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8/6/24, 12:00 PM After latest market meltdown, will investors actually learn anything new? | Analysis – Gulf News

Since then, innovation, financial or otherwise, has driven markets. Some of it silly, but

all discussion has been devoid of fundamentals. Instead, the focus has always been on

the new, new thing. New things that imply complexity, which by definition makes them
increasingly opaque.

Investors who talk about dividends are almost sneered at, and why wouldn’t they be,

because the greater the opacity the greater the upside.

What we are seeing now is something that naturally has to accompany that upside -
greater volatility. And so, Intel can fall by 30 per cent in a day, crypto by more than 20

per cent, and all of this can happen even as companies in the UAE are generating

dividend yields in excess of 5 per cent (like Fertiglobe, Salik or DEWA).

And have nothing to do with the carry trade contagion whatsoever, with valuations

lower by more than 50 per cent than their peers. Not everything is a buy, but the ones

that are would make mutual fund giants salivate.

Giving short shrift to real value

But online platforms and analysts have little joy in recommending such stocks because

it is not the new, new thing, not part of the zeitgeist, and therefore not understandable.

In the upside down world we live in, companies will make outrageous amounts of

money till such a time that they are about to go under, and intrinsic value and
sustainability be damned.

This pattern has repeated itself with increasing frequency in the last 50 years. Despite

the so called rising fragility, investors keep restoring themselves to factory settings, back
to the class of 1980 (when interest rates first started falling and therefore became the

focal point of investors). Where value and valuations are not about fundamentals but

about the greater fool theory.

There will be a bounce, and the commentators will extol the virtues of the old players
but the edifice has been cracked. As the old song goes, “There’s a lullaby for suffering

and a paradox to blame…”

Something is about to give.

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