Ok, so not kicking off with gentle preamble but jumping straight in with a word that is not often used, reflexivity. What is reflexivity you ask, give me a moment, I will get to it.

But first the back story.

I was at Baillie Gifford head office in Edinburgh 6 or 7 years ago seeing a few fund managers. It was going ok and during a break I said to our host, you know it would be great if we could get 5 minutes with James Anderson who was way out of our league in terms of importance to get a meeting with.

The nice man said, well I doubt he will agree, but I’ll ask his p.a.

Next thing I know the great man strides through the door and introduces himself.

Now I have met a few famous types, Bob Geldof, Jonny Wilkinson, Warren Buffett, Freddie Mercury and I’m usually able to hold it together.

But James Anderson sort of unhinged me for some reason. I started not too badly with some questions about the fund but I wanted to make a lasting impression (fatal) so I reached for the most intellectual thing I could think of related to investing.

George Soros, a multi billionaire investor and intellectual most famous for shorting sterling in the 1980’s when it was forced out of the tie up with the Euro, had then recently written a book called REFLEXIVITY. I had read all of it and understood some of some of it. Fundamentally it is about the relationships between what’s happening and what people believe is happening and will continue to happen. So, it seeks to draw together the dual strands of fact and belief to illustrate that one influences the other, sometimes excessively.

I have written this explanation far more coherently than I could articulate it then, trust me.

So, I airily say to James, “oh, I’ve just read Reflexivity by Soros, very interesting”

Now my wish was for him to respond with.

“Really, oh my, I’ve tried too but it was way too hard for me, I insist you become my new best friend”

But as I finished saying “interesting” I knew what was coming next. It was the Hitchcock moment when the person realises bad stuff is about to happen and there’s nothing they can do to stop it.

And here it came.

“Oh, interesting, which bits exactly?” he asked.

I cannot really remember much after that apart from a lot of mumbling and fidgeting.

He left the room shortly thereafter. We did not become best buds!

Anyway, the first six months of 2021 has seen a tonne of Reflexivity occurring and below are some thoughts on a few of the main areas.

Interest rates

The big question is how long they stay super low. With inflation (more on that next) running at 4-5% currently and yields on cash close to nothing, the loss each year in cash value is 4-5%. This is forcing money into assets such as property, commodities, and shares. Much less so bonds because their value falls if interest rates rise, with the only move they can make from zero being up.

The answer is probably that they stay lower for longer than most think and the longer they do, the less they can then rise.

The Reflexivity here is the general belief of how long is longer. Markets wobbled in May as belief changed to sooner but reversed in June as Treasury rates declined.

It is useful to remember Japanese rates have been zero for several decades with little inflation.


The next big question is does inflation reignite and force interest rates up? It’s running hot at the moment, but it did the same post financial crisis as supply bottlenecks worked through and commodities spiked higher (especially oil) for a time. Once equilibriums of supply and demand re-established inflation was muted for the decade.

Our view is that most of the spike is short term, but wages are increasing to lure people back to work and they will stick higher which is a good thing.

Inflation generally continues to be subject to the mighty force of technology innovation which drove it down in the last decade and will do so even more ongoing.

The dash for trash

We have invested with Harry Nimmo in the Standard Life Smaller Companies Investment Trust (SLS) from day one of the portfolios and regard him as world class. He wrote last year that the fund would initially lag when a recovery is unfolding as in his experience the first wave of buying would be in the shares of companies left for dead. He termed this as a ‘dash for trash ‘. As he invests in strongly growing businesses with long future runways for expansion they would, he said, take a little longer to participate.

He was right, as he usually is and from January through May 2021, the most compromised companies caught a strong bid. Since 13 May however, SLS has powered ahead (up circa +10%) as ‘trash’ was seen to be a quick trade for most, not a buy and hold. If you were in and out at the right times, you would do well but that is tough to do.

We suspect that the great growth companies who suffered first half underperformance due to the combination of rate rise fears and rotation into the beaten-up stocks will reassert their outperformance in the second half of the year.

There are two reasons stock values rise. The first is multiple expansion which really means the market pays more for the same level of earnings. The second is increasing earnings and profits. It seems therefore sensible to invest in companies with stronger than average long-term earnings profiles. Which is what we do.

UK recovery

It is over 5 years since we voted to leave the EU. It has been a roller coaster of political and economic uncertainty which in 2020 was exacerbated by being amongst the worst affected COVID countries. So, no wonder the U.K. stock market suffered a lost decade.

We wrote last year that it was compellingly cheap and 2021 has seen strong returns.

This has been aided by the world leading vaccination programme which currently has close to 70% of the population receiving at least one dose.

We expect to see the returns continue to be strong as the ‘Reflexivity’ of stronger performance garnering greater attention and therefore demand.


The property market is changing before our eyes. Work from home which works ridiculously better than anyone realised is absolutely here to stay. Zoom is now a verb, and nobody is going to travel as much when video meetings are so effective. People will go to offices for sure but not five days a week. This has and will cause a migration away from inner cities to more rural locations. Inside and outside space is valued far more highly now. Bristol to London on the fastest train a little over one hour. House values currently for something average in London buys pretty much anything in Bristol.

Commercial property is equally experiencing tectonic shifts. High price London offices are going to struggle, smart warehousing in prime distribution points is gold.

Crypto currency

The significance of the rise of crypto currency is far more wide ranging than Bitcoin. As staggering as price increases were, they have halved in the last four weeks but still remain up a lot. The development of a digital universe which incorporates Non-Fungible Tokens (NFT’s), the nascent metaverse which is an Etherium story, smart contracts etc, are all very real. It was noted by Mark Andreeson that the most important innovations can initially start out looking like toys and this is certainly true of the telephone, automobile, and computer.

The problem any investor has though is trying to work out which are the long-term winners (the Amazon, Google, Facebook, Netflix) of this next wave.

I do not profess to have a clue, but history suggests a winning strategy is often investing in those providing the picks and shovels which as examples would be Nvidia, Arm, ASML and Etherium.


We wrote last year that Disney + (streaming) would be a huge win for them and if they achieved a Netflix type multiple, the shares would go up a lot.

They were then at around $85 as of 20 March 2020, a year later, they were $197.

Just occasionally a blind squirrel finds a nut.


This is already too long but in our view, we’ve saved the best to last.

Messenger RNA which is the biotechnology behind the Moderna and Bio-NTech Covid vaccine is absolutely transformative for medicine.

This is not hyperbole, not overstating its significance, it is opening up a whole new world of treatments both pre and post issue.

The technology allows our DNA to be reprogrammed, literally bits of it to be rewritten or enhanced.

There is not much this cannot or will not be used for so watch this space. It is going to be huge news.

Note: This is written in a personal capacity and reflects the view of the author. It does not necessarily reflect the view of LWM Consultants. The post has been checked and approved to ensure that it is both accurate and not misleading. However, this is a blog, and the reader should accept that by its very nature many of the points are subjective and opinions of the author. Individuals wishing to buy any product or service because of this blog must seek advice or carry out their own research before making any decision, the author will not be held liable for decisions made as a result of this blog (particularly where no advice has been sought). Investors should also note that past performance is not a guide to future performance and investments can fall as well as rise.