Today's column is an effort to help out the average person who is interested in investments, but burdened by a day job or a lack of investment education. I face the same problem when I read the paper.
Whom can you rely on? Which experts are real and which ones will kill you? You are going to find large generalizations in this column, but on balance they are valid.
The very first question that you should ask is why does anyone in the investment industry want to be interviewed or quoted? Many don't and hypothetically they may represent the best brains in the industry.
My experience is that the people who don't want to be quoted are no smarter or dumber than anyone else. There are some elementary reasons why people choose to be quoted. It can be good for business and it appeals to our vanity.
Hopefully I can give you one modest tip to facilitate your newspaper reading productivity. The most important articles to read are by, or about successful investment managers. Articles by or about investment executives and corporate executives come next. Research analysts should be read afterwards.
The last experts to rely on are economists, with one notable exception. Jeffrey Rubin of CIBC has been told to be more sensitive in his writing, but his predictions on oil and interest rates have been so profound that he is definitely an exception to the rule that avoiding economists is quite permissible.
The genesis for this article was a story in The Wall Street Journal dated Aug. 1, about Christopher Davis, the manager of some very large U.S. mutual funds. The story is about a man who has made billions for himself and tells you what he is thinking. Even more important, he has been known for decades to be candid. Mr. Davis is the anti-Donald Trump.
Since we now manage hedge funds, theoretically I should be devoting equal time to a discussion of what not to read in the Daily Bugle. Avoid all the articles interviewing Mr. and Mrs. Average Canadian who want to share their investment expertise with us. Certainly there are many astute investors out there in the real world, but the real world is full of experts on sports, movies and politics as well. However, the editors of these sections do not choose to air these amateur views like they do in the financial section. I repeat that I recognize that there are brilliant investors out there, but they don't have the discipline of achieving reported performance numbers like myself. This lack of discipline prevents the reader from knowing whether they are dealing with lucky or smart people.
On the surface it is mandatory to read statements by public company executives. I have many reservations when I read about them. Executives of public companies have one small flaw. They are optimistic almost all the time and will never admit to anything being wrong.
The other day a public company guy was explaining why the latest quarter was a tad low. Apparently the first month of the quarter was quite slow, but the following two months were much better and since the quarter's end everything was terrific. I sincerely appreciated this up-to-date blow-by-blow analysis of how the company is doing, but darn if I can recall any mention at the time of the slow first month of the quarter.
This is not an unusual story. It represents the overwhelming percentage of companies with any entrepreneurial flair.
I used to be a brokerage analyst in my former life and you might expect me to be more sympathetic to these hard-working people. Unfortunately analysts (with good reason) have to be very careful about what they say about the management of the companies that they follow. It is not about corporate finance relationships. Analysts at big Canadian brokerage firms are far removed from the gaze of corporate finance.
The analysts are wary of upsetting management if they say anything even slightly neutral. A bad relationship with management is thought to be a career stopper. You may say that in today's era of full disclosure the analysts have nothing to worry about, but this is academic. There remains considerable evidence that public companies treat analysts they view as unfriendly in a discriminatory manner, and most important, the analysts are worried about the distinction. The end result is that the analysts are not prepared to say anything publicly negative about any of the companies they follow.
Until I started this column I contributed my 2 cents to an investment column in another paper for decades. I always gave my best shot, as did many of my competitors. I read it religiously and not with a view to doing the opposite of what the column suggests. Investment managers are only human. They love to share their wisdom and, of great significance, many think that it adds customers.
Ira Gluskin is president and chief investment officer of Gluskin Sheff + Associates.