I cannot say I am a great fan of breakfast meetings. In fact, I am not much of a breakfast person. The days of a full English, followed by toast and marmalade, are behind me. Still, how could I resist an invitation from the mighty investment houses of Artemis, Fidelity and Threadneedle to learn what their investment gurus are expecting for 2005? Taking myself off to the London Capital Club, I was tempted with eggs and bacon, sausages, mushrooms, tomatoes and all manner of goodies. That is why I do not like breakfast – if put in front of me, I feel obliged to eat. But breakfast I did, conscious of the fact that too many of the pounds that were shed while I languished on my sickbed were re-establishing themselves around my middle.
Aside from a jolly collection of journalists (what is the collective
noun for journalists? If none exists, I suggest that jolly could
serve well), there was the odd fund analyst (aren’t they all?) and a
multi-manager or two. Under the moderation of Anne McMeehan (well,
they described her as a moderator), fund managers and strategists
from these three august houses set out their stall for the year ahead.
session, there was a dangerous degree of consensus among them. When you have lived and breathed investments for as long as I have,
you learn to distrust forecasts. Not for nothing do I close seminars
with a quote from JK Galbraith that divides forecasters into two –
those who do not know and those who do not know they do not know.
Indeed, McMeehan, herself a past managing director of a retail funds
group as well as having been communications director at the IMA,
remarked at the outset that this is the season where fund managers
pit themselves against pinwielding chimpanzees and precocious
six-year-olds. There was, though, a degree of humility from the panel and I took
away with me a number of themes, each of which is worthy of
reflection. One of the most encouraging messages came from Laurence Mutkin,
director of fixed-income strategy at Threadneedle. His was a face
unfamiliar to me but I found his dry wit appealing and was refreshed
by his acknowledgement that his brief is to look at companies – and
countries for that matter – in a way that is foreign to equity
investors. He sees little credit risk around the world. In other words, if there
is an iceberg floating out there just waiting to hole equity markets
below the water line, it is unlikely to come from imprudent lending.
Such a scenario is really rather comforting. Bear markets have been
built before on defaulting bond issuers and collapsing banks. Among the other themes was the slowing of the global economic
recovery (consensual view number one) and the continuing decline of
the world’s major reserve currency (consensual view number two). The
panel suggested that these seemingly inevitable trends can continue
without upsetting the equity apple cart. Of course, neither trend
will continue indefinitely. A trend is a trend until it stops. Of
course, it is spotting the turn ahead of the rest of the pack that
delivers the biggest payback to a fund manager. There was also universal agreement that the predominance of the
stockpicker in the investment management world is set to continue.
Even where intense scrutiny of individual investment opportunities is
taking place, as made clear by Artemis (although I have little doubt
that both the other contributors employ equally robust engines to
make the task of stock selection easier), in the end it was
acknowledged that the individual manager has to make the decisions
and can make the difference. But the investment houses did not agree on everything. For me, that
was even more encouraging than the bland expectation that a slowly
building bull market is in little peril. Still, the message from all
three is remarkably similar. There appears little risk in holding
either equities or bonds. We all operate in a more professional world these days.
Professionals will often take a consensus view. But I found the whole
presentation stimulating, even the breakfast.