#32 – The Do-Gooder
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SUMMARYJonathan Ruffer is the founder of the eponymous asset management firm, a bold and successful investor (a combination unusual to survive, let alone thrive) and considers himself a financial historian. He remains the figurehead of the firm although has stepped back somewhat from the daily combat with markets. In this episode, he explains why he thinks the Yen could double, why the equities age is behind us, why inflation is here to stay and much more. And in a first for this podcast, Jonathan turns the tables and asks me the most difficult interview question of all time.
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GETTING INTO INVESTINGJonathan always wanted to be an investor from age 11 and went to work for the local stockbroking firm, age 16. He laughs at how many jobs he had prior to setting up his investment firm Ruffer, which made him the perfect guest at dinner parties. I am sure Jonathan remains a perfect dinner party guest as he is delightful company but he has subsequently only run his own firm which celebrates its 30th anniversary this year – only the most successful investors have had such a long run.
Some takeawaysThere was a huge amount here to digest and I could have carried on for another hour quite easily, although my intellectual pace is about half that of Jonathan’s. We didn’t follow through on all the threads and there were some big questions.
InflationJonathan believes inflation is here to stay. He sees two primary drivers behind this:
Deglobalisation and the localisation of supply chains. As we duplicate centres of manufacturing etc, the concomitant duplication of resources is inherently inflationary.Wage pressures. He believes we have reached and surpassed a tipping point in the relative power of capital and labour. He likens this to the situation in the UK in the 1970s, when we had the miners’ strike, rubbish piling up in the street and the winter of discontent. When the power of labour had become simply too great, the power swung in the other direction. That has lasted until now, but the power of capital has now become too great and workers will have the upper hand going forward. That means higher wages and ongoing inflation. The Age of Equities May be OverJonathan recalls British fund manager George Ross Goobey, who managed Imperial Tobacco’s pension fund and became famous for being the first manager to recognise that pension funds should buy equities. Formerly, bonds were the darling of investors and equities were often tied up in family hands.
Since Goobey’s insight in the early 1950s, we have had an age of equities where it is perceived they can only go up and where no right-minded investor would own anything else. Jonathan believes this era has ended. And he cites an unusual signal.
We are currently seeing a swing from private equity to private credit. This of course may be at least in part because of prevailing and impending restrictions on the banks, partly a reflection that equity valuations and increasing interest rates leave less on the table and partly because of the sheer weight of funds committed to private equity.
But Jonathan believes that private equity is the smart money and they are voting with their feet and that’s a signal we should not ignore.
The 1937 Stock Exchange YearbookJonathan tells the story of a getaway with his wife when he spent more time reading the yearbook than talking to her. He considers himself something of a financial historian and loves reading contemporary accounts to understand the mood of the day. Nothing is new in markets. The 1937 Yearbook is particularly interesting because December 31, 1936, marked a high which was not broken in real terms until 1985.
ABOUT Jonathan RufferToday, Jonathan Ruffer is widely respected as a brilliant investor and the founder of the eponymous asset manager. He started as a stockbroker, then became a barrister (no relevance to investing he thinks), and went on to work in corporate finance for Schroders, then to Dunbar, a private bank. In 1994, he co-founded Ruffer Investment Management Limited, with Robert Shirley, then Viscount Tamworth, and Jane Tufnell. The firm became Ruffer LLP in 2004 and Jonathan was its chief executive officer from 1994 to 2012 and has been its chairman since 2011.
Ruffer credits William Rathbone VI as a source of inspiration for his philanthropy. In 2013, he donated £15 million to preserve Auckland Castle, the historical palace of the Bishop of Durham, through the Auckland Castle Trust, of which he is the chair. He has also donated significant sums to the local area of County Durham.
Jonathan recommended Sideny Homer’s History of Interest Rates but you should look at the 1963 edition not the 1977 edition when some views may have been modified in the light of experience. I don’t think he was joking and will take a look on my next visit to the British Library.
But Jonathan is incredibly widely read and we used the library meeting room in the photo for the interview. This includes his collection and that of an economist friend.
HOW STEVE KNOWS THE GUESTSteve was originally introduced to Jonathan by economist Peter Warburton many years ago. Ruffer LLP is a client of Steve’s and he bumped into Jonathan in the building reception and asked Jonathan to come on the podcast.
A TOUR OF RUFFERI took a few photos on my arrival at Ruffer and the art on the walls includes reminders of how to lose money:
– Zimbabwe banknotes
– share certificates from failed businesses
– reminders and quotes
Here are a few photos:
Transcript
PrevE1 – Emmanuel Lagarrigue
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