A Mid-Pacific View of Markets

Robin Griffiths, one of the longest serving technical analysts in the City of London, now at Cazenove Capital, has a plan for surviving the next phase of the market cycles. Later this week he sets off to fulfil a lifetime ambition, sailing round the world in his 54ft ketch. Thanks to the wonder of modern communications, he will continue to have access to data while he is bobbing around on the oceans; and being a committed market junkie, like the rest of us, he will of course be at his laptop updating his views at periodic intervals on where he thinks the world is going.

Danger: Computers at Work

In The Fear Index, the latest thriller by Robert Harris, now heading for the Christmas bestseller lists, a brainbox hedge fund manager with little in the way of interpersonal skills discovers that his computer-driven trading system has flown out of control and threatens to send the world’s stock markets into an unprecedented tailspin. Anyone familiar with Mary Shelley’s Dr Frankinstein, or any Bond film, will recognise the genre: an oddball genius consumed by his own creation, conflagration, nemesis, the whole works – populist fiction at its best. But is it fiction?

Curious Episodes That Bode Who Knows What

The volatility we have seen in financial markets since the middle of July will go down, I suspect, as a good case study in future years for connoisseurs of curious episodes in market history. While years of experience caution us all against describing the market as having lost touch with reality, the past six weeks may come to merit just such a description. Salute the wisdom of crowds, by all means, but wisdom is precisely what seemed to go walkabout as soon as the big beasts in the investment community and government packed their bags and went (or tried to go) on holiday in mid-July.

Retreat of Hedge Funds No Bad Thing

The news that George Soros is throwing the last outside investors out of his Quantum fund and keeping it solely as a family office from now on provides a useful reminder that hedge funds are facing increasing obstacles, of which the regulatory requirements which prompted this move are just one. If they go back to being what they once were, namely private pools of capital with a finite number of owners and fend-for-yourself regulation, the investment world would, in my view, be no worse a place as a result.

Time to Study Cycle Turning Points

Who said: “Investment results largely depend on how one behaves near the top and near the bottom” [of the market cycle]? The answer is Keynes, whose remark is quoted in a collection of some of his most famous comments about investment in the latest issue of the Journal of Portfolio Management. In my experience, that statement is broadly true, as indeed anyone who cares to think through the implications and study the evidence has to concede.

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.

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