The “dash to trash” is when overbuying occurs (the “dash” to buy) of stocks that have fallen precipitously in value and are thought to be cheap ("trash") or of high-yield bonds (bonds that have high risk). James Montier, who has a blog called Behavioural Investing and who has written several books on the topic, coined the term in his April 2006 essay “The Dash to Trash.” Montier wrote another essay in January 2008, “The Dash To Trash And The Grab For Growth.”
Montier describes the “dash to trash” as “an obsession with return without any regard for risk.”
What Does Dash To Trash Mean?
When investors flock to a class of securities or other assets, bidding up prices to beyond what can be justified by valuation or other fundamental measures. While the dash-to-trash effect can occur within any type of security, the phrase is typically used to describe low-quality stocks and high-yield bonds, both of which can be subject to periods of overbuying in the markets.
Location: United Kingdom
I have worked in the investment industry for the last 18 years or so. I specialize in the application of psychology to finance. I’m author of four books (including the Little Book of Behavioural Investing, and Value Investing).
Posted 04-24-2006 9:49 PM by John Mauldin
The Dash to Trash
By: James Montier
Investors seem to be displaying signs of pure fearlessness. Perhaps they see themselves as high-wire walkers, bravely showing their skill to the breath-holding crowd. To us they look more like Wile E. Coyote, running in thin air before looking down and realizing they have nothing to support them, and succumbing to the inevitable gravity check.
Our fear and greed index continues to remain at extreme risk-loving levels. This suggests that it is an obsession with return without any regard for risk, that best characterizes investors’ behavior at the current juncture.
Posted 01-28-2008 4:15 PM by John Mauldin
This week we look at a very thoughtful essay by an old Outside the Box friend James Montier. James is now working at Societe Generale in London. He is one of the truly great minds on the psychology of investing, as well as proving great research on how to structure your portfolio. IN this week’s essay, entitled “the Dash to Trash and the Grab for Growth,” James shows how investors tend to do the wrong thing at the wrong time in times of market volatility. This is a longer letter with lots of graphs, and there is an executive summary at the beginning, but I suggest you read then when you have 15-20 minutes to really concentrate. You will be a better investor when you do.
John Mauldin, Editor
Outside the Box
The Dash To Trash And The Grab For Growth
15 January 2008
by James Montier
What a difference a week makes! Recession talk is everywhere. This begs the question, are markets priced for such a possibility? We would suggest the answer is a resounding no. Valuation and cyclical risk are enormous. Yet, investors pile on the pressure by believing they can tell ‘true’ growth stocks from young pretenders. Simultaneously, investors seem to have transformed into speculators. This creates opportunities for those with the discipline to stick to their long-term process. Such investors are likely to find comfort in cash, if they are allowed. Failing that, large cap dividend paying stocks are probably the best place to hide.
The dash to trash
Investor’s behaviour is clearly incompatible with cognisance of this risk. For the last 18 months or so, investors (or should that read speculators?) have been engaged in what I.ve described previously as a dash to trash - a desire for low quality assets. In fact the lower the quality, the greater the demand has been.
Interactive Investor Blog
The dash to trash
Posted on May 11, 2009 by Richard Beddard
The popularity of shares like Yell is symptomatic of a “dash to trash”, as James Montier calls it, where the weakest companies do best as speculators throw money at the companies that fell the furthest in the bear market.
Tools and Techniques for Intelligent Investment
By James Montier
Hoboken, NJ: J. Wiley & Sons
The last few years have not been kind to this strategy. Three of the last five years have seen our short basket actually do better than the market! This attests to the extreme nature of the dash to trash that we have witnessed.
New York City • Banking/Finance/Insurance • (1) Comments • Monday, February 14, 2011 • Permalink