The Waiting Room

March 2018

I like to think I take a long term view of the markets; certainly, we spend quite a bit of effort urging our clients to look beyond the next week, month or year.  However, my recent chance conversation with an 83-year-old retired entrepreneur and active investor made me realise I may well have a lot to more to learn.

We were both waiting for a blood test.  I had been using the waiting time as an opportunity to catch up on my neglected Weekend FT.  A couple of articles caught my eye.  I shared “How outsourcing fell out of fashion in the UK”  with Can, my co-founder.  We have used what are broadly termed “infrastructure” funds selectively in some of our client portfolios and have been watching carefully as sentiment towards them has been affected firstly by the ‘threat’ of a Corbyn government and then by the prospect of interest rates rising faster than markets expected.

Then, over the page, I was surprised to see a prominent article on cryptocurrency “investing”.  I thought that circus left town after Christmas, leaving a field full of rubbish and nappies…?  Apparently not; although, in an echo of bubbles throughout the ages, there was a quote from an office worker who “had made losses of as much as 60 per cent on her investment in Litecoin. She has decided to hold on what she concedes is a ‘punt’, partly because “there’s no point […] realising the loss’”.  The ‘get rich quick’ play that magically transforms into a long term investment; I recall telling myself the same with a handful of dotcom shares in 2000.  As with the internet, there is a lot more to come from blockchain technology.

At this point the man tapped my arm and commented, “It’s been an interesting time, hasn’t it?”

“Yes, it has,” I replied, smiling politely at this interruption to my reading pleasure.  I pointed at a photograph of Donald Trump on the facing page and continued, “although I doubt this guy has as much to do with it all as he thinks.”

The man laughed.  As I was to discover during our short conversation, he founded a local motorcycle sales shop in 1958.  Since selling it in 1995 his primary activity (outside of spending more time with loved ones) has been to manage his and his wider family’s investments, something he started taking an interest in back in the 1980s with the wave of privatisations under Margaret Thatcher.

It turned out that investing was now rather more than an “interest”; this most silver of surfers used a software package to download and scrutinise company prices and financial data daily.

He explained, “It all started in the 1980s.  I bought shares in the privatised companies – “

“I’m just old enough to remember the ‘Tell Sid’ campaign for BT…” I interrupted.

“ – yes, I bought BT and I still hold those shares, and others…  The thing people don’t often realise is the value of the dividends these companies pay out.  We rely on the income now in our retirement.  Even with shares that haven’t done a great deal, when you look at the dividends we have had over the years, we are still well ahead.  I have noticed with many companies the share price can be all over the place but often the dividends continue to flow and that’s what we rely on.”

“I guess you must have quite a wide portfolio to help spread the risk?”

“Oh yes, we do.  Although we have some big fluctuations.  This past month has seen some big falls – sometimes tens of thousands of pounds in some holdings – “

“Doesn’t that worry you?  Don’t you find it stressful?”

“Oh no.  Not at all.  It’s all part of putting your money to work.  And I can only remember one case where a holding went horribly wrong.  That was TelSpec.  Back in the 1970s, for a company to have a telephone number, it needed a physical line into its building.  If you wanted more numbers, you needed to have more lines.  TelSpec came up with a way to have multiple numbers on the same line.  It was brilliant!  But eventually it was overtaken by better technology and changes in the market and its shares basically went to zero.  That’s the only holding I can remember being pretty much wiped out.  Otherwise, prices have moved around a lot, but we have enjoyed excellent income along the way.”

“It sounds like you have the perfect temperament for an investor...”

“I’m fine with the ups and downs.  Although I do think my mind is not as sharp as it was…”

He told me he was interested in the miners and energy giants, including BP, which, he said was still below the price he paid.

“Because of the damage from the Gulf oil spill?” I asked.

“Yes.  Although that’s to say it is still underwater on a capital basis; adding in the dividends we are plenty ahead of our original investment.”

“You don’t think the likes of Shell or BP are under any structural threat?  Aside from the shift to renewable sources of energy, just to keep up future cash flows they have to keep investing enormous sums in the present to find new sources of oil at a time when, certainly in the West, we are using less oil per head…”

“Ah, that’s the thing.  I expect they’ll be around for a lot, lot longer than people think.  These changes tend to happen very slowly and very gradually.  And they are not standing still.  Shell has diversified into gas; they bought that other company…”

“BG Group?”

“That’s it.  At the time everyone said they paid too much.  But it was a strategic move.”

I was starting to get the feeling that while I had the details at my fingertips, this man held far greater reserves of wisdom and knowledge than I did.  When he talked about changes happening more gradually than people thought, I felt like I had a glimpse into what it is like to take the very long view of things, away from the noise and clamour of 24-hour news.  Paradoxically, he had this perspective while scouring share price data daily, while I remained drawn to the heat and light of market “news” despite trying to restricting my analysis to longer cycles.

When I discovered his old business, the motorcycle shop, was down the road to where I lived, I asked if he were still local.

“Yes.  I have always been here.  We’ve been married 53 years and lived in the same house for 53 years.”

I laughed.  “You know, you are like the Warren Buffett of Woodford.  Perhaps you should host your own investment festival!”

He laughed and shook his head.  “I am really not sure about that.  Neighbours and friends sometimes ask me for ideas because they know I take an interest, but I never get involved.  Risking my own money is one thing but I do not want the responsibility for theirs.”

At that moment, the electronic counter beeped.  It was my turn to go in.  I stood up and shook his hand.  For the rest of the day I forgot about Trump, Corbyn, Bitcoin and all that; I found myself musing on the long arc of history and how powerful it would be genuinely to be able to look at markets in terms of decades instead of the days and minutes that dominate the 24 hour news cycle?

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