Sunday, 2 February 2014

Chameleon Day

'Breathe on me, eclipse my mind
It's in some kind of disarray
Killing time, I cradle far

Chameleon days
Chameleon day'

('Chameleon day' by Talk Talk)

'...and in summary, 2013 was a year when we protected your capital and grew it a few percentage points ahead of inflation.  We anticipate to do the same in 2014.  And now we would be happy to answer your questions, if there are any'. 

I could see, even from the back of the auditorium, that Harry was unsure whether to sit down or continue standing.  I had taken my seat a minute or two before he had started talking.  It was a complete accident that I was here.  I had finished another meeting, but had ample time to spare before the next one, and had wandered past a sign directing shareholders to the meeting.  On a whim I walked in.  Wearing a suit, no-one had challenged me. 

I knew Harry from investment industry articles only.  Some well-connected PR had got him a number of write-ups in the trade press.  The company he worked for had an old sounding name but had not really been around that long, at least in its current incarnation.  Still they managed a decent amount of money nowadays, so they should put on a good show...or at least have a reasonable buffet afterwards.  The lure of the latter had attracted a hundred plus crowd. 

Of course no-one wanted to ask the first question, so one of the house marketing people lobbed over an easy one which Harry linked to some of the better decisions taken in the year.  A few people were already shuffling impatiently in their seats as the dull clunks of serving dishes and coffee canisters being laid out could be heard from the next door room. 

'...and any questions from the floor?'

An older gentleman raised his hand, stood stiffly up, and reached out for the microphone being offered to him.  He cleared his throat but spoke confidently and firmly:

'Thank you for the presentation, I found it very useful.  I have one question.  Should you have done better in 2013?  I appreciate you protected my capital and grew it a handful of per cent above inflation but was that not the best market for years?'

Harry ambled over to the front of the stage.  'Thank you for your question. Yes, we did protect and grow your capital and that has to be our primary investment aims.  However, I still see many opportunities going forward as discovered by our rigorous investment research methodology...'

'Yes, we heard that...'.  The older gentleman spoke over Harry. Not too rudely but firmly enough that Harry stopped speaking.  'My question was though whether you should have done better?  Here's my fear: you may make a handful of percentage returns from your bonds but your equities are going to probably provide the majority of your returns going forward.  You played it safe last year and got soundly beaten by stock market indices.  You are still playing it safe but is not safety too highly prized in markets already, as all the bond holders have switched into the stable yield stocks already?'

Harry paused before speaking.  'Whilst it is true that the international franchise shares are more highly valued than other areas, they are still our focus as in a global world they are the best ways to play global themes over the medium-term.  Names that you and other investors know, names that you can see in your home, names that you can feel confident in'. 

The older gentleman leaned over the microphone one more time.  'Yes that is comforting for the medium-term whatever that may mean...but convince me please why I should not just split my money half in cash and half in a cheap index tracker of global markets.  I reckon that outperformed you by about five per cent last year and I would have saved on fees, raised my liquidity'. 

Harry looked at his feet in thought, pulled himself up straight and turned to face his marketing colleague:

'Peter, do you have any thoughts on this?'

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