THE BOOK IS OUT at last - Doctor! Doctor! An Investment Analyst on the Couch (AVB Publications, HK$149), at your local bookshop now. Why Doctor? The reason is that I expected I would need one after I had booked a meeting several years ago with a fund manager whom I had been telling for more than a year to buy South Korean stocks, during all of which time the Korean market had gone straight down. I was expecting a mauling. Instead, this client looked me in the face and said: 'You know, I think that what this Korean market needs is not an investment analyst. What it needs is a psychoanalyst.' Ask any number of investors in Korea how true that can be. Work out your Korean price-earnings ratios or cash flow numbers if you will but, before you do anything else, give yourself a grounding in the Korean mind-set. You may not require a psychoanalyst but you may occasionally want to think as one does. It is true of more than Korea alone obviously and sometimes a few of those searching questions that go a little deeper than the financial ratios need to be pointed the other way too. You need to point them at yourself. Here is one, for instance, that too few people ask and would do themselves a lot of good if they asked more often: if this investment adviser who says he can get me a 20 per cent annual return on my money is really so clever, why isn't he rich? He may say he is rich, of course, and he probably will be but then why is he sitting with you at 5:30 pm on a Friday to offer investment advice when he also says he likes sailing? If he is really that clever then why hasn't he made his fortune with his own money and long been gone on a sailboat somewhere off Tahiti? It is entirely an appropriate question and the reason so many investment advisers do not like to be asked it is that they have no real answer other than the obvious embarrassing one. This should tell you enough. Look at it another way. Take a hypothetical teacher who has the investment adviser's children in his class. He obviously treats this as an entirely natural arrangement. The investment adviser is not a professional in the teaching business and therefore he sends his children to school with someone who is. Likewise, says the teacher to himself, if I have some money to invest I do not invest it myself. I am not a professional in the investment business and therefore will put my money with someone who is one and can give me a higher return than I can get myself. It seems like a fair trade but it has one serious flaw. The teacher may know all about the curriculum and the best techniques for getting children to learn and remember their lessons but the one thing about which he can make only a hazy guess is what those children will do with their lives when they leave his school. Likewise, the investment adviser knows all he needs to know about buying stocks, bonds or commodities with your money, finding you the best price he can get, ensuring that you have good title and selling these investments for you again quickly at a good price when you choose to do so. But the one thing he cannot do is to tell you whether you will turn a profit on these investments. He is as blind to the future as you are. His is essentially a technical skill, a worthwhile one, but not really deserving of a greater income than the teacher's. Remember this when you sit across from him. It is up to you decide where you want to put your money. His role is to tell you how to do it. There you have the theme of Doctor! Doctor! Money does not grow on trees.
