Sir John Templeton may have asserted the four most dangerous words in investment are ‘this time it’s different’ but, if we were after a solo contender – etymology’s combined equivalent of great white shark, carpet snake, mosquito and Brazilian wandering spider (now there’s one fact I wish I had not checked) – I would respectfully suggest … well, I have already used it.
No, not ‘shark’ – although the Jaws music would make an appropriate sound track for this column. I am instead talking about ‘but’, which I have been noticing a lot more of late in the context of investment specialists saying things like: “Yes, I admit my particular area of expertise is looking a bit toppy these days – but …”
Take fixed income, where fund managers are having to be ever more creative about the nooks and crannies they claim to be finding value. With positive yields seemingly going the way of the Labour MP in Scotland, bond managers’ own theme tune is currently entitled “We’re going negative duration – but … we’re confident we can time it.”
In response, this has led to equity managers humming the golden-oldie “Picking up pennies in front of a steamroller”. While this is in danger of being played to death, it is a classic for a reason – though if bond managers grow any more niche, we might add in a verse about the pennies being glued to the tarmac and whatever works to bring concerns about market liquidity into the metaphor.
It would of course be unfair to suggest the butters are solely confined to fixed income – my current favourite from the world of equities is one manager’s belief the rally in his sector “may be a towering edifice built on sand – but …” – but (sorry, it must be contagious) it is certainly where we are seeing it most.
Sometimes the “but” “is implied – a fine example being a quote from the Financial Times, where a fixed income professional described the “distortion” in European bond markets as “a gift from heaven given to investors by the ECB” before continuing: “It is difficult to tell your clients you are not accepting this gift.”
More than a whiff there of Chuck Prince’s observation from 2007 that “as long as the music is playing, you’ve got to get up and dance” – and indeed of the latter stages of the tech boom. Back then, we should remember, many investment types readily acknowledged things might not end happily ever after but, equally, felt they could not afford not to be involved.
This view will have been more strongly held where people had seen colleagues fired for electing to stop dancing while the 90s techno music still played. It is, after all, an uncomfortable fact of investment life that doing right by one’s clients is not always consistent with keeping one’s job – hence my invoking Jaws earlier on. Der-dum, der-dum …
Now, I wish I could say I was unlikely to return to this subject at a later date. But …
Julian Marr is editorial director of Adviser-Hub and co-author of ‘Investing in emerging markets – the BRIC economies and beyond’.
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