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Weekend reading: Actively able

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What caught my eye this week.

I don’t write much about active investing on the blog these days – but I remain the same investing junkie who was buying housebuilders in 2011 and getting gold miners wrong in 2013.

I was therefore thrilled this week to meet a fund manager I’ve admired for well over a decade – Nick Train, who runs the Finsbury Growth & Income and Lindsell Train Investment trusts, among other things.

Train’s writings on the Lindsell Train website have been must-reads for me for years. But I was still steeled for disappointment on meeting the man in the flesh.

A lifetime ago I used to interview bands, and it was almost always underwhelming. The one time I did interview a band who truly lived up to my youthful notions of rock-and-roll1 I sheepishly retired from band-interviewing! I’m much older, a tad wiser, and have fewer delusions about people these days.

The funny thing is I don’t even invest the way Train does. I think it’d be great to identify and hold the best companies forever, Train-style, but experience has taught me I can’t do it.

I can’t even buy and hold Train’s funds! Although I do own a little FGT right now.2

So in some respects this was simple investor-groupie-ism.

Anyway, Train did not disappoint. He seemed about as level-headed as one of the best fund managers of his generation could be expected to be – and winningly paranoid about what the world and the market could yet do to his portfolio. He even warned against applying the word brilliant to anyone who owes their fortune and livelihood to something as capricious as the stock market, and to Lady Luck.

Fund managers get a rough ride these days, and understandably so. Academia – and common sense – has shown active investing is a zero-sum game – and a weight of evidence has demonstrated that after costs, most active funds lose to the market.

Nearly everyone reading this will be better off using tracker funds than active ones – let alone doing what I do, which is pick stocks.

But as I’ve said before – to some criticism from the passive purists among you – every fund manager (as distinct from wealth manager or banker, where this definitely does not apply) that I’ve met has been really interesting to talk to, and most have made me a little jealous of their day jobs.

Obviously it helps that we have a passion in common – but that’s my point. Criticize these guys for cognitive dissonance if you like, but don’t think the best don’t live and breathe investing. They fail to beat the market because it’s incredibly difficult to do so, not because they’re out playing golf.

The era of the star fund manager is long gone. I expect most readers under-30 can’t name a famous investor besides Warren Buffett, and amen to that.

But I don’t mind admitting I’m from another era, and a little weird.

And that I was a little bit starstruck – and a little envious – of Nick Train!

From Monevator

Simple maths for investors – Monevator

From the archive-ator: Perfect 10 investing – Monevator


Note: Some links are Google search results – in PC/desktop view you can click to read the piece without being a paid subscriber. Try privacy/incognito mode to avoid cookies. Consider subscribing if you read them a lot!3

MSCI to quadruple the weighting of China A-shares in its global benchmarks – CNBC

Crowdfunding in search of the next Apple or Facebook [Search result]FT

Inter-generational inequality runs deeper than you think – Bloomberg

Tesla cuts price of Model 3 electric car to a more mass-market friendly $35,000 – BBC

‘Build-to-rent’ flats launched; utility bills w/ rent and no upfront deposit – ThisIsMoney

Premium bond Ernie takes quantum leap into fifth generation – Guardian

Debate is kicking off about Help to Buy and housebuilders profits – BBC & FT [Search result]

Dwindling numbers of buy-to-let property purchases [Search result]FT

Products and services

Citymapper to undercut Tfl with London travel card – Guardian

Household bills will go up across the board on 1st April… – ThisIsMoney

…but energy provider Bulb is cutting gas prices, against the trend – Guardian

Ratesetter’s £100 bonus effectively boosts your expected annual return on £1,000 to 14%  – Ratesetter [Affiliate link]

Fitch warns open-ended property funds could lock-up investor money, again – ThisIsMoney

Could your post-2000 banger be a classic car? – ThisIsMoney

How to use various Morningstar tools to benchmark your portfolio – Morningstar

Mid-century homes for sale [Gallery]Guardian

Comment and opinion

Quick thinking leads to bad behaviour – Morningstar

Eight questions to put the value of money into perspective – Humble Dollar

Cherish your exceptions… – A Wealth of Common Sense

…because numbers are not reality – The Irrelevant Investor

The lower the cost, the greater the chance of success [Blog and podcast]TEBI

Stock-bond correlation, and its implications for investors [PDF]DE Shaw & Co (via A.R.)

Edge over odds – Demonitized

The perils of idol worship: Lessons from Kraft Heinz – Musings on Markets

BAE Systems has significant problems as a dividend stock – UK Value Investor


US takes a tough line with UK in post-Brexit trade talks [Search result]FT

Manufacturers cutting jobs and stockpiling ahead of Brexit – BBC

Kindle book bargains

The Complete Guide to Property Investment by Rob Dix – £0.99 on Kindle

Pre-Suasion: A Revolutionary Way to Influence and Persuade by Robert Cialdini – £1.99 on Kindle

The $100 Startup by Chris Guillebeau – £0.99 on Kindle

Off our beat

How to create reality – Mr Money Mustache

Workism is making Americans miserable – The Atlantic

The world’s top 15 global brands: 2000-2018 [Animation]Visual Capitalist

15 stories of windfalls that changed people’s lives – Topic

Countries with more butter have happier citizens – Big Think

Amazon rolls out day-of-choice delivery to cut costs, emissions – USA Today

The power of asking someone how they’re doing – HBR

Why Internet debate in comments/elsewhere is being wiped out – Slate Star Codex

Manhole mania – via Twitter

And finally…

“The ability to see the future is rare. The ability to rationalize the present is all too common.”
– Thomas W. Phelps, 100 to 1 in the Stock Market

Like these links? Subscribe to get them every Friday!

  1. Mercury Rev, if there are any indie musos out there. []
  2. I never invest in open-ended funds, and only occasionally in investment trusts. The fun for me in active investing is finding great companies, not great fund managers. []
  3. Note some articles can only be accessed through the search results if you’re using PC/desktop view (from mobile/tablet view they bring up the firewall/subscription page). To circumvent, switch your mobile browser to use the desktop view. On Chrome for Android: press the menu button followed by “Request Desktop Site”. []
{ 30 comments… add one }
  • 1 Snowman March 1, 2019, 10:54 pm

    You interviewed Mercury Rev. Wow. We need more information on that. Something for Joey and Goddess on a Highway, great tunes.

  • 2 LukeM March 2, 2019, 12:15 am


  • 3 The Investor March 2, 2019, 3:22 am

    @Snowman — Indeed, this was in the early 1990s. (I think you’re probably the first person ever to reference Something for Joey when I’ve mentioned the band this century. Gosh I loved that album — or cassette, which was the version I had! 🙂 )

  • 4 Faith A. March 2, 2019, 8:12 am

    Oooh I’m envious you got to meet Nick Train. I’ve got a bit in FGT too. Always been fascinated by the radically different personalities and approaches when I’ve talked to some of the higher profile fund managers through work – Carl Stick, Neil Woodford, Job Curtis, Guy de Blonay. Sadly I never got the chance to meet Jack Bogle, but Bill McNabb was really interesting on the benefits of automation vs education.

  • 5 Snowman March 2, 2019, 9:43 am

    @The Investor
    Definitely the early Mercury Rev stuff was the best. So much energy and exhuberance while being melodically brilliant. They were certainly fuelled by something different to me! Picked up most of my musical tastes from John Peel, but the first Mercury Rev tune I heard was Something for Joey on some ITV show where you miserably listened through 55 minutes of dross, and then suddenly a tune like that came on, with the interesting video that went with it, and the word was a great place again.

    I think there are some general life lessons that transfer to thinking about areas such as investing (given this is an investment blog we perhaps shouldn’t diverge too much). And that is to look outside the mainstream for better ideas, and carefully and skill yourself up to critically evaluate those other ideas for wisdom. That way you not only avoid Bryan Adams but you are able to accumulate returns from investments rather than transferring those returns to the pockets of the investment industry.

    Following that approach you then spot the nonsense in other areas. Take nutrition, is it really right for the NHS to recommend getting 30-40% of your calories from carbohydrates, or is that a recipe for fuelling the obesity and type 2 diabetes epidemic, while condemning people to the misery of low fat diets? Or is better to eat a satisfying healthy low carb, real food diet (including butter!)

    The good thing is that the information is now out there on the internet, but you have to be able to evaluate which bits are right and which are wrong, and which are the go to places for information. For music it might be bands such as Mercury Rev. For nutrition that might be Ivor Cummins youtube channel or the Public Health Collaboration website. And for correct investment thinking and ideas it is Monevator of course.

  • 6 Fellrunner March 2, 2019, 9:53 am

    So what did Nick train say to you, is there a link or is this just sending us to his website.
    Would love further info as to his thinking.

  • 7 The Investor March 2, 2019, 12:16 pm

    @Fellrunner — No, not really a link or anything. I just wound up collating the other links and was wondering what to make my intro story, and found the idea of the highlight of my week being meeting an active fund manager an interesting juxtaposition as an aside for this blog. 🙂 It wasn’t done on the grounds of talking to media etc so I feel sort of Chatham House-y about the content to be honest.

    @Snowman — Indeed. I may be mis-remembering, but I think early on they did all their practising/recording/similar in some sort of community arts space that was used by lots of different local people in the part of New York where they lived, so they were getting various other inputs alongside the standard issue New York post-punk/whatnot fodder. When I interviewed them they told me that for their latest album they had a proper recording budget, but they recreated a similar low-fi vibe by renting a shack in the Catskill mountains and then spending the production money on “whiskey and guns”. Looking back they may have been kidding but I was too wide-eyed and in starstruck by Jonathan Donahue’s legitimate rock star vibe to know.

    @Faith — Yes, I would have liked to have met Bogle. Apparently he was whip smart to the end.

  • 8 LukeM March 2, 2019, 12:26 pm

    I went to see Terry Smith speak at the Fundsmith Equity shareholders’ meeting on Tuesday. What with your encounter with Nick Train, it seems it was a good week for active fund management!

  • 9 Backache March 2, 2019, 1:12 pm

    @The Investor
    Did you ever do a follow up blog on ‘Days of being wild part 1’ ?
    I really enjoyed reading your insights into being a private active investor.
    As indeed I do on many of the Monevator postings.

  • 10 Neverland March 2, 2019, 1:22 pm

    It’s no surprise that all fund managers are eloquent, interesting and persuasive

    This helps in doing marketing which is the principle task of fund managers

    Getting assets under management and keeping them is their main job

    Actually managing money well is just secondary

    If I ever invest again with an active fund manager I will be looking for a disabled woman with a speech impediment, eczema and poor personal hygiene who grew up in a council estate

    Statistically she is more likely to be very good at running money, because that’s almost the only way she could have ended up a fund manager

  • 11 Fellrunner March 2, 2019, 1:29 pm

    Was Terry bullish or bearish.
    I too hold fundsmith and always look forward to the agm being available
    on video. I hang on his every word.

  • 12 A beta investor March 2, 2019, 1:46 pm

    Funny how no one ever wants to interview a passive fund manager.

  • 13 Backache March 2, 2019, 1:57 pm

    Jack Bogle was always very readable.

  • 14 A beta investor March 2, 2019, 2:48 pm

    And now he has gone who will champion passive management?

    I know the investing public loves to read what Mr Fund Manager thinks about Brexit, Trump, ANOther plc and the premier league but it is all noise.

    It seems to me that there is a big gap in the market to tell investors what the big signals are in the market.

    Stuff like aggregate data on profits, takeovers, new listings, dividends, share buy-backs and corporate actions. Rather than focussing on the ingredients of the cake hardly anyone is commenting on the size of the cake and whether it is growing or shrinking.

  • 15 tom_grlla March 2, 2019, 3:15 pm

    Glad to finally find another music writer turned finance obsessive… I wrote a bit later than you, at the time of Mercury Rev I was a wannabe with terrible hair wearing Pavement t-shirts, glued to the usual rags e.g. NME, Select, Jockey Slut etc.

    I’ve always thought digging around for new bands was quite complementary to digging around for investments.

    I stupidly forgot about the FGT AGM, and would very much like to meet or hear Mr Train (though I can pretty much predict what he’d say at this point). He has been one of the biggest influences in my investing philosophy, and I am indebted for the excellent literature he has put out.

    For me, Lindsell Train are one of the most investable houses – they have always shown an immense amount of integrity, and alignment with investors, plus by openly showing their investment philosophy, it’s much easier to assess if you think they’re up to the job.

    I admire Terry Smith, especially his Annual Letters, but in public he slightly lacks the humility of Lindsell Train.

  • 16 LukeM March 2, 2019, 3:40 pm

    Terry was Terry. So he didn’t pretend to be able to forecast anything. As you know, he has his investing strategy, and he sticks to it. We choose whether or not to go along for the ride. He’s very happy with Facebook, which predictably loads of people had asked questions about.

  • 17 Grislybear March 2, 2019, 4:24 pm

    @ Neverland, very amusing comment but 100% true. Most fund managers as you say are very good at presenting and discussing their funds. This is almost the opposite of what a really good one should be, nerdy, obsessed with markets and making money to the detriment of communication, hygiene etc. Warren Buffet is in this category but he is good at communication.

  • 18 The Weasel March 2, 2019, 8:28 pm

    Help to Buy: giving builders extra money, while the buyer get’s the inflated debt – and the risk – and the buyer after him inherits it, and on and on… Great for builders!

    Another example of a market that is only as free as it is convenient to some lobby group.

  • 19 ZXSpectrum48k March 2, 2019, 8:55 pm

    @Grislybear. I’d argue the opposite. Most of the fund CIOs I know are nerdy introverts with OCD and paranoia. The last thing they want to do is talk to other humans (aka investors) or (shudder) go on CNBC and spin their wheels. They hire expensive investor marketing teams to avoid it. They’d even prefer to throw their most socially inept PMs in front of big clients to explain the strategy instead! It doesn’t work. The investor wants to meet the CIO in person, and given they are paying, they get the access they want.

    Of course, I’m talking about CIOs who run macro/rate/FX/quant funds, rather than those who run equity funds. It has to be said equity types are far more outgoing. Some of them even seem more interested in people and businesses than numbers or computers. Equity fund managers are just plain weird.

  • 20 Ianh March 3, 2019, 1:15 am

    “They fail to beat the market because it’s incredibly difficult to do so, ”

    Hmm. It’s one of those triple negatives or something. But no. It’s not incredibly difficult to fail to beat the market. I do it all the time

  • 21 MrOptimistic March 3, 2019, 10:27 am

    Not following this. Don’t equity fund managers brag about engaging with the companies they invest in etc etc, can’t see they would thrive as toungue- tied introverts. Personally I never know quite what to make of technical analysis, I can believe the theoreticians for that may be a bit nerdy.
    From what I recall a lot of the quant types, and those involved with pricing derivatives, tended to be physics PhDs: now these I do know a lot about :). They seemed basically normal enough, if a bit shy about entering the working mainstream.

  • 22 james March 3, 2019, 1:09 pm

    What would have done better then outside of london.

    Buying the average priced house (outside of london in 2011)
    Buying 1 or the whole market of Housebuilder shares

    In reality the gearing most buyers get from mortgaging would make me guess option 1 but forgetting that maybe not so sure…

  • 23 Snowman March 3, 2019, 7:41 pm

    @The Investor
    Good story about the whiskey and guns. I do remember Mercury Rev saying on Snub TV that they were recording an album in a retreat in the mountains, but don’t recall any mention of whiskey and guns!!

  • 24 ermine March 4, 2019, 12:30 am

    Thank you for the workism link. It puts it well

    The decline of traditional faith in America has coincided with an explosion of new atheisms. Some people worship beauty, some worship political identities, and others worship their children. But everybody worships something. And workism is among the most potent of the new religions competing for congregants.

    I used to think that overidentifying with work was a form of Stockholm syndrome after doing it for 30,40 years. But the hypothesis of it being a religion, a source of meaning for people, stacks up better. As the man said, everybody worships something 😉

  • 25 MrOptimistic March 4, 2019, 10:23 am

    @ermine. Is it perhaps not simply a need for a sense of purpose ? Not an uncommon phenomenon and has global scope eg

  • 26 ermine March 4, 2019, 10:58 am

    > Is it perhaps not simply a need for a sense of purpose ?

    Well, yeah, but as another of this week’s links suggests, work is a really, really, bad place to get that from in general.

    As the man says, it’s who you spend your time with that matters. Work isn’t generally a tremendous assistance with that and often inimical, possibly with the exception of the rare folk who work with their partner and kids 😉

  • 27 The Investor March 4, 2019, 1:22 pm

    @backache — I stopped the series at Part One. A couple of the usual suspects had a moan, and this was around the beginning of my writer’s block / dialing back on certain topics here at Monevator. And to be fair to the critics there was a tension there in that eventually that series would see me revealing market-beating returns (with a very well diversified, and generally lower volatility portfolio) and pondering what, if anything, that means for me/advice, and whether it was worth it (an even tougher question!) In particular with the absence of regular posts from The Accumulator it didn’t seem particularly value-adding for the readership, and it was going to be hard to sidestep the accusation that it was one big humble brag wrapped up in something fancier. I wouldn’t have cared about the latter a few years ago and perhaps I won’t in a year or two, but things have occasionally gotten quite nasty in the past 36 months, and I didn’t fancy the fight. 😐

    @fellrunner — I’d beware hanging on the every word of anyone for your financial future. There’s a bunch of reasons (most records fade eventually, conflicts of interest, his needs/aims are different to yours) but a very practical one is Terry Smith isn’t exactly in his 30s. Who will guide you when he’s gone? Fair enough IMHO to have a listen to different viewpoints, of course, at a lower level of conviction. 🙂

    @a beta investor — Standard market-cap passive fund managers would (should) have nothing to say about the signals you mention, because it should all be in the market price (especially at a risk-adjusted level). If you’re talking about factor-based passive managers (aka smart beta / return premium) such as value indices or whatnot, maybe have a Google/read of say Cliff Asnes or Meb Faber. Both are passive-friendly quants who write a lot / are interviewed.

    @tom_grlla — Would this be a good time to mention I interviewed Pavement? 🙂 It was in a tiny alcove at the old Town & Country club in Kentish Town — if I could ever find it I actually have a recording of Steven Malkmus relieving himself in the tiny loo adjacent. 😉 My then-girlfriend insisted on hearing it twice.

    @ZXSpectrum — Agreed. All the (rare) best investors I know / have known are weird (at the risk of talking my own book) and disagree constantly.

    @Ianh — Not sure it is, but a wry comment anyway. 🙂

    @MrOptimistic — Plenty of active investors (me included) think meeting management is a bad idea. Another thing we should all remember when assessing the likes of Train and Smith and even Buffett in terms of their media-friendly loquaciousness is you’re invariably seeing them after decades of success and as very rich men, which brings confidence, security, and no doubt media training. (Even affable Buffett had to attend Carnegie classes to learn to speak to anyone. He was a nerds’ nerd, originally!)

    @james & others — I can confirm in practical terms it was near impossible to keep up with the returns on a geared property bought in the South East over the past 20 years! Even if you’d put all your money in housebuilders in 2011, it’d have been a tight run thing, depending on leverage. I bought some but I’m not a nutter, and I didn’t foresee them going up 6x or more! 🙂

    @ermine — Or, as discussed many times, if you’re the self-determining sort likely to be reading this site there’s the option of working for yourself under your own terms. 🙂


  • 28 tom_grlla March 4, 2019, 8:55 pm

    It would be! How great – that’s living the dream!

    I haven’t heard the name ‘Town & Country’ for a while… all very evocative, coming out of the tube, and grabbing a few beers in that grungy pub nearby beforehand.

    The closest I got to glory in that era was interviewing the guitarist of the Jesus Lizard, who I adored (Liar – amazing Steve Albini production, cool artwork and they were so much fun live).

    Back in the present day, I just read the Smithson Interim. The portfolio is full of very good companies as far as I can see (some at quite punchy valuations though) and you don’t see those type of mid-cap US stocks in a retail fund often. I like that the manager’s written a decent amount, though he’s arguably basically regurgitating the Fundsmith playbook. It still feels a bit early to know how it’ll play out and what the mettle of the manager is like – will it be a Fundsmith pt.2 or a FEET…

  • 29 Scott March 5, 2019, 3:31 pm

    @Snowman – I’m also a Mercury Rev fan, and I was enjoying your life lessons in post #5, until you revealed yourself to be a “carbs are bad” advocate.
    In answer to your question, yes, I believe it is right for the NHS to advise getting x% of your diet from carbs, as that advice is evidence-based. This doesn’t mean you should be filling yourself with refined sugar every day; in fact the NHS includes many explanatory statements, such as:

    “While we should reduce the amount of free sugar in our diet, we should base our meals on starchy carbs, particularly the higher fibre varieties…There is strong evidence that fibre, found in wholegrain versions of starchy carbs for example, is good for our health”

    “But foods high in sugar are often high in calories, and eating these foods too often can contribute to you becoming overweight. There’s some evidence that diets high in sugar are associated with an increased energy content of the diet overall, which over time can lead to weight gain.”‘

    Unless and until the scientific consensus swings to suggest a low-carb diet is better for us, then I’ll continue to follow the advice of the experts, rather than crackpot internet theorists.

  • 30 LukeM March 5, 2019, 6:49 pm

    I like this bit from the Smithson interims, attributed to one of the managers, but with all the hallmarks of Terry Smith:

    “We could take this opportunity to opine at length on [the issues that started to impact asset prices in the early Autumn] but unfortunately it wouldn’t be worth much to you, because although we have our opinions, we don’t know what will actually happen in the future regarding these matters. In fact, just giving our opinions would likely cause you a disservice, because there is a chance you might actually believe what we say.”

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