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Diary of a Fund Manager - As I was saying

Date: 24 January 2022

After four days and eight years the time has come to write the last Diary of a Fund Manager. Not that after 362 editions and over 300,000 words I have run out of subjects, the investment world never stops, but rather that 41 years in the City seems long enough. Time and tide waits for no man.

The timing of my exit from fund management is either brilliant or atrocious. Inflation and the standoff between Russia and the US have both followed a 40 year arc and we are now back to where we were when I nervously presented myself to the receptionist at stockbrokers Sheppards and Chase in September 1980. In recent days, equity markets have ‘gone all wobbly’ with the technology heavy NASDAQ index and the Russian market vying for the worst performance award year to date, both down about 12%. Interestingly bonds have stabilised and the US dollar is attracting safe haven buyers. Covid rumbles on with the risk of new lockdowns in China more serious than the UK going maskless. Supply chains were just starting to show signs of coping with this pandemic changed world, but not if the Chinese stop manufacturing.

Inflation remains a hot topic and on CNBC last week I was asked if I thought central banks were ‘behind the curve’ and so now playing catch up. To an extent this is a fair summary, as what is unsettling investment markets is the marked change of approach by those responsible for interest rates. Most importantly the US Federal Reserve is talking tough, although has yet to actually do anything. Inflation has registered with US consumers and they are telling their politicians that something has to be done. Employers are also under pressure, trying to balance higher input costs and wage rise demands with consumers unwilling or unable to pay more. If the shooting starts in the Ukraine and energy prices multiply then all that seems troubling today will become much worse. I was not an investor in the 1970s, but do remember the unpleasant consequences of a fourfold increase in the price of a barrel of oil in just one year.

Returning to Covid for a moment, and setting aside the possibility that future variants will be harder to control, the economic consequences of the pandemic will last for years. The best analogy that I can come up with is comparing the present to the aftermath of the Second World War which was marked by rapid changes of direction for both prices and growth. Over the last two years we have been waging a just war on Covid, but now there is a price to be paid.

Easy as it may be to walk away from investment risk during difficult times, history tells us not to. Talking with entrepreneurs and observing the actions of the world’s biggest companies there are many reasons to be optimistic. Winners will be those who adapt to the challenges of the present and grasp the opportunities presented by the future. Investors are in a privileged position being able to attach themselves to these winners. In the shorter term, the art of fund management is to tilt towards the negative news flow rather than sell everything, before deciding when to go against the unsettled consensus.

Looking back at eight years of writing it is sobering to see how much has changed in such a short time

I have decided to resist the temptation to sign off with a few contrived investment truths gleaned from these Diaries, but nevertheless looking back at eight years of writing it is sobering to see how much has changed in such a short time. From Obama to Biden via Trump or Cameron to the present incumbent as a starter or the threat to democracy in the US. Brexit was in the future when I wrote the first Diary and the internet of things was nowhere near as influential as it is now. Yet investors have found a way through this maze of dead-ends and superhighways. Short of ‘arresting the market’ I don’t think this will ever change.

What I can say is that writing on a regular basis is to be recommended. Striving to form an opinion and then committing it to paper is like going to the mental gym every week. Just like real gym fanatics you get fitter without noticing the change on a day by day basis. As the circulation list expanded along with the geographical reach, feedback from readers for which many thanks, has been investment gold dust and visiting their companies and countries a pleasure. Whilst with acknowledgements, the words may be all mine, but many thanks to my colleagues at Quilter Cheviot for their support including those who reviewed the Diary every week in order to keep me out of trouble. The long service award goes to Sophie Gorman who has been on the team since day one.

In search of guidance about how to end this series I looked to the past. Alistair Cooke’s last letter from America was no help as it was business as usual despite the passage of 58 years. Similarly, Garrison Keillor whose voice was in my head when I wrote the first Diary, ended Lake Wobegon Days with his usual sign-off. Turning to Samuel Pepys, he at least acknowledged that the entry on 31st May 1669 would be his last blaming poor eyesight. That day included, ‘another meeting with the Duke of York at White Hall, on yesterday’s work, and made a good advance’. What that work was is not recorded.

A couple of quotes to finish;

  • From Charlie Munger of Berkshire Hathaway. ‘Investment isn’t supposed to be easy. Anyone who finds it easy is stupid.’
  • And Alexis de Tocqueville. ‘Though it took the world by surprise, it was the inevitable outcome of a long period of gestation.’

Best wishes to all.

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