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Brian Tora: The pros and cons of the information age

Brian Tora MM blog side

The sheer volume of email traffic across my desk can be terrifying. Much of it is instantly dismissible. Occasionally there will be nuggets of information. Overall it is hard to determine whether electronic communication is a major facilitator or a scourge of business life. The reality, of course, is that it is now how we do things, whether in medicine, the arts, or the investment world.

I was put in mind of the overwhelming importance of technology in our daily lives by the recent spat between computer giant HP and their recently acquired UK software business, Autonomy.

While not a technophobe, I am hardly the best person to deliver judgments on technology issues, but it did rather sound as though big computer had bought something they barely understood and were seeking to justify why it would not be as useful to them as they had once thought.

As well as being deeply embedded in so much of what we do, technology has become an important force in the investment world. The largest companies in which we can invest are engaged in the technology industry.

Technology has created the opportunity to develop new products and to execute trades swiftly and cheaply. Investment managers use technology to aid their decision taking processes. IT is all around us.

So swallowing hard – and acknowledging that the world only moves forward, never back – it seemed an appropriate moment to pay a little more attention to those reams of emails that populate my inbox each day.

The range of new products and interesting (but not always practical) investment ideas was remarkable. Infrastructure, agriculture, student accommodation, films – all featured in recent missives, as did the more conventional plays of commodities and (you’ve guessed it) technology.

And this represents a minority of the electronic traffic. Charts on market moves and potential moves, company results, economic forecasts, bond market reports – the stream of information is seemingly endless. Organising yourself to filter this plethora of information in a meaningful way strikes me as a task that is nigh impossible. But people do and, if anything, it does level the playing field.

Every so often, though, a gem emerges which makes the gargantuan effort involved in not deleting most emails unread appear worthwhile.

Six years ago it was the advance warning of the impending collapse of the US subprime mortgage market to which I attest my good fortune.

Having just relinquished the day job and finding myself exposed to a wider range of sources of investment research, I was fortunate enough to pick up on the collapse of a couple of lenders.

Even then first mover status was not as helpful as you might imagine. Concerned that a slide in house prices might precipitate a financial crisis (honestly), I sold shares when the FTSE 100 Index hovered around 6000. Within six months it was more than 10 per cent higher. But then the ordure hit the revolving metal as all those cleverly assembled financial instruments dissembled. The rest, as they say, is history.

Of course, you only realise the value of the gem after the event, when outcomes confirm your judgment. And I am realistic enough to accept that it remains possible to misjudge what the consequences of a set of circumstances might be.

It happens that the commentary appearing in my inbox today to which I am attracted is far from new and merely serves to confirm my current view.

When an experienced and knowledgeable operator in fixed interest markets remarks that the risk/reward ratio of lower yielding credit was “uncompelling”, it reminds me that the only justification for holding government debt returning less than inflation must be a belief that deflation lies just around the corner. And if it isn’t, perhaps equities are cheap, despite subdued economic growth. 2013 could prove an interesting year.

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

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