Brian Tora: The final instalment


I cannot recall exactly when I penned my first article for Money Marketing, but it was sometime in 1991. Tim Potter was the editor then, only the second after Roger Anderson, who held the editorial reins on day one of publication. You can see, then, that I have contributed my thoughts on the investment scene to all but one of the editors of this august journal – and that is quite a number.

And the investment world has not  exactly stayed still over this period. We have had the technology boom and bust, upsets in the seemingly staid world of investment trusts, several wars, an oil shock or two and the seemingly inexorable rise of China.

Shares have gone up – and down – but not necessarily in that order. Interest rates have moved from double figures to the near zero at which they stand today, while inflation has all but disappeared.

Meanwhile, the investment industry itself has seen changes in regulation, ownership, investment styles, remuneration packages and the approach to looking after the assets of clients. Dull, it hasn’t been.

Moreover, this near quarter century of change and action covers less than half of my career in the investment world, which started for me in the mid summer of 1963, when Harold Macmillan was prime minister.

But all good things must come to an end. With my three score years and 10 duly clocked up, the time has come for me to surrender my keyboard to newer, younger contributors for whom the business of making sense of the investment scene will, I hope, be a welcome challenge. If there is one piece of advice I can give, though, it is to remember what the late Sir John Templeton said – you should never believe the man who tells you this time things are different, but accept that in the investment world things seldom turn out to be truly the same.

Take the situation now. The members of the Federal Open Markets Committee have just met to determine whether interest rates should be raised.

The rationale for any hike would have been that quantitative easing in the US is coming to an end and a monetary policy more in keeping with the way things have been managed in the past is considered appropriate. Except that the past is another world and nothing is quite as it has been before.

Printing money on the scale that has taken place in the post-financial crisis years is without precedent. Many, including me, felt we would pay for all this loose money with higher inflation, but we did not, mainly because wage inflation was subdued thanks to a sluggish economic background. And when wage rates started to rise, thanks to an improving underlying economic trend, China started to slow down and commodity prices fell, taking any pressure that might have been applied to the cost of living away.

But the fact is while all this printed cash may have kept the economic buoy afloat, it has also allowed debt to balloon, nowhere more spectacularly than in China. It is not as if the debt burden was under control in the first place. If the financial crisis raised awareness of anything, it was banks needed more, not less control. The level of borrowing is now a global problem, but populations all around the world are growing tired of austerity, so reining in lending will not prove popular.

So what’s to be done? If I knew the answer to that, my esteemed editor would be begging on her knees for me to stay and share my wisdom with the rest of the investment community. My gut feel, helped by more than a half century of experience, tells me we will muddle through somehow. Don’t expect an easy ride, though. And don’t forget that markets always overreact to events – in both directions. For the wily fund manager that presents more of an opportunity than a threat. The message is – buy wily fund managers and stay patient.

Brian Tora is an associate with investment managers JM Finn & Co