It could have been Mark Twain who said something to the effect that history does not repeat but it does rhyme. In my opinion, whoever said it could quite easily have been referring to the financial markets and to the global economy in general. Although technology changes, as do fashions, much remains the same especially in the context of human nature. Looking back at J.K. Galbraith's classic The Great Crash 1929, with its depiction of fear, greed, panic and hubris, it's not difficult to see parallels with the financial crisis in 2007. Technology may have moved on but the human condition appears to remain static.
Casting our minds back to the recent past, how many serious commentators predicted a Trump Presidency? How many pundits predicted Leicester City winning England's Premier League in 2016? And what about Brexit? Let's finesse that. How many of those who accurately predicted those outcomes were prepared to bet a penny on their predictions? Sure, I can't prove it but I would suggest that very few people predicted those events, at least in their embryonic stages. And even fewer were prepared to wager anything on their own views.
As anyone who has studied history can testify unusual events frequently happen. Once assimilated they are no longer regarded as unusual; they are generally forgotten about. I am sure that looking across all sports and over time, Leicester City's accomplishments are not exceptional. Putting events in context, especially putting them into a longer time frame allows us to see similarities. Do you seriously believe that Trump's behaviour is that outrageous when compared to other leaders across time and space? Listening to the late Alistair Cooke's radio broadcasts in “Letters From America” gives a good portrait of how spicy American politics has been in the not so distant past. Viewed in context, I would suggest that Trump the politician may not be as odd as many believe.
So what you may ask as the above got to do with portfolio diversification? The point I am really making is in terms of the unpredictability of events – political, technological, social and economic, amongst many others. I would argue that we may have some broad ideas where things are moving, at least in the short-term, but that's broad and it may not go exactly to plan. Maybe as investors we need to accept that we have no…
Fortunately I practise what I preach. A company that I mentioned in this article, Kennedy Ventures, has been suspended from the stock market as a result of not being able to file its accounts on time. With a market valuation of around £10 million and some £2.4 million in cash plus some very valuable strategic assets, I expect this to be a temporary state of affairs. Basically, it appears to be something of an oversight. The company's year end is 31st December but the local auditors are closed until 8th January and so are unable to sign off its Namibian subsidiary's accounts.
No matter how the above is viewed, it does in my opinion, demonstrate just how unpredictable listed companies can be. Although I saw Kennedy as being inherently risky, the late filing of accounts was not something that remotely occurred to me as a potential risk. It was outside the range of possibilities that I considered. It took me and I suspect most investors by complete surprise.
But this is the real point. Since the announcement of the suspension on 21st December, I have not really given it much thought. Why? Simple, I haven't bet the ranch on this stock or any other for that matter. Should the company be de-listed I would be most unhappy. But it will have no material impact on my life. That said, I don't think that it will occur but it could. Kennedy's suspension has reiterated the lesson I learned a long while ago about the unpredictability of events. The only possible solution I have come across is diversification. Not over exposing oneself to any one position. Simply accepting that the unexpected does happen. And above all else limiting any one investment to no more than what I can comfortably afford to lose. That's key.
By the way, if someone does have a fully functioning crystal ball I might be interested in buying it.