Miss Mackay's Money Microscope: how the City has changed

investors-chatting-with-portfolio-graphs

Ros Price, a founder director and former chief investment officer at 7IM, retired this January after 36 years working in the City. The fact that she was offered her first role - as an investment analyst at the Esso pension fund - by telegram is an indication of how much has changed since 1979.

Price wryly recalls that a knock on the door by a telegram bearer when your husband was on a tour of duty on the Falls Road in Northern Ireland was not an immediate indicator of good news. 'Luckily, there was no family liaison officer with him, so I knew it couldn't be that bad,' she says.

Price was only the sixth woman to be granted permission to work on the Stock Exchange floor, at a time before technology eroded the relevance of the physical trading exchange.

How can we get more women investing?

SCEPTICAL ON TECHNOLOGY

She is sceptical about the changes that technology has brought over the decades, and she clearly despairs at the proliferation of stereotypical numbers geeks who never look up from their screens and use algorithms as a comfort blanket.

'We now tend to shy away from making decisions and using judgement. We expect spreadsheets to stand instead of decisions and judgements,' she says.

'We use statistics that are backward-looking to make predictions about the future, rather than look into the murk and construct models of what might happen.

'We don't do what-ifs all that well without huge computational spreadsheets, as if we are afraid of taking responsibility for our judgements. Common sense, which is so useful when trying to assess a business, is rare.'

She thinks many fund managers have become intellectual cowards who cover their personal errors with spreadsheet problems or algorithm malfunctions: 'Few are the managers who have the balls to stand up and say "mea culpa. I screwed up here".'

In a decade when technology and algorithms are set to revolutionise the personal investing space in the shape of an invasion of so-called robo-advisers - whose precise job is to offer a cheap indexed average - we are likely to see the active fund manager's role become increasingly about personal conviction.

UNORTHODOX APPROACHES

It will involve avoiding the trap of expensive index-hugging, and instead support smaller, emerging business by supplying capital and seed support.

For example, Neil Woodford's Patient Capital Trust is about finding smaller businesses, with less data and spreadsheets and ancillary information, displaying more personal conviction and (hopefully) skill.

Price tells of her time as a retail analyst in the early 80s when she walked Oxford Street to count shoppers' carrier bags and look at the numbers of shoppers.

As recovery from the recession began in the early Thatcher years, she would kill waiting time at industrial-action-hit Clapham Junction by looking at freight transport; similarly, she says, brokers would send juniors to the docks to look at containers.

Later in her career, she started researching online. 'You can find out a lot of information online. Order a dress that has been available for two weeks. When you find it has sold out, that tells you something.'

She takes a similarly unorthodox approach in wider macroeconomic analysis. 'When I go on holiday with my husband, and we drive up and down the motorways of Europe, I look at the freight lorries.

Where do they come from? Where are they going? Once I noticed they were all coming from Germany. That year the 7IM fund went long on Germany. In those days, you couldn't buy that sort of information from any broker.'

THE YEAR AHEAD COULD BE VOLATILE

So what does she think the next year will hold for markets? Price says the currency markets, often the quickest to react to news, are telling us that Brexit is 'dangerous for the UK'.

The pros and cons of Brexit

She sees this issue as more about sovereignty than economics. She believes a Brexit could seriously undermine the UK economy, but also fundamentally damage the EU as populist parties gain strength.

Price says: 'The next 12 months is likely to be difficult and volatile as the mood of investors lurches from depression to euphoria and back. Global trade is growing, but very slowly, and some argue that the rate is slowing. The recovery since 2009 is tepid compared with others I have experienced.'

With the geopolitical backdrop frenetic and both earnings and dividends under pressure, Price worries that equity valuations could come under pressure.

She says: 'Bonds have for some time been telling us that all is not well in the global economy, but equity markets have been wilfully ignoring the warning.

'The realigning of valuations with reality (as far as earnings and dividends go) may be painful, but far from the sort of disaster we saw in 2008. The worry is that debt levels globally are climbing. That needs watching by central banks.'

Price's concern is that the still-growing global economy may be held back by the accumulating weight of debt. So we can look forward to a volatile year as markets agonise over the impact of this debt and the growth levels resulting from such a burden.

CITY VIEWS

During our discussion, I can't help but notice the impressive gold bling Price is wearing around her neck. Although a softly spoken, unassuming woman and far from flashy, she does have a soft spot for jewellery, and she rather sweetly tells me about the pieces bought as gifts for her by her husband.

Does this fondness for glitter translate into a recommendation for investing in gold? It seems not. The price of storage puts her off buying physical gold.

She says: 'For those concerned that inflation will creep in - and that lower sterling could spark UK inflation - some exchange traded notes (ETNs) give exposure to gold, but I can't see myself buying those now [an ETN is similar to an exchange traded fund, but with more bond-like qualities].'

So what is the biggest change Price has seen over her career? There's a distinct tinge of nostalgia when she tells me there was honour in the past. She thinks back to the tough days of the 1970s and what partnership meant then.

She says: 'During the economic slump, partners had to take money from their own savings to keep their businesses afloat.'

She doesn't like what she refers to as today's 'Porsche and palace brigade': a younger generation that expects to work for a few years and make serious money producing questionable returns.

The strongest messages I got from spending an hour with Price were the importance of intellectual humility, having the guts to trust your instincts and observations, and using your eyes.

As she says: 'Markets are about people and their reactions to events and data, not the actual data. We have to try to guess people's views and probable reactions to data and events.'

So, after 36 years of boom, bust, globalisation, 'perfect information' and algorithms, it's still all about greed and fear.

Although we're told that artificial intelligence could soon transform investment practices, for now, spreadsheets and databases can't understand greed or fear - or what's in all those lorries heading out along German autobahns.

PRICE'S PRESENT PORTFOLIO

Three weeks ago, Ros Price spoke at a networking event I run for women in financial services.

Rarely lost for words, I stopped in my tracks with a torrent of thoughts racing through my head when she announced that she was 82 per cent invested in cash. Run for the hills, I thought. Stockpile baked beans. Assume the brace position.

However, her position was largely down to a January retirement and the agonising experience of aggregating all her pension pots into a single Sipp, which often requires paper forms, encashment of non-transferable assets and a lot of time.

However, she has been adding to positions over the past few weeks. She uses 'nasty market days' to buy, and this has taken her position up to about 50 per cent invested.

She says: 'Some equity markets look much more reasonably valued than they did a few weeks ago. But I worry that people will chase the markets again and push values too far once more.'

Although cautious in her outlook, she thinks it sensible to use 'nasty days' to buy into funds of solid, well-run businesses, and she is considering some new exposure to emerging markets.


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