Crumbs

by

21 Nov 2014

I cut it fine sending through this month’s column. OK, to be strictly accurate, I was 24 hours past my allotted deadline but the reason I felt able to try the patience of the sainted editor was I was feeling discombobulated by markets yet had some hope that the conference I was chairing the next morning could help.

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I cut it fine sending through this month’s column. OK, to be strictly accurate, I was 24 hours past my allotted deadline but the reason I felt able to try the patience of the sainted editor was I was feeling discombobulated by markets yet had some hope that the conference I was chairing the next morning could help.

I cut it fine sending through this month’s column. OK, to be strictly accurate, I was 24 hours past my allotted deadline but the reason I felt able to try the patience of the sainted editor was I was feeling discombobulated by markets yet had some hope that the conference I was chairing the next morning could help.

In retrospect, this may have been optimistic because what had partly caused my discombobulation was a conference I had chaired a few days previously. A question from the audience of financial advisers seeking some crumbs of comfort to offer clients after weeks of depressing markets saw the panel of fund managers dispensing whole loaves of the stuff.

Far from this being the start of anything sinister, they averred, the last month or so was merely a midmarket wobble. Move along, nothing to see here – as of course they did not actually say. Well, yes, markets can often be unattractively spineless and prone to panic without great cause – but, as things stand, there appears no shortage of great causes for real concern.

From chunky valuations in the US to Germany following the economic example of its EU counterparts rather than the other way around, it all feels a bit uncomfortable and that is before we get to the increased activity of at least three-quarters of the Four Horsemen of the Apocalypse – or indeed to bonds.

Ah, bonds – the asset Lewis Carroll would have been proud to have created, where up is down, good is bad and where a ‘flash crash’ actually sees asset prices rise. Unless the ‘crash’ was just the bit when yields rebounded upwards but … er … anyway, there were a number of bond managers on the bill of my second set of chairing duties and I had my question ready.

It took me a while to ask – it always does when I am striving not to insult either managers or their asset classes – but it came down to whether bond markets would ever have the decency to crash properly in the way we journalists, quoting you professionals, have been suggesting on and off for the last few years.

To put it another way, are bond investors playing chicken on a motorway or are they more like that – hopefully – metaphorical frog who ends up gently boiled? Neither, came the replies. Things will not be easy but nor will they end horribly – at any speed – and especially not for those investors sensible enough to entrust their cash to whoever was replying at the time.

Ultimately, it emerged each bond manager – as well as the multi-asset professionals who comprised all but one of the remaining line-up – had a plan and this was … diversification. As one of them noted: “We cannot be sure what will happen next but we can be sure diversification is the best way of navigating whatever does happen.” That at least has the virtue of being honest, if not, perhaps, enough of a justification for missing my deadline.

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