Graham Bibby believes psychology moves markets and we are beginning a bull market with substantial potential for profit. Brad Reagan and 20 others followed his momentum
The trick is knowing when to poke the bear
As a rule, most money managers like to present themselves as more clever than the competition, able to outsmart the market and see around dangerous corners. This is one area where Graham Bibby stands apart from the herd. Mr Bibby, the chief executive of the Hong Kong-based Richmond Asset Management, subscribes to an investing philosophy that can be summed up as "go with the flow". He tracks the momentum and psychology of markets, factors that he believes are far more important than any skill at analysing the underlying fundamentals of companies and economies.
"I believe psychology moves markets more than anything," he said in a presentation to investors at the Abu Dhabi Hilton this week. "When the markets start going up, the reason why is not really relevant. If you follow trends, you can make money in those movements." Mr Bibby's firm recently announced a partnership to manage money for clients of Globaleye, a Dubai financial planning company that also has an office in Abu Dhabi. Of the 20 or so people in the audience, most were already Globaleye clients.
His core message: we are in the early stages of a global bull market, driven largely by China, but opportunities abound. "Right now, all the lights are green," he said. "The greatest profits are not made in a bull market. They are made coming out of a bear market, and I think we are still coming out of a bear market." John and Rebecca Read of Abu Dhabi, who attended the presentation, found the message comforting.
"We were expecting the double dip - you know, the world is ending," Mrs Read says. About six months ago, the Reads began setting aside about US$1,000 (Dh3,672) per month in an investment plan. John, a pilot with Etihad, said Mr Bibby's analysis is making him consider being more aggressive. "It is interesting to see that he sees things on the way up," Mr Read says. Mr Bibby is aware that asset managers have a well-earned reputation for advising clients to buy regardless of the economic outlook, or at worst to sit tight until markets recover. He says his approach is different; he's willing to sit out of the market entirely if he sees the trend turning negative.
In the past eight years, he says, he kept the money he manages entirely in cash 40 per cent of the time. "If your troops are in battle and they are getting slaughtered, you don't just leave them there. You retreat," he says. "The secret to investing is not how much money you make when the markets go up, it is how little you lose when the market goes down." Richmond's growth fund has returned more than 15 per cent over the past eight years, whereas the MSCI World Index averaged closer to 2 per cent (Richmond's fund is down about 2.5 per cent this year).
Mr Bibby warns that he believes the buy-and-hold philosophy that sustained many armchair investors throughout the 20th century is now outdated. Markets are too volatile and unpredictable. "The investment market, despite what we are told, is not rational. We get irrational exuberance on the way up and the same thing on the way down," he says. One man, who asked not to be identified, said after the presentation that he essentially agreed with Mr Bibby. The man is 56 and hopes to retire in four years. When his mother died last year, he cashed out her portfolio entirely rather than risk trying to manage it himself.
"The days of people working on hunches and a gut feeling are probably over," he says. The man says he also plans to meet with his financial adviser this week to discuss whether to incorporate some of Mr Bibby's outlook. While the money manager makes most of his decisions based on technical analysis of market trends, he has opinions about where the global economy is headed as well. He is most bullish on China - "there is going to be some fantastic money to be made out of China" - and Southeast Asia in general.
Mr Bibby forecasts that China's growth will pull the Japanese economy out of its extended doldrums in the coming years, with major opportunities in India and Indonesia as well. He is not especially enthusiastic about gold prices, but likes silver more. Overall, he believes the slight bump in global markets in the past month is the start of a longer trend, although he declined to put a timeframe on it. "I think this is the start of a new bull market," he says.
Mr Bibby says he has not studied the UAE market closely in the past, but was starting to do so now. He thinks the country will benefit from the growth to the east as the global economy picks up again. "This is like the pruning of the garden. Now you will get new shoots of growth. But it will not just be about Dubai again," he says, adding that Abu Dhabi will be playing a much larger role in the country's growth going forward. "All boats will be lifted by this uptrend."