Jonathan Davis

When pessimism prevails, it’s probably time to buy If one thing puzzles private investors more than anything else, it is the extraordinary capacity of the stock market to move in ways that appear to follow no discernible logic. ‘Profits Up, Shares Tumble’, or even ‘World War Declared, Stocks Rise’: such headlines understandably confuse the uninitiated. But in reality there’s nothing strange about this pattern of behaviour, and understanding it explains why being a contrarian — going against the thrust of expert professional opinion — is so often the key to the greatest investment success.

Here’s the good news. Share prices are falling. Investors are panicking. Talk of crisis dominates the headlines. These are precisely the conditions in which bargains tend to become available on the stock market. Just as history is written by the victors, so the day-to-day stock-market narrative is written from the perspective of those with most to lose: those who already have wealth, not those who need it in the future. Yet when it comes to investment, as all great investors know, what matters most is how cheaply you can buy, not whether the market is going up or down around the time you do so.

In search of the next ‘trade of the decade’ Imagine you were sitting in St Paul’s at the 1981 royal wedding, waiting for the mismatched bridal couple to arrive and idly speculating about the best way to save up for a wedding present for their first-born, a generation hence. The odds are you would not have given much thought to British government stock, or gilts, as the investment of choice. At the time, gilts had become a pariah of the financial markets, shunned by anyone who had followed their calamitous decline in value over the postwar period.

For the outspoken Terry Smith, successful investing means never having to say ‘sell’ Terry Smith’s office is high up in Tower 42, formerly the NatWest tower, in Old Broad Street. It has a sweeping view over Docklands towards Essex, the neck of the woods with which he seems to be associated in the popular mind. This high-profile City figure’s image is that of a bruiser with attitude, who made good in the money markets through a series of ballsy deals and likes nothing better than a good scrap. On his new blog, Straight Talking, you can read his denunciations of Labour spending and the ‘myths’ about Osborne’s cuts, particularly as reported by the BBC.

Jonathan Davis talks to globetrotting investment guru Jim Rogers about the bull market in commodities, China’s rise to superpower status — and how America lost the plot ‘What do they know of England who only England know?’ Kipling’s question, with its powerful message that true knowledge of a locality can only come with the perspective that foreign travel provides, has important echoes for the modern investor. In today’s global markets, virtually no overseas country is closed to the armchair investor. In less than a minute at the computer, you can buy an index fund that tracks the performance of the stock market in Korea, Brazil or even Kazakhstan, or shares in the largest companies in Turkey, South Africa or Ecuador.

Jonathan Davis says that if Britain’s ancient universities want to remain world-class, they should take tutorials from Harvard and Yale in how to invest their endowments Devotees of the diaries of Harold Nicolson and Alan Clark will feel that they know the cramped apartments at the Albany in Piccadilly as a vicarious second home. It was there that both men would repair after dining and gossiping in clubland; there also, the reader is led to assume, that their extramarital assignations would be consummated. But how many of the millions who pass the Piccadilly entrance to the Albany have ever stopped to wonder who owns the elegant building in which these famous bachelor sets are located? The answer, it turns out, is Peterhouse, the oldest Cambridge college.

Twelve years ago, on a rainy afternoon when nothing much else seemed to be happening, I abandoned my desk in Canary Wharf for a few hours in order to track down a new and obscure betting operation somewhere off the Mile End Road. The managing director was a large, florid man in his late forties. He smoked a succession of fat cigars and looked the picture of ill-health. No medically-minded betting man would have offered better than evens on his survival into the new millennium. The business he ran belied his appearance however. The office, in a quiet cul-de-sac, was newly fitted out and spotlessly clean. The trading screens were impressively up-to-date and there was a buzz of excitement.

We’re barely ten seconds into our interview when Jeremy Grantham, one-time bedpan salesman from Doncaster, now hugely successful US money manager, is off on a favourite tack — mixing it with his competitors in the investment world. In this case what has drawn his ire are some reported comments from a well-known American fund manager whose views I have alluded to in a recent newspaper column. ‘I’m going to start with an ad hominem remark,’ he announces down the line from Boston, his adopted home, where he has built from scratch a global fund management business that looks after more than $140 billion of other people’s money. The pundit in question, he says, ‘is the biggest historical revisionist around.