Well, Hi there! Howareya? Just fine. Thanks. You're welcome. Have a nice day The good citizens of Boston are unfailingly polite, refreshingly relaxed and hold what comes across as a sincere interest in your welfare.
The occasion of my revisiting the cradle of American independence was a trip with two Gerrard Investment Funds managers and a group of investment IFAs to learn more of how US houses view markets in general and technology shares in particular. Our transatlantic cousins fully lived up to their reputation as generous hosts, enthusiastic investors and incurable optimists.
Boston is the home of old money. There are buildings in the city centre more than 200 years old – of which Bostonians are inordinately proud. The near 30 years since I last walked the Freedom Trail have seen many changes, not least the world's biggest road construction project – The Big Dig – which, when completed, will transform the waterfront.
Boston also boasts a fund management industry to die for. Fidelity, the investment house with the most funds under management, is headquartered there, while such well known names as Putnam and State Street Global Investors are also based in the city. Indeed Putnam, which has as the head of its investment division an Englishman who previously ran HSBC's asset management operations, looks after more money than the whole of the UK investment industry.
But we should not be surprised at the scale and the power of US investment managers. Not only is their country much bigger and wealthier than ours, money and investment pervade everything. Flicking through the 80 or so TV channels available, I was struck by the volume of ads for investment funds, retirement plans, internet brokers, full-service retail stockbrokers, insurance products and just about everything else that makes the financial services world go round.
Putnam was kind enough to show us over its city centre operation. It has computer systems to deal with personal pension plans that made Advisory and Brokerage Services Gareth Marr's mouth water. We could only speculate at the back-up provided by the “sheds” they operate on the fringes of Boston and wonder at the extent of the investment undertaken. Stakeholder could mean this level of commitment by UK houses, we thought.
As to the technology market, the Nasdaq was falling around our ears as we sped from brokerage house to fund manager. Yet despite the carnage on the screens it was hard to find a bear of new economy stocks. Hard, but not impossible.
Dan Chornous, chief strategist of RBC Dominion Securities, considered that tech had further to fall. He based his views on what he described as justifiable market ratings at various earnings' growth rates and time horizons. On Dan's calculations, if a company is capable of growing at, say, 30 per cent per annum compound for 10 years, it justifies a price/earnings multiple of 53 times. If it can only keep up this growth rate for five years, then the justifiable multiple falls to 30 times. And in his view, looking just five years out is hard enough. Tech had proved as vulnerable to the economy as any industry. I asked: “Are we in for a hard landing?” He responded: “What is a hard landing?” Anything less soft than your own forecast was his view.
The message was pretty much the same from all we visited. The bigger new economy companies on extravagant ratings are in for a tough time. But there will be winners among smaller stocks, capable of levering themselves into a more powerful position through advanced processes. Many of these smaller companies also offer value. The moral is keep looking but stay careful and do not be afraid to discard an investment even if it has served you badly recently.