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Investment view

There is something about our two principal seats of learning that sets them apart from other cities. Aside from the inevitable clutch of young and exuberant foreign students taking advantage of the availability of cheap accommodation during the summer recess to brush up on their English, the atmosphere feels highly charged. Perhaps it is the accumulation of brainpower that somehow permeates the minds of those less well-endowed in grey matter. Whatever, Oxford and Cambridge are always a joy to visit.

It happened that I was fortunate enough to visit both Oxford and Cambridge during a single week. Both contain Gerrard offices and it was Gerrard functions that drew me to the dreaming spires. Not for me, sadly, the exploration of where Inspector Morse might have parked his Jaguar or Adam Dalgleish mused on verse. There was work to be done but at least the opportunity presented itself to gauge the feelings of private investors and their advisers. Overall, I was much encouraged.

Given that markets around the world have rebounded quite comprehensively from earlier lows, the generally more confident atmosphere present at a seminar for IFAs and a gathering of private investors was cheering and persuades me to believe that the corner really has been turned. The advisers in Oxford, who were gaining CPD points on Sipp investing, generally believed that business is picking up. The private investors, gathered in a garden in a Cambridge college, were more concerned with the future than the poor performance their investments have delivered over recent years.

This is not to say that the investment environment has not changed. The word on everybody&#39s lips these days is risk. Demonstrating that you can manage risk for whatever type of investor is seeking your services is crucial if you are to win their trust. If there is one thing that a prolonged bear market has done, it is to accelerate the migration of professionalism from the institutional market to that which services the retail investor. There is no going back to the cottage industry days now.

Which brings me round to the topic of evaluating markets. My knowledge of this industry has been gained through experience, yet experience alone is not always enough. Markets are dynamic and history may well have lessons to deliver. However, you cannot rely on the past bailing you out. A deeper understanding of what drives markets is needed by anyone seeking to advise the general public on where to put their money. And the humility to realise that you will not always get it right is essential.

Working, as I have, in the world of financial services for more than four decades, I can see experienced, trained hands bemused at their inability to cope with the changing nature of markets. Criteria for judging when an appropriate time for investing arises have been tested and found wanting. It is at times like this that we need to return to basics and assess shares using simple but established valuation methods.

If one of the most familiar of these is price/earnings multiples, then at least the rush of results that we have seen in London will have given us some comfort. Profits are tending to surprise on the upside, so price/earnings multiples do seem to be coming down. Equity investors should pause to consider what is really happening. If risk management is the new mantra of the professional investor, cost cutting is the businessman&#39s. A leaner, meaner corporate Britain and US is driving the bottom line.

This is just as well as growth and pricing power still seem to be eluding most businesses. While the narrative accompanying these results is generally more upbeat than we have become used to in the last year or two, no one is running all the flags up the mast yet. There are plenty of corporate fingers crossed at present.

The weaker in the business world go to the wall that much more quickly these days. With the public sector expenditure programme in danger of running out of steam, we need to watch those economic numbers very closely from now on.

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