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Money: Like Tolstoy’s general said, the strongest warriors are “time and patience”

26 Oct 2018

Could Leo Tolstoy have something to tell us at this time? Share market have slumped with portfolios down 5% to 7% in the past three weeks?

No one has called us asking for an explanation although I bet there are a few who wonder if this could be the ‘big one’ that commentators have been talking about for the past two or three years.

It was the NBR this week that pointed out that there had been two other share market slumps of a similar magnitude to this one already this year, the first starting on 26 January and the second on 9 March. How quickly we forget the scary stuff when we get a few months of good returns in between.

If you look at the main United States index consisting of the largest 500 companies in the US, the S&P 500, you can see it hasn’t exactly been plain sailing over this time –

S&P 500 Index of Large US Shares Year to Date


Source: Bloomberg

There have been plenty of ups and downs over the past 10 months which is typical of share markets, but it was the fall of nearly 7% in the week beginning 3 October that rattled markets around the world.

Why this kind of fall in share prices? Why now?

There have been all sorts of answers to those questions ranging from rising interest rates in the US (in reality this reflects good news), to the trade war between China and the US, to reduced growth coming out of China, to the rise in high-frequency trading by computers that send sell or buy signals to the market in milliseconds based on complicated assumptions that someone has decided are relevant.

Whatever the answer, it was up to Jim Parker of Dimensional to bring up the reference to Leo Tolstoy’s great novel, War and Peace, in which a Russian general charged with defeating Napoleon and expelling the French from Russian soil argued against rushing into battle, saying the strongest of all warriors were “time and patience”.

Time and patience worked for the Russians in 1812. Perhaps it too is the real answer to the questions I asked above.

Keep asking great questions …

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