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Price and value don’t always move in tandem

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By Michael O’Connor    

In 2021, the S&P 500 hit new record highs in nearly one-third of all trading days and saw losses capped at 5%.

In a year of perpetual uncertainty, we saw one of the most robust and stable market performances in the last 25 years.

"The market can remain irrational longer than you can remain solvent" – John Maynard Keynes

Last year brought us the now infamous GameStop and AMC Short Squeezes, countless meme stock rallies and a 49,000,000% return for the meme coin Shibu Inu.

At this point, I think it’s blatantly apparent to everyone that price and value don’t always move in tandem.

In finance, we often expect the world to behave rationally. We carefully look to quantify the probability of each individual outcome, but not everything is measurable. We naively assume logic will prevail and underestimate the persistent irrationality of man.

As, investor Jim Grant reminds us:

"To suppose that the value of a common stock is determined purely by a corporation’s earnings discounted by the relevant interest rates and adjusted for the marginal tax rate is to forget that people have burned witches, gone to war on a whim, risen to the defense of Joseph Stalin and believed Orson Welles when he told them over the radio that the Martians had landed."

History is a perpetual stream of mistaken opinions and unpredictable outcomes. If you’ve relied on data and logic alone to make sense of the economy, you’ve been confused for one hundred years straight.

Instead of presuming everything is purely logical, it is important to realise that there are two sides to every investment: the numbers and the story.

While not always the case, in today’s momentum-driven market, ‘the story’ has consistently been more potent than the numbers. We have seen growth stocks soar off the back of compelling narratives about future possibilities with little numbers to back them up. SPAC’s, high growth stocks and altcoins have rocketed ‘to the moon’ all hitched to a promise of what could be.

This may be frustrating for many, but these market forces need to be acknowledged and understood. Blindly assuming that logic will instantaneously prevail is a sure way to underestimate the inherent risks of the market.

Crazy things happen in markets all the time. Don’t expect that to stop any time soon.

Outlook for 2022

In short, I view this to be the mid-cycle of the recovery. The growth rates seen early in the cycle will slow, volatility will increase, economic and earnings figures will be suppressed by higher inflation and less accommodative central bank policies. However, there are still opportunities for risk assets in the coming year, albeit with more modest expectations for returns.

I continue to favour US over international stocks. Large-cap and high-quality stocks look set to lead the way as markets will likely favour a tilt towards value stocks.

Fixed income remains an asymmetric trade with little upside, while alternatives will continue to become less ‘alternative’ as investors seek diversification in a rising interest rate market.

Risks abound, but opportunities will persist.

For my full, in depth 2022 outlook, go to www.theislandinvestor.com.

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Festive jumpers and a Kerry jersey brings fundraiser to €10k

By Michelle Crean Jumpers have helped to raise almost €10k so far – but now it’s a very special jersey which could drive the fundraising numbers up! A Kerry football […]

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By Michelle Crean

Jumpers have helped to raise almost €10k so far – but now it’s a very special jersey which could drive the fundraising numbers up!

A Kerry football jersey signed by the 2022 All-Ireland winning team is up for grabs via a fundraising link once a donation is made to the Presents for Palliative fundraiser.

On Friday eight local schools including Holy Cross Mercy, Killarney Community College, Presentation Monastery, Lissivigeen, St Brendan’s College, St Brigid’s, St Francis Special School, and St Oliver’s
swapped their uniforms for their most colourful festive gear with funds going to help the amazing services in the Palliative Care Unit/Kerry Hospice Foundation.

“The day took place across the schools involved last Friday (December 2) and looks like it has been a success,” teacher Elaine Moynihan from St Brendan’s College told the Killarney Advertiser.

“The donations from the schools are still being counted but students look to be on their way towards making their goal of €10k.”

The iDonate ‘Fundraising For Kerry Hospice Foundation’ has been very helpful in this regard, she added.

“Anyone who donates via the link and leaves their name will be in with a chance to win a Kerry jersey signed by the 2022 All-Ireland winning team which will be presented to them before Christmas by a couple of members of the team.

“This was organised by the students involved in the fundraiser as a way to say thanks, and give back, to the members of the community who have gotten involved in the event – the link is live until December 18 and the draw will be made the following day.”

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Killarney punter secures €50,000 in EuroMillions draw

A lucky Killarney punter got an early Christmas present when they scooped €50,000 in the EuroMillions ‘Ireland Only Raffle’. The winning ticket, sold in the Lidl supermarket on the Tralee road, was […]

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A lucky Killarney punter got an early Christmas present when they scooped €50,000 in the EuroMillions ‘Ireland Only Raffle’.

The winning ticket, sold in the Lidl supermarket on the Tralee road, was valid for Tuesday night’s special draw.

The Killarney winner was one of 10 who each secured the €50,000 windfall.

“The National Lottery can reveal that three players in Dublin, three players in Cork and one player in Kerry, Roscommon, Kildare and Wexford all scooped the special raffle prize which was the seventh of 12 draws in the National Lottery’s ’12 Draws of Christmas’ promotion,” said a National Lottery statement.

The eighth draw will take place tonight (December 9) where 10 more players are guaranteed to win the amazing prizes.

Meanwhile, a player in Belgium scooped the EuroMillions Jackpot prize worth an astonishing €142,897,164.

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