The Rules of Investing

Guest: Ben Griffiths, Principal and Portfolio Manager of Eley Griffiths Group. When Isaac Newton first posited that an object in motion would stay in motion unless acted upon, he probably wasn't thinking of stock markets. But hundreds of years later, the same principle has been adapted for investors; or "the trend is your friend" as it's more commonly stated. While this rule of thumb can be pretty handy, there are rare moments in financial markets where everything can turn on a dime, and suddenly that trend doesn't look so friendly. George Soros called these times 'inflection points', and according to Ben Griffiths, Principal and Portfolio Manager at Eley Griffiths Group, we stand at one of these crossroads today. “It is classic exhaustion price action. Bulls aren’t sure if they’re convinced anymore, and bears are in the process of giving up after that strong run-up from December. It’s what markets do best at turning point; they confound the bulls, they trip up the bears, and they generally exhaust investors.” In this week’s episode of The Rules of Investing podcast, Ben explains why the Australian economy could be doing better than it seems, how he knew it was time to start buying shares near the bottom of the GFC, and three simple investing rules that’ve served him well.

Guest: Roger Montgomery, Chief Investment Officer, Montgomery Investment Management. Australian house prices and the economy stand at an important crossroads. On the one hand, we have the return of the Liberal-National coalition, the softening of APRA regulations, and rate cuts from the RBA, which all stand to stimulate. On the other hand, we have housing starts down by over 25% over the last year and showing no signs of turning, combined with anaemic retail sales, with the potential to push the economy into a dark place. One rarely discussed dynamic, however, is what Roger Montgomery, Chief Investment Officer at Montgomery Investment Management, calls 'the economics of enough'. “People have borrowed enough, they’ve bought enough stuff, and eventually growth slows, and that’s where you get deleveraging occurring in the economy, where credit growth is slower than economic growth. I think there’s a risk that we’re now in that deleveraging phase.” In this week's episode of The Rules of Investing, Roger shares what "quality" really means to him, some lessons on late cycle investing from Buffett himself, and we discuss two outwardly-similar companies with very different long term prospects.

When a young Charlie Jamieson arrived at work in London on September 11th, 2001, little did he know how much that day would affect his views on markets. At the time, he was trading US Dollar bonds from Merrill Lynch’s London office, having just left the New York office three weeks earlier. It was a harrowing time, but it wouldn’t be the last time that he faced a major catastrophe as an investor. Years later, he found himself managing Euro portfolios throughout the GFC and the Euro Crisis. While many investors would remember the equity sell-offs that follow, these crises were often centred around debt markets. But it’s not just times of crisis that rates matter, in the full podcast, Charlie explains why interest rates are the virus that affects all assets.

Guest: Nick Griffin, Chief Investment Officer at Munro Partners. For decades, traditional wisdom has held that value investing is the only way to outperform, and with good reason. Until the GFC, value had outperformed growth in all but a few brief periods, and those periods immediately preceded a major bear market. But for nearly a decade now, growth has produced superior returns. While some may argue that zero interest rates and quantitative easing are to blame/thank (depending on your positions), a look at the top 10 companies in the world tells a different story. As the world exited the worst of the GFC, the top 10 companies in the world were all traditional businesses – oil, supermarkets, banks, and telcos. 10 years later, the list is dominated by digital businesses.

Paul Moore, founder & CIO of PM Capital, discusses his big picture views, characteristics of investments to own and avoid, examples of current pricing anomalies and one major risk being caused by investor crowding.