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Bitcoin chatting cabbies! What bugs three wealth managers

Reality TV ‘stars’, the correlation between economic growth and equity returns and postcode snobbery are also among this week’s bugbears

Michael Flitton

Investment analyst, Cerno Capital

Investment

Those market strategists who tell us about ‘cash on the sidelines’ – there are no sidelines! Yes, when stocks are sold, investors move into cash, awaiting a chance to return. However, the investor on the other side of the transaction presumably moved a precisely equal amount of cash off the sidelines.

Personal

Colleagues who refer to Acton as ‘Chiswick North’ – wishful thinking! 

(This is a nod to Tom Milnes, our BD director, who is constantly joking about this.)

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Michael Flitton

Investment analyst, Cerno Capital

Investment

Those market strategists who tell us about ‘cash on the sidelines’ – there are no sidelines! Yes, when stocks are sold, investors move into cash, awaiting a chance to return. However, the investor on the other side of the transaction presumably moved a precisely equal amount of cash off the sidelines.

Personal

Colleagues who refer to Acton as ‘Chiswick North’ – wishful thinking! 

(This is a nod to Tom Milnes, our BD director, who is constantly joking about this.)

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Arnaud Gandon

Chief Investment officer, Heptagon Capital 

Investment

‘We are seeing strong GDP growth, therefore one must buy equities.’

Wouldn’t life and investing be so easy if this type of causation held true? I have stopped counting the number of times we have heard this seductive, simple and yet inaccurate argument in the financial media.

It turns out that the long-term correlation between economic growth and real equity returns is actually negative! (Dimson et Al [2002], Ritter [2005]).

Regardless of how strong your economic growth is, if you are paying 40x current earnings on your local equity index, the chances are that your five-year forward real return will be poor. More often than not, starting valuation points matter much more than economic growth.

Personal

When the taxi driver asks: ‘Should I buy some bitcoins…?’

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Jordan Sriharan

Head of collectives research, Thomas Miller Investment

Investment

Investment managers who present gross of fees performance numbers.

Furthermore, I am sceptical of the argument that different clients pay materially different management fees.

The overwhelming message that is portrayed when performance numbers are presented without accounting for the fees payable is one of opaqueness.

For the cynical investor, thoughts turn immediately to what the investment manager might be hiding. Maybe Mifid II will eventually create a more transparent playing field.

Personal

Why are reality TV stars considered celebrities? Once upon a time, individuals were considered celebrities because they had a modicum of talent – singing, acting, dancing or playing a little sport here and there.

Now we live in a world where people are ‘celebrated’ for simply watching TV. How is Gogglebox even considered a TV show?!

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