Ross Middleton CA on tweets, short-termism and the stock market bubble

Finance data
By Andrew Harbison, CA Today

5 April 2017

Ross Middleton CA, Senior Investment Manager for Murray Asset Management, speaks to Andrew Harbison about short-termism, the influence of a tweet and the stock market bubble.

We are living in the age of instant. Instant quotes, instant messaging and on demand video means we are becoming accustomed to getting what we want at the push of a button.

This focus on the short term and instant gratification has made its way into the world of finance and investments.

“The danger of that is that people become used to this short-termism and looking for a quick profit,” says Ross Middleton CA.

But when it comes to his role as Senior Investment Manager for Edinburgh-based Murray Asset Management, Ross does not subscribe to the short-term way of thinking.

“I’ve been here for 17 years this month, so I’ll be getting my annual LinkedIn congratulations message soon,” he laughs.

Ross Middleton

Ross’ career in finance began in audit for Ernst and Young in Edinburgh.

He then moved to Australia and spent two years working in the Sydney office of EY.  He almost didn’t return to the UK.

“I was tempted to stay, I really was. I had all the forms I needed and was seriously thinking of staying out there.

“Part of the reason for doing the CA, for many people, is that it gives you the opportunity to travel as it’s a transferable skill.”

But, keen to pursue a career in financial services, he made the move back to Edinburgh.

“I wanted to get involved in the investment side of FS. I had been exposed to that in Edinburgh from auditing clients. I felt the contacts I had built up in Edinburgh meant I had more chance of changing career there.”

The challenges of the investment manager

Having secured the position of trainee investment manager and dealer with Murray Asset Management, Ross found that he had to hit the books yet again in order to have the opportunity of managing portfolios on behalf of clients.

“While I was working I was also studying for the Securities Institute exams, now the CISI.

“Unlike accountancy training where you go on block release and have designated time to study, this was very much on your own time.

“I found that tough, studying after work.”

But one of the biggest challenges for an investment manager, Ross explains, is ensuring clients understand the nature of investments purchased on their behalf and explaining the risks involved. This is achieved through clear and transparent communication and a rigorous client take on process.

"That’s a skill that you develop over time, and not something readily available in the training manuals”.

Clients also appreciate a proactive approach where a holding has failed to deliver the returns expected.

“We would all like to have every investment going well for us, but that isn’t always the case.

"In these instances, making sure you are upfront and can clearly explain the reasons for any investment failing to meet expectations is paramount.

There are many examples of people investing in areas that they really don’t fully understand which is incredibly risky. Never lose sight of the reason for buying a stock and If something sounds too good to be true it usually is.

"However, our investment approach is aimed at ensuring we have a diversified portfolio of holdings in a broad range of asset classes which will produce solid long term returns. This is designed to reduce the capital risk associated with investment thereby minimising the influence of any one holding on a portfolio."

The dangers of short-termism

The days of scouring Teletext for share prices are far behind us. With more people now using the internet and mobile apps to trade in stocks, the landscape of investments is rapidly changing.

“You can press a button and become a shareholder,” said Ross.

“I think as a result of that people are looking for returns a lot more instantly. That’s created some interesting challenges and opportunities for long-term investors, like us.”

There are potential dangers that come with this method of investing, especially for someone unfamiliar with the stock market.

“There are a lot of people claiming to be making money on a daily basis this way. But it’s the old adage, of ‘caveat emptor’ or buyer beware in relation to stock market investing.  

“There is so much in the way of due diligence that we would do before investing on behalf of our clients that I don’t think is undertaken by private investors.

“There are many examples of people investing in areas that they really don’t fully understand which is incredibly risky. Never lose sight of the reason for buying a stock and If something sounds too good to be true it usually is." 

A new era of influences

The stock market will ebb and flow, companies’ shares skyrocket and plummet, this is nothing new. But some of the influences that cause these fluctuations have recently changed.

President Donald Trump’s Twitter presence has had an effect on the share prices of various companies over recent months. From aircraft manufacturer Boeing to Macy’s department stores, Trump’s influence has become a new challenge for investors.

Being able to analyse the vast amounts of information that is available to the industry is a key part of an investment manager’s role. There is a lot of short term ‘noise’ which can cloud an investor’s judgement and concentrating on the fundamental principles of long term investing is therefore crucially important. This is especially so given recent political and economic developments.

Regardless of who is tweeting what, the stock market is experiencing an upwards curve, but is the bubble about to burst?

“To use an economic term: investor interest in stock market investing can be similar to that of a Giffen good. This is where the traditional supply-demand ratio is turned on its head. The better the market performs and the higher the value attached to a stock market, then the more likely people will want to get involved.

“It’s the fear of missing out. You can link that to what happened in previous market crashes. I’m not saying we are heading for one now, though.”

In fact, Ross believes that things may be moving in a more positive direction for investors. A measure of this will be the US economy and how it performs over the next few years.

“Everyone is looking at the US now because it is the first economy to come off life support. They have started to raise interest rates and the Market is expecting further rate hikes this year.

“That’s the litmus test. Once the effects of quantitative easing and central bank measures begin to recede and you return to a more traditional credit cycle involving inflation and interest rate rises, only then will we have a clearer picture on the outlook for the global economy.


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