Two decades ago, Japan attracted the frenzied admiration of the world. Yet far from becoming the global ‘Number One’, its economy has this year been overtaken by China. Pundits now suggest that Japan’s decline from economic pre-eminence will mirror that of Argentina over the twentieth century. Such gloomy prognostications should whet the appetite of all contrarians.
Author: Jonathan Davis
Author, columnist and investment professional.
1994 Has Some Lessons
The sharp sell-off in Government bonds last week has left some investors, so one bond market strategist told the FT last week, “shell shocked at the speed of the rise in yields”. Hmmm: if that is the case, it seems that the investors in question would do well to consider a crash course in financial market history. A good place to start would be More Money Than God, Sebastian Mallaby’s splendid analysis of modern hedge fund experience, published earlier this year. The chapter on the events of 1994, a year when bond markets cracked in spectacular fashion, is particularly relevant.
Bonds Designed To Leave Savers Bemused
I have been studying the prospectus for a “kickout bond”. Many retail investors in Britain may recently have received solicitations for these products, probably with rather more appealing names. The typical structure of a kickout bond is something like this. If the FTSE index is higher in a year’s time than it is today, you receive a 10 per cent return and your money back (no doubt with an invitation to apply for a new kickout bond). If the FTSE has fallen, the bond runs for another year.
A Year for the Strange and Unusual
Looking back over the behaviour of the financial markets this year, the one thing that can be said with confidence is that they have not lost their inordinate capacity to surprise. The month of September was a good case in point. Not only did it turn out to be a barnburner of a month for equities, reversing the poor performance more typically associated with the month, but it also saw equities, bonds and gold all rise in value at the same time, the first time that this affront to market normality has happened since the 1930s.
An Exercise in Character Analysis
Does it make a difference as a fund manager how well qualified you are? This intriguing question is raised by an new piece of academic research that looked anew at the question of whether a manager holding a CFA (Chartered Financial Analyst) or MBA is likely to produce superior returns in a fund. I am grateful to the publication Index Investor for alerting me to the findings of a recent research paper* on this topic by Oguzhan Dincer, Russell Gregory-Allen and Hany Shawky.
Q and A: Colin McLean
Colin McLean founded the fund management house SVM Asset Management, based in Edinburgh, 20 years ago and was one of the professional investors featured in my book Money Makers. An experienced stockpicker, in this Q and A he describes his current thoughts on the markets and how he is positioning his portfolios.
Jonathan Davis 