The Long Good Buy

Analysing Cycles in Markets

Peter C. Oppenheimer

• Publisher: Wiley
• Year: 2020
• Print ISBN: 9781119688976
• eBook ISBN: 9781119689003
• Edition: 1
• Topic: Business
• Subtopic: Finance
• Index: Business

PRAISE FOR THE LONG GOOD BUY:

"Oppenheimer offers brilliant insights, sage advice and entertaining anecdotes. Anyone wishing to understand how financial markets behave – and misbehave – should read this book now." Stephen D. King, economist and author of Grave New World: The End of Globalisation, the Return of History

"Peter has always been one of the masters of dissecting financial markets performance into an understandable narrative, and in this book, he pulls together much of his great thinking and style from his career, and it should be useful for anyone trying to understand what drives markets, especially equities." Lord Jim O'Neill, Chair, Chatham House

"A deeply insightful analysis of market cycles and their drivers that really does add to our practical understanding of what moves markets and long-term investment returns." Keith Skeoch, CEO, Standard Life Aberdeen

"This book eloquently blends the author's vast experience with behavioural finance insights to document and understand financial booms and busts. The book should be basic reading for any student of finance." Elias Papaioannou, Professor of Economics, London Business School

"This is an excellent book, capturing the insights of a leading market practitioner within the structured analytical framework he has developed over many years. It offers a lively and unique perspective on how markets work and where they are headed." Huw Pill, Senior Lecturer, Harvard Business School

" The Long Good Buy is an excellent introduction to understanding the cycles, trends and crises in financial markets over the past 100 years. Its purpose is to help investors assess risk and the probabilities of different outcomes. It is lucidly written in a simple logical way, requires no mathematical expertise and draws on an amazing collection of historical data and research. For me it is the best and most comprehensive introduction to the subject that exists." Lord Brian Griffiths, Chairman - Centre for Enterprise, Markets and Ethics, Oxford

Part I
Lessons from the Past: What Cycles Look Like and What Drives Them

Chapter 1
Riding the Cycle under Very Different Conditions

In 1985, when I started as a graduate trainee at Greenwells & Co, a stockbroking firm in the City of London, I spent a short period on the floor of the London Stock Exchange, along with the other new graduate recruits. At that time, many of the practices were probably much as they had been for many decades. The government Gilt brokers still wore top hats, and it was just 12 years since the first women had been elected as members of the exchange. One of my classmates was jeered for turning up in brown shoes and was sent home to change. So-called blue buttons – the juniors, or clerks – would walk around the various stalls of ‘jobbers’ (market-makers) asking for quotes on stocks, write the prices down on paper, and then take them to the back office behind the trading floor, where they would be written on a large board. When a salesperson in the brokerage office had an order, the ‘blue buttons’ on the floor would be able to give a fairly up-to-date estimate of the price to buy or sell.

After my initial training, I joined the economics team in the research department at Greenwells. One of the tasks of the juniors was to collect the latest data releases after they were published. This involved physically going to the Bank of England on Threadneedle Street, a few blocks away from our office. When handed the release at the Bank, the analysts would then rush to the large bank of telephone boxes outside of the stock exchange (in the adjacent block) to communicate the details to the economists, who would interpret them and write a data comment, which was then photocopied and distributed to the sales team.

This rather cumbersome system was about to change. Our senior partner and economist decided to invest in a new time-saving technology – a mobile telephone (a rather large device in a box) – that enabled the junior economist to telephone through the information directly to the office as soon as it was released, thereby saving the time and effort of having to put coins into a telephone box. Even then, small improvements in time could be critical in winning business (by the new millennium, speeds would accelerate dramatically as average trade execution times would go from multiples of a second to millionths of a second¹).

But this was just one small innovation in a wider environment of rapid change and disruption that was about to revolutionise financial markets. The City of London was on the brink of the ‘Big Bang’ deregulation of 1986. For the first time, face-to-face transactions were replaced by computers and telephones, resulting in an explosion of volumes. The old way of doing business was under threat. Barriers to entry were blown apart and gave way to a new wave of entrants, many from overseas.

Technology was fast changing the landscape of business and society more generally. Personal computing also saw major innovations at this time. In 1985, Microsoft Corporation released Windows 1.0, the first version of its computer operating system that would come to dominate the PC market. The first dotcom domain name, symbolics.com, was also registered in 1985 by the Symbolics Corporation, adding a commercial domain to the then dominant .edu domains used by educational institutions. At the time, of course, this was probably not well known, nor were the implications and far-reaching changes that would result from the commercial application of the internet and the speculative bubble that emerged because of the dotcoms in the late 1990s.

In 1986, IBM introduced the first laptop computer and Intel launched the 386 series of microprocessor. This was also the year when the Internet Message Access Protocol (IMAP) was developed, which was to become the first standard protocol used to enable people to retrieve email from a mail server and manage an email box.

Other far-reaching innovations – which may have seemed less significant at the time but would be the start of significant changes to come – were unfolding as well. In 1986, for example, a group of British scientists discovered a hole in the earth's ozone layer, a finding that led just two years later to the Montreal Protocol, the first international agreement to protect the ozone...

Table of contents

• Cover
• Table of Contents
• Acknowledgements
• About the Author
• Preface
• Introduction
• Part I: Lessons from the Past: What Cycles Look Like and What Drives Them
• Part II: The Nature and Causes of Bull and Bear Markets: What Triggers Them and What to Look out For
• Part III: Lessons for the Future: A Focus on the Post-Financial Crisis Era; What Has Changed and What It Means for Investors
• Summary and Conclusions
• Suggested Reading
• Index
• End User License Agreement