EAPG London Roundtable Tuesday 24 June 2008
5.15pm welcome for 5.30 - 7.00pm

Discussion leaders:
Paul Marson and Jan Hutchings, Morgan Stanley International

"The great tragedy of science is the slaying of a beautiful theory by an ugly fact" (T Huxley, 1870)

In today's world, as in the past, a thirst for certainty drives much of our investment thinking, such that economic forecasters can carry the day. Dig into the numbers, however, and one discovers economic growth has no long-term bearing on stock returns. Paul Marson, Chief Investment Officer, Private Wealth Management (Europe, Middle East) will walk us through a number of mistaken beliefs where theory collides with inconvenient fact, in what promises to be an interesting revelation for both expert and distant observer alike.

• Beautiful theory 1: Successful equity investing is simply a matter of investing in the fasting growing regions. Ugly Fact 1: There is no statistically significant relationship between relative economic growth rates and relative equity market returns. What that means is, even if you could forecast economic growth perfectly it would be useless to you!
• Beautiful Theory 2: Equity investors listen to equity analysts because they believe that growth matters. Ugly Fact 2: From one year to the next there is no statistically significant relationship between economic growth and earnings per share growth and between earnings per share growth and equity returns!
• Beautiful Theory 3: Price/Earnings ratios matter. Ugly Fact 3: Equity investors spend immense amounts of time forecasting next years earnings and determining the P/E , in the belief that it matters ...buy the cheap ones ! In fact, from one year to the next the P/E ratio has no predictibility with respect to equity returns… the P/E matters only in the long run [5-10 yrs].
• Beautiful Theory 4: Own stocks for the long run because they always outperform. Ugly Fact 4: In many cases, the long run means the REALLY long run ! US equities have underperformed Treasury Bills for the last 9 years [almost 10 years] and real stock prices barely changed from the late 60s to the mid 1990s!

5.15 pm welcome for 5.30 – 7.00 pm discussion, followed by drinks and refreshments, Tuesday 24 June 2008
Host & Venue: Shelley Nason, University of Chicago Graduate School of Business, Woolgate Exchange, 25 Basinhall Street, London EC2V 5HA
(nearest Underground stations: Bank, Moorgate)

To attend EAPG’s London Roundtable, ‘Investment Myths’ on Tuesday 24 June 2008, please email sue@plannedgiving.org.uk [1]. Non-members are welcome to attend one roundtable in order to judge the value of our events first-hand.