Investment

Don’t trust anything you can’t prove and other lessons learned from an investing legend

Published

1 year ago

May 25, 2023

Michael Ryan’s career provides a perspective on how things have changed and how investing principles have remained the same. Photo by Bryan R. Smith/AFP/Getty Images

It’s not often you get a chance to talk to someone who’s been involved in a profession for more than 70 years. But the Vancouver investment community has such a person. Michael Ryan has been a pillar of insight, integrity and sound counsel since the early 1950s, and on June 1, the CFA Society Vancouver is launching an award in his honour: the Michael Ryan Award of Excellence.

Think about it. Ryan started out when luxury cars had fins, the Rolling Stones were in grade school and the NHL had six teams. His career provides a perspective on how things have changed, particularly regarding ethics and the availability of information, and how investing principles have remained the same.

Things were primitive back when he graduated from the University of British Columbia in 1952 with a degree in finance. His first job with a tiny brokerage firm, HJ Bird, lasted exactly a day, but he quickly got a job down the street at Hall Securities. Everything was done on paper and blackboards. Being near a ticker tape machine was a real edge. There was very little business reporting in the newspapers (the Financial Post was a weekly) and prospecting for new clients was done through the mail.

As Ryan recalls, brokerage firms were “a dime a dozen.” In Vancouver, there were “a few national (investment) houses and three local firms trying to do a job for individual investors, and 40 firms trying to do a job on investors.” Forbes magazine once called Vancouver the “Scam Capital of the World.”

Ryan had an analytical bent early on. He read the Wall Street Journal as a youngster and went “halfers” on a set of nine investment books from Barron’s with his school chum, Art Phillips, co-founder of Phillips, Hager & North. “We learned as we went,” he said.

He began doing security analysis when few others did. It was rare to talk to company management or even read an annual report. He tells the story of going to see a company and the CEO sliding the annual report across the table and grumbling, “Read this.” Ryan shocked him by saying he already had and had a question about one of the notes in the auditor’s report. “We became very good friends after that.”

In those days, investors got an edge by getting information nobody else had. Today, there are rules against that, and company information is a commodity. Investment results weren’t rigorously recorded, either. Few people knew what mutual funds were, and their results were reported once a year. Closed-end funds were more common.

Ryan made several other stops along the way, including setting up Ryan Investments, where he trained Murray Leith of Leith Wheeler Investment Counsel. He didn’t have a mentor himself, but mentored many industry notables including Leith, Bill Wheeler and Ken Shields.

Initially, his teachings were about security analysis and markets, but he became an invaluable consultant on management issues. “It was great having Mike around when there was a tough decision to make,” Wheeler said.

In the 1950s and ’60s, it was easier to differentiate your firm than it is today. Ryan Investments’ big edge was U.S. stocks. His small team had the U.S. market to themselves while everyone else was touting mining stocks.

Ryan also worked for Pemberton Securities twice (the second time after it bought his firm) and spent many years at Leith Wheeler. He was at the centre of some important investment milestones, most notably the creation of the Portfolio Management Foundation at UBC, which gives aspiring investors real money to manage and a professional committee to report to (many Canadian business schools have used the UBC template). In mid-May, he was bursting with pride when he told me the initial stake of $300,000 in 1986 had grown to more than $10 million.

A lot has changed during Ryan’s career, but his approach to investing is timeless. He believes you shouldn’t trust anything you can’t prove. “Most portfolio managers and analysts waste about 80 per cent of their time,” he said. “They’re looking at metrics and things that really aren’t that important.” He didn’t accept commonly accepted indicators unless he could prove them. “There are too many loose ideas around. You have to ask questions.”

Along the way, he developed a pension for growth stocks, and learned from Phillips to pay attention to what is now called momentum. Phillips believed a majority of his holdings should be in uptrends. Ryan remembers him saying, “It doesn’t matter if I like the stock. What matters is that others like it.”

As is typical, Ryan is looking ahead, even at 93 years of age. He believes years from now people will be talking about how primitive our work on governance was. “Corporate governance is incredibly important, and we have very poor tools to get at it.” I think you’ll agree, he has the perspective to say that.

Tom Bradley is chair and co-founder of Steadyhand Investment Funds, a company that offers individual investors low-fee investment funds and clear-cut advice. He can be reached at tbradley@steadyhand.com.

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Economy

S&P/TSX composite down more than 200 points, U.S. stock markets also fall

Published

1 week ago

September 6, 2024

Anne Joseph

TORONTO – Canada’s main stock index was down more than 200 points in late-morning trading, weighed down by losses in the technology, base metal and energy sectors, while U.S. stock markets also fell.

The S&P/TSX composite index was down 239.24 points at 22,749.04.

In New York, the Dow Jones industrial average was down 312.36 points at 40,443.39. The S&P 500 index was down 80.94 points at 5,422.47, while the Nasdaq composite was down 380.17 points at 16,747.49.

The Canadian dollar traded for 73.80 cents US compared with 74.00 cents US on Thursday.

The October crude oil contract was down US$1.07 at US$68.08 per barrel and the October natural gas contract was up less than a penny at US$2.26 per mmBTU.

The December gold contract was down US$2.10 at US$2,541.00 an ounce and the December copper contract was down four cents at US$4.10 a pound.

This report by The Canadian Press was first published Sept. 6, 2024.

Companies in this story: (TSX:GSPTSE, TSX:CADUSD)

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Economy

S&P/TSX composite up more than 150 points, U.S. stock markets also higher

Published

3 weeks ago

August 29, 2024

Anne Joseph

TORONTO – Canada’s main stock index was up more than 150 points in late-morning trading, helped by strength in technology, financial and energy stocks, while U.S. stock markets also pushed higher.

The S&P/TSX composite index was up 171.41 points at 23,298.39.

In New York, the Dow Jones industrial average was up 278.37 points at 41,369.79. The S&P 500 index was up 38.17 points at 5,630.35, while the Nasdaq composite was up 177.15 points at 17,733.18.

The Canadian dollar traded for 74.19 cents US compared with 74.23 cents US on Wednesday.

The October crude oil contract was up US$1.75 at US$76.27 per barrel and the October natural gas contract was up less than a penny at US$2.10 per mmBTU.

The December gold contract was up US$18.70 at US$2,556.50 an ounce and the December copper contract was down less than a penny at US$4.22 a pound.

This report by The Canadian Press was first published Aug. 29, 2024.

Companies in this story: (TSX:GSPTSE, TSX:CADUSD)

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Investment

Crypto Market Bloodbath Amid Broader Economic Concerns

Published

1 month ago

August 5, 2024

Harry Miller

The crypto market has recently experienced a significant downturn, mirroring broader risk asset sell-offs. Over the past week, Bitcoin’s price dropped by 24%, reaching $53,000, while Ethereum plummeted nearly a third to $2,340. Major altcoins also suffered, with Cardano down 27.7%, Solana 36.2%, Dogecoin 34.6%, XRP 23.1%, Shiba Inu 30.1%, and BNB 25.7%.

The severe downturn in the crypto market appears to be part of a broader flight to safety, triggered by disappointing economic data. A worse-than-expected unemployment report on Friday marked the beginning of a technical recession, as defined by the Sahm Rule. This rule identifies a recession when the three-month average unemployment rate rises by at least half a percentage point from its lowest point in the past year.

Friday’s figures met this threshold, signaling an abrupt economic downshift. Consequently, investors sought safer assets, leading to declines in major stock indices: the S&P 500 dropped 2%, the Nasdaq 2.5%, and the Dow 1.5%. This trend continued into Monday with further sell-offs overseas.

The crypto market’s rapid decline raises questions about its role as either a speculative asset or a hedge against inflation and recession. Despite hopes that crypto could act as a risk hedge, the recent crash suggests it remains a speculative investment.

Since the downturn, the crypto market has seen its largest three-day sell-off in nearly a year, losing over $500 billion in market value. According to CoinGlass data, this bloodbath wiped out more than $1 billion in leveraged positions within the last 24 hours, including $365 million in Bitcoin and $348 million in Ether.

Khushboo Khullar of Lightning Ventures, speaking to Bloomberg, argued that the crypto sell-off is part of a broader liquidity panic as traders rush to cover margin calls. Khullar views this as a temporary sell-off, presenting a potential buying opportunity.

Josh Gilbert, an eToro market analyst, supports Khullar’s perspective, suggesting that the expected Federal Reserve rate cuts could benefit crypto assets. “Crypto assets have sold off, but many investors will see an opportunity. We see Federal Reserve rate cuts, which are now likely to come sharper than expected, as hugely positive for crypto assets,” Gilbert told Coindesk.

Despite the recent volatility, crypto continues to make strides toward mainstream acceptance. Notably, Morgan Stanley will allow its advisors to offer Bitcoin ETFs starting Wednesday. This follows more than half a year after the introduction of the first Bitcoin ETF. The investment bank will enable over 15,000 of its financial advisors to sell BlackRock’s IBIT and Fidelity’s FBTC. This move is seen as a significant step toward the “mainstreamization” of crypto, given the lengthy regulatory and company processes in major investment banks.

The recent crypto market downturn highlights its volatility and the broader economic concerns affecting all risk assets. While some analysts see the current situation as a temporary sell-off and a buying opportunity, others caution against the speculative nature of crypto. As the market evolves, its role as a mainstream alternative asset continues to grow, marked by increasing institutional acceptance and new investment opportunities.