Square Mile's Victoria Hasler spent ten days meeting and interviewing fund managers across North America and Canada.
Greetings from Boston, Massachusetts. This is a city where cannabis was recently legalised. I won't go into the social problems this is starting to create, suffice to say that it makes for some sad sights. Cannabis stocks, however, are just as disconnected from reality as many of those partaking in the drug itself. And that's a little how stockmarkets feel too. Our manager here described the market as "toppy". It's hard to be a fundamental investor when everything is rallying, including total junk.
So what do you do when the markets just keep going up and nobody cares whether a company is well-run and cash generative, or has never made a profit and probably never will? You stick to your guns. At times when most investors seem to think that volatility is their best friend, wise investors remember that it won't always be so, and when markets turn we had best all be ready.
Greetings from Toronto. The skies are grey here, and dodging lightning strikes seems to be something of a pastime. Temperatures are unseasonably warm, but one can hardly call it cheerful. Instead there is a definite feeling that things aren't quite right. The Canadian stockmarket, like the weather, isn't behaving as it should.
Our manager here described September as "an impossible month for long/short funds". What he meant, of course, is that the markets are not trading on fundamentals, but are swinging around wildly with seemingly no pattern. So what do you do in Toronto in October when the weather is unseasonably warm? You hunker down and prepare for winter of course.
And any sensible manager will do the same when markets are not behaving as they should. Stick to what you know, yes, don't get distracted, for sure, but at the same time hunker down. Reduce gross exposure, reduce net exposure and admit that sometimes markets are just irrational. It won't last for ever, it never does.
At the end of the day, Canadian stockmarkets are not efficient and a good manager will be able to make money in the longer term if he doesn't lose his head now.
Greetings from Dallas, Texas. The sun is shining and there is more of a feeling of optimism here than there has been in the other cities we have visited. Indeed, one of our managers opened the meeting with the interesting observation that business conditions in the US are much better in the South than the North. Don't get me wrong - the markets haven't been any easier for the managers here than they have been anywhere else.
Another of our managers remarked that "investing has never been easy, but this year has been surprisingly challenging." He went on to say that he was "tired of talking about shorts that get acquired and then written down in the parent company". I can't blame him.