Ordinary stuff

28 April 2004 Angelo Coppola

After a fairly stirring start to the year, the last two months have been pretty ordinary, reports James A. B. Downie from

As I've said before, the rolling 12 month returns are going to look weird this year as we add on new months and cast off the old ones from last year. March 2004 and maybe April, but don't hold your breath, will be the best rolling 12's this year.

In May, the 12 month figures will cast off last year's May number of 9-11%, for the month, so unless May 2004 produces an equivalent extraordinary return, the rolling annual performances will take a bit of a dive.

So investors/trustees with 30 June year-ends, don't think you're going to be able to brag about the 30% figures in the surveys. The time to communicate investment returns is now.

Still, with annual inflation rates hovering in the very low single figures, an annual return of 10% is pretty good. There's a facet of behavioural finance called "anchoring" that deals with our inability to accept a result that is dissimilar to what we are used to.

I wonder how many people read the figure of 10% and said to themselves "I don't think a return of 10% is pretty good". That's anchoring - when last year was over 20%, anything less is bad.

The race for top spot over 12 months is nail-biting in the moderate risk space. Both the domestic race and the global mandate competition are tight with managers vying for the top 5 places.

Only about 1.5% separates the 5 leaders in both tussles. Makes it easier for commentators when the leaders swap around a bit. It's not very newsworthy to say every month or every quarter, "Manager A is still at the top."

I came across an interesting quote in a book the other day. "It was true that the global economy was in good shape; since the collapse of communism and capitalism - now so long ago that both events seemed simultaneous - the skilful application of Chaos Theory by World Bank mathematicians had broken the cycle of booms and busts, and averted (so far) the Final Depression predicted by many pessimists."

Obviously from a work of fiction that also referred to the Great Oil War of 1990-1 but interesting thoughts nonetheless.

Does anyone know the e-mail address of a World Bank mathematician? It seems like we could use one right now.

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