It is all too easy to fill one’s life with regrets. Never being one to turn down a mixed metaphor, spilled milk should be water under the bridge. As we all found out last week, had we invested $100 in Apple when it first floated in 1980 we would now be rich enough to own a medium-sized country. Given that you are currently reading a column I wrote, the chances are neither of us did and you are not being hand-fed caviar on your Caribbean gin palace. Good job, it would be ghastly.
The chances are also that had we been brilliant enough to make said core investment, the evil mistress temptation would have led us astray and we would have sold long ago. In my early years in the City, which is a wee while ago, I once knew someone who bought seven million shares in Next at seven pennies each. At today’s share price of close to £57 that would make his punt worth just shy of £400m.
I am sure you already know how the story ends. He sold a couple of months later after he had brilliantly doubled his money. Regrets? He had a few. But probably too few to mention.
I have never been quite sure of the difference between an adage and a lesson. That is probably just my confusion. One of the most important skills to learn as a fund manager though is never to worry about what you don’t own, as there is plenty enough in what you do. What happens to a share, or fund, after you have sold it is irrelevant. All that matters is what happens to those that you actually hold in your fund or portfolio. It is terribly easy to fret about each and every opportunity cost; but to do so will only lead one to neglect one’s own holdings and is a slippery slope to dribbling and gibbering.
For someone who was once taught to play chess, my ineptitude at the game is staggering. Nevertheless, the one thing that I remember is the positivity of the two words ‘if only’. As pre-teen pupils we were taught to plan chess strategies on an ‘if only’ basis. If only his bishop wasn’t there…means plotting a means to move it elsewhere.
Taken the wrong way, ‘if only’ can quickly become overpowering. If only we had invested into Apple. If only England had scored a second goal against Croatia. If only we had bought that little terraced house in Pimlico. If only the Bank of England hadn’t raised interest rates on Thursday.
On the face of it, the Bank has lost the plot. But please bear with me, I would never be so rude about our illustrious neighbour in Dix’s Field and there is logic in their lunacy. The Bank argues that the output gap has closed. That is jargon for saying that the economy is operating at full capacity. So no matter how paltry one may think the country’s current rate of growth may be, any increase in growth is inflationary.
We may argue the toss over why the UK has run out of capacity. Lousy productivity is a factor, as is a long-running lack of investment. We have insufficient means of production and we are pretty useless at using what we have. Allegedly. One might have thought that the solution to this would be to encourage more investment. The problem is that it is not the Bank’s bag. Be it QE, QT or the level of bank rate, all the Bank can do is fiddle with the cost of money in the hope that this will change demand for it. One may argue that it is being sent to play in the hockey world cup final with a badminton racket.
If we are right in supposing that underinvestment is the core problem, then higher interest rates are probably not going to help. Indeed, they may make things worse. There is also peer group pressure, with America’s Federal Reserve making it very clear that there is another rise in the fed funds rate coming in late September.
As things stand, none of this matters very much. Bond markets are ticking over without yields changing very much, while equities remain resolutely firm. If there is a monster about to come over the hill, there is precious little sign that anyone is worrying too much about it (but we are watching the copper price…). Apple may have been the first to a trillion, but it is a keen race between Amazon, Alphabet and Microsoft to be the second. Facebook’s share price, just for the record, is still up in 2018.
We learned last week that The Beano was a considerable influence on many of our readers and well done to those who replied with Bash Street School. Today, a fun one for the holidays. Who in 1992, according to a misheard lyric, asked Bill Oddie to rub his beard all over their body?
Jim Wood-Smith – CIO Private Clients & Head of Research
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