As many readers grit their teeth and prepare to spend the post-Christmas lull in various states of satiety and sobriety, making awkward chit-chat with tenuously related family members, I am here to remind you that things could be much, much worse.
You could be at the Christmas party from hell, as constructed by the personal investor strategist of a certain large asset manager who earlier this month recommended a series of “conversation starters” aimed at sparking discussion of 2015’s potential investment themes with non-professional investors.
As far as goals go, luring random party attendees into financial discourse is perhaps a laudable one. Unfortunately the results of the exercise are more likely to inspire your conversation partner to lacerate themselves with the nearest available corporate Christmas card just so they might have a viable excuse to leave.
Consider this gem meant to be kept in one’s “back pocket” for seasonal social gatherings: “What’s all the fuss about the central banks?”
Where to begin? Clearly the difficulty is not so much in the subject matter — the levels of irony encouraged by post-millennial society mean that pretty much anything is fair game for a conversation nowadays — but in the framing of the question.
Asking “What’s all the fuss about the central banks?” leaves far too much flexibility for responders. You could be trapped for hours if some economist happens to wander by as you casually introduce the topic.
Even if you manage to accurately size-up your target as the type of Average Joe at whom the query is presumably aimed, it is too open-ended for even this correspondent to attempt to answer (though I like to think that I would down my eggnog with a flourish and say something clever about liquidity withdrawal).
Unfortunately, the suggested icebreakers get worse from there.
“So thrilled that the US economy is the top global performer. How are you going to leverage this good news?” To which clearly the only acceptable answer is: “By insisting that my stock broker begin every phone conversation by reciting the pledge of allegiance and ending them with a vigorous fist-bumping chant of USA! USA! USA!”
Another: “Inflation isn’t keeping me up at night — for now. How are you going to prepare?” Well, friend, with a medicine cabinet full of sleeping pills and a stack of 2015 investment outlooks by the bed in case the pills don’t work. I might dip into the pills now if that’s OK?
And any awkward silences are a thing of the past once we reach: “Hello again volatility. Looks like we’re heading into a more normal bumpy ride with stocks. How are you planning to keep your eyes on the long-term goal, paying no heed to ups and downs?” (I am unsure if this is addressed to an actual anthropomorphic personification of volatility. If it is, I would imagine volatility to be the type of person who would smile serenely then sprint out of the room screaming at the top of their lungs about a gamma trap.)
Quite why active investment managers are seeking to engage unsuspecting partygoers in a financial conversation is also a question left unanswered. After all, active managers, as we all know by now, have had a terrible year: a preliminary estimate from Wharton has just 10 per cent of US active managers beating their benchmarks in 2014.
The majority have been wrongfooted after taking positions based on the expectation of modest increases in interest rates, higher bond yields and some variation in stock performance. Over the past year the opposite has occurred — interest rates remain near zero, bond yields have ground ever lower and stocks have generally risen — but not in the pattern expected by many active managers.
So let this column serve as a cut-out-and-keep guide for non-professional investors confronted by “What’s all the fuss about central banks” and “Hello volatility” conversational gambits this holiday season. Grab a cocktail and skewer your interrogator with the following — fabulously specific — questions:
By how much did you beat your benchmark this year? What was your investment thesis going into 2014? How is this different from your investment thesis going into 2015? I’m not a finance professional, but the two sound very similar to me? What’s all this fuss about finance?
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