Global shocks and investor behaviour
In 2009 I flew to Kabul. I spent 6 months there, training a set of raw recruits to be officers in the Afghan National Army. I have nurtured a mild fascination with Iran ever since.
Much of Northern Afghanistan speaks Dari; it has historically served as the language of government. It is mutually intelligible with Farsi, which is spoken in Iran; I fell down a rabbit hole. I spent a lot of my downtime while away learning vocabulary. I taught myself to read the Persian version of Arabic script. I ordered the Farsi Rosetta Stone software and tortured my bunkmates with evening recitations into my headphone microphone. Work involved repetitive exercises and classroom lessons with 100 people who spoke almost no English and at least passable Dari. It was a perfect learning environment.
When I returned from the tour I tried to keep my hand in. I took military language exams to give me a reason to study; it helped that I got extra pay for passing them. I, in turn, paid an Iranian PhD student from Sheffield to chat to me for an hour each week on Skype. I wanted to travel to Iran. I first thought about it shortly after I got back from Afghanistan when I had some leave, but I decided private travel would be unwise as a serving military officer. I ended up catching a train to Eastern Turkey instead.
When I left the military, I tried again. My wife and I planned to go to Iran on our honeymoon. We got married in May 2014; almost simultaneously the Iranian government put restrictions on travellers from certain countries. People from the United Kingdom could only travel the country with a registered tour guide. I didn’t much like the idea, and I was still nervous that I could end up in Tehran’s famous Erin prison, as several British travellers had before and have since. My wife and I went trekking in the Caucuses instead.
Drones and air defence are proving important technologies in the current conflict in the Persian Gulf; I spent some of my time in the British military running troops operating both types of equipment. Between my personal interest and military background, the current conflict in Iran feels like a mild confluence of my experiences. How does this translate to helping people make decisions about how to invest their money? Do these niche interests provide me with some additional foresight as to the likely path of the conflict and its impact on investment portfolios? Not at all.
While I sometimes grumble at ‘evidence-based’ investors when it comes to asset allocation, I have a lot more time for empiricism when it comes to guiding investor behaviour. If you do not have sufficient exposure to financial assets the best time to invest is now. If your portfolio suffers losses in a global energy crisis the best thing to do is nothing. This seems like homespun advice but there are numerous studies that show these to be the best tactics for most people most of the time. Repeated academic analysis has shown that because financial markets go up more than they go down, simply being invested is the most important component.
So, while I enjoy a bit of geopolitical pondering as much as anyone, I think it can be a distraction. The basic formula for investing success is to ensure that you have enough cash for short term exigencies and that the remainder of your wealth should be exposed to financial assets which are most likely to defeat inflation. Although simple, this is not to say it is easy to do.
The events in the Persian Gulf have caught many experts off-guard. The US military had no littoral troops capable of threatening a land invasion nearby and has had to send for them. The GCC countries have been surprised at the extent to which Iran has treated them as legitimate targets for reprisal from US and Israeli bombs; Qatar has been particularly wrong-footed. Experienced oil trading firms had extended bets on a reduction in energy prices going into the conflict and suffered billions in losses as they rose instead. The lesson might be that following long term principles of good investment behaviour are more likely to keep you safe than trying to analyse the warp and weft of a tragic, distant war.
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