Lethal cocktails rarely end well

Woodford’s ‘reckless’ investment style is precisely what the IMF latest warning refers to…

‘Lower-for-longer yields may prompt institutional investors to seek riskier and more illiquid investmentsto earn their targeted return.’

Woodford is not an isolated case. It’s just an early casualty in this lower return, lower quality, higher risk environment. 

Worrying about whether this toxic combination is going to end badly could be a complete waste of energy.

But are you willing to bet your life savings on that being the case? I’m not.

Everyone who invests expects the ‘higher returns party’ to be a good one. Otherwise why do it?

However, the current conditions are a lethal mix.

Excessive debt. Poor credit quality. Historically high PE multiples.

In my mind, this assortment is not all that different to…youth. Alcohol. Drugs. High-powered cars.

In each case, these lethal cocktails have track records in ending (very) badly.

And after your worst fears have been realised, there are all the questions.

Why did we? Why didn’t they? Where were the parents/authorities? We didn’t think?