WE ARE RESOLUTE
James Anderson , joint manager , Scottish Mortgage Investment Trust
W E ’ RE OPTIMISTIC .
WE ’ LL RETURN TO THIS SOON . But we ’ re also resolute . This may be even more important . That ’ s because it may be even more unusual . If fund managers find it professionally hard to be optimists , they find it harder still to show resolve . It ’ s not the way the financial services industry works . Instead it encourages participants to be endlessly restive . This is not unnatural . Activity pays . It pays for brokers , it pays for investment banks , and it pays for consultants . Fund management is the modern equivalent of an isolated citadel being attacked by a furious fusillade of weapons . Instead of canon and burning oil we have corporate earnings canisters fired at us , macroeconomic data lobbed over our defences , politics used to terrify us ( if central banks have not already made us cower ).
If the scary news-flow shows dangerous indications of flagging , brokers are always there generously to provide recommendations for changes . By far the easiest response is to surrender . Brokers will then be very nice to you and the media will be delighted to convey your hasty outbursts of activity to an admiring readership . You will join the club of never being wrong for long . You may even be right for long enough to be rewarded with a large bonus for your performance over the last 52 weeks because that surely couldn ’ t be random chance could it ?
But this isn ’ t at all helpful for clients . It is isn ’ t at all helpful for fund managers trying to invest well . But then even the term ‘ investor ’ has been terribly debased . It should usually and usefully be replaced by ‘ traders and speculators .’ Investors are interested in the ultimate value of an asset as eventually revealed by its free cash-flow . Traders and speculators are concerned by whether its price is going up or down in the next few hours . That ’ s very different .
Sadly our media cannot be bothered with the distinction . Even more sadly the supposedly authoritative Financial Times is bottom quartile in this regard . Pick up any edition at random and take a look at the confusion . I picked up today ’ s . On the page entitled Markets and Investing it assures me that the dollar was bouncing back ” as investors shrug off geopolitical tensions ,” that “ investors anticipated that tropical storm Harvey would generate demand ” for equipment rentals and – confusingly – “ that investors have speculated ” that Kraft Heinz would buy Mondelez . Meanwhile , Jameel Ahmad of FXTM told the FT that “‘ Sell volatility , buy the dip ’ has been the investor mindset .’” I could go on but this is exhausting and I apparently need to hurry off to take a position on each of these issues and then trade on them all to be a real investor . No one wonder investing is so hard and we ’ re so well-paid .
But that ’ s what is so perturbing about finance . There ’ s no evidence that acting in this frenetic manner has any social utility . There ’ s no evidence that it is productive of impressive returns to clients . Instead all the evidence suggests that the great investors are dull , patient and resolute . They accept that it ’ s just not possible to predict all those events and moods that the Financial Times sees as essential to investing .
Resolve isn ’ t just needed to block out noise , it ’ s that even in the greatest of investments and companies there will be repeated and tiring periods of stress , difficulty , disappointment and deferred profits . Jeff Bezos was once said to be close
12 trustnetdirect . com