The extreme pessimism of the past 12 months is busy giving way to better market sentiment.
The best buying opportunities taken by brave investors at the beginning of this year may have passed, but there are always opportunities for long-term investors who base their picks on sound principles rather than "irrational exuberance" and other flawed strategies.
Deon Vernooy is a senior executive officer at Emirates Investment Services
Skewed figures
In the village of Mevagissey in southwest England the housing stock has doubled in the last century while the number of residents is half the historic high. The village's Neighbourhood Development Plan states that 26% of homes are holiday retreats. Prices are high, averaging around £300,000, £50,000 more than the Cornish average of £250,000. The local average wage is £15,458.
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Formula Middle East Calendar (Formula Regional and Formula 4)
Round 1: January 17-19, Yas Marina Circuit – Abu Dhabi
Round 2: January 22-23, Yas Marina Circuit – Abu Dhabi
Round 3: February 7-9, Dubai Autodrome – Dubai
Round 4: February 14-16, Yas Marina Circuit – Abu Dhabi
Round 5: February 25-27, Jeddah Corniche Circuit – Saudi Arabia
Important questions to consider
1. Where on the plane does my pet travel?
There are different types of travel available for pets:
- Manifest cargo
- Excess luggage in the hold
- Excess luggage in the cabin
Each option is safe. The feasibility of each option is based on the size and breed of your pet, the airline they are traveling on and country they are travelling to.
2. What is the difference between my pet traveling as manifest cargo or as excess luggage?
If traveling as manifest cargo, your pet is traveling in the front hold of the plane and can travel with or without you being on the same plane. The cost of your pets travel is based on volumetric weight, in other words, the size of their travel crate.
If traveling as excess luggage, your pet will be in the rear hold of the plane and must be traveling under the ticket of a human passenger. The cost of your pets travel is based on the actual (combined) weight of your pet in their crate.
3. What happens when my pet arrives in the country they are traveling to?
As soon as the flight arrives, your pet will be taken from the plane straight to the airport terminal.
If your pet is traveling as excess luggage, they will taken to the oversized luggage area in the arrival hall. Once you clear passport control, you will be able to collect them at the same time as your normal luggage. As you exit the airport via the ‘something to declare’ customs channel you will be asked to present your pets travel paperwork to the customs official and / or the vet on duty.
If your pet is traveling as manifest cargo, they will be taken to the Animal Reception Centre. There, their documentation will be reviewed by the staff of the ARC to ensure all is in order. At the same time, relevant customs formalities will be completed by staff based at the arriving airport.
4. How long does the travel paperwork and other travel preparations take?
This depends entirely on the location that your pet is traveling to. Your pet relocation compnay will provide you with an accurate timeline of how long the relevant preparations will take and at what point in the process the various steps must be taken.
In some cases they can get your pet ‘travel ready’ in a few days. In others it can be up to six months or more.
5. What vaccinations does my pet need to travel?
Regardless of where your pet is traveling, they will need certain vaccinations. The exact vaccinations they need are entirely dependent on the location they are traveling to. The one vaccination that is mandatory for every country your pet may travel to is a rabies vaccination.
Other vaccinations may also be necessary. These will be advised to you as relevant. In every situation, it is essential to keep your vaccinations current and to not miss a due date, even by one day. To do so could severely hinder your pets travel plans.
Source: Pawsome Pets UAE
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Key facilities
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- Premier League-standard football pitch
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- 600-seat auditorium
- Spaces for historical and cultural exploration
- An elevated football field that doubles as a helipad
- Specialist robotics and science laboratories
- AR and VR-enabled learning centres
- Disruption Lab and Research Centre for developing entrepreneurial skills
The specs
The specs: 2019 Audi Q8
Price, base: Dh315,000
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Fuel economy, combined: 6.7L / 100km
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Killing of Qassem Suleimani
Our legal columnist
Name: Yousef Al Bahar
Advocate at Al Bahar & Associate Advocates and Legal Consultants, established in 1994
Education: Mr Al Bahar was born in 1979 and graduated in 2008 from the Judicial Institute. He took after his father, who was one of the first Emirati lawyers
Ms Yang's top tips for parents new to the UAE
- Join parent networks
- Look beyond school fees
- Keep an open mind
Top 10 most polluted cities
- Bhiwadi, India
- Ghaziabad, India
- Hotan, China
- Delhi, India
- Jaunpur, India
- Faisalabad, Pakistan
- Noida, India
- Bahawalpur, Pakistan
- Peshawar, Pakistan
- Bagpat, India
How much sugar is in chocolate Easter eggs?
- The 169g Crunchie egg has 15.9g of sugar per 25g serving, working out at around 107g of sugar per egg
- The 190g Maltesers Teasers egg contains 58g of sugar per 100g for the egg and 19.6g of sugar in each of the two Teasers bars that come with it
- The 188g Smarties egg has 113g of sugar per egg and 22.8g in the tube of Smarties it contains
- The Milky Bar white chocolate Egg Hunt Pack contains eight eggs at 7.7g of sugar per egg
- The Cadbury Creme Egg contains 26g of sugar per 40g egg
Company%20Profile
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Company%20profile
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Director: Laxman Utekar
Cast: Vicky Kaushal, Akshaye Khanna, Diana Penty, Vineet Kumar Singh, Rashmika Mandanna
Rating: 1/5
Test
Director: S Sashikanth
Cast: Nayanthara, Siddharth, Meera Jasmine, R Madhavan
Star rating: 2/5
In numbers: PKK’s money network in Europe
Germany: PKK collectors typically bring in $18 million in cash a year – amount has trebled since 2010
Revolutionary tax: Investigators say about $2 million a year raised from ‘tax collection’ around Marseille
Extortion: Gunman convicted in 2023 of demanding $10,000 from Kurdish businessman in Stockholm
Drug trade: PKK income claimed by Turkish anti-drugs force in 2024 to be as high as $500 million a year
Denmark: PKK one of two terrorist groups along with Iranian separatists ASMLA to raise “two-digit million amounts”
Contributions: Hundreds of euros expected from typical Kurdish families and thousands from business owners
TV channel: Kurdish Roj TV accounts frozen and went bankrupt after Denmark fined it more than $1 million over PKK links in 2013
