Charlie Morris, chief investment officer at Newscape Group and editor of the Fleet Street Letter and Atlas Pulse, speaks to Glint’s editor Alex Matchett on cryptocurrencies, Gordon Brown’s crucial mistake and why we might soon be paying for our holidays with gold
A former Grenadier Guard, Charlie Morris entered finance via HSBC, heading up their absolute return offering during a 17 year stint notable for having a global economic meltdown bang in the middle of it. In 2013 he started Atlas Pulse, a regular report looking into the gold price and the validity of holding gold in your portfolio. Two years later, on leaving banking, he began editing the Fleet Street Letter investment round-up and last year he took on the role of chief investment officer at Newscape Group, a St James’s based investment fund.
It is in his offices overlooking Christopher Wren’s St James’ church that he details the contrarian circumstance that first brought him to gold: “1998, Gordon Brown sold our gold, it was all over the headlines and a bit of a strange thing. People had forgotten about gold, it had been falling for eighteen years, there’d been a big bubble in the 1980s, inflation had then come under control and in 1997 Roger Bootle had written a book called The Death of Inflation which turned out to be right for the next 15 years — so gold was seen as irrelevant by the mainstream. It was the fashionable view: ‘We can get rid of this gold that sits there and doesn’t earn interest and we can sell it and buy some bonds.’ On the face of it that’s not a stupid idea. Except at times of stress those bonds are worthless and the whole point of the gold reserve is to be there at times of stress — in exchange for having this thing that is financially bulletproof you have no yield.”
But wasn’t this a declaration of belief by Brown in a better system, and, given the choice at the time, would it not have been prudent to make your reserves work? Morris’ hindsight cuts one way, accounting for Brown’s belief, but not his prudence: “It demonstrated his excessive faith in the system he was a part of. He had absolute faith in all the bullshit coming out of his mouth and everyone else’s mouth in the G8, G20, circles — the idea that a backstop no longer mattered, that the Titanic no longer needed lifeboats. Most people disagree with that view these days,” he suggests wryly.
“At the time gold was a highly contrarian trade, then Graham Birch, who ran the Blackrock Gold & General fund at Merrill Lynch, came round and told everyone how amazing gold mining was, so it just seemed like something different, something to go into during an equity bear market. So we bought some shares through his fund and they worked out pretty nicely, although it never really shone through as a great trade because the portfolios went down, [following the dot.com crash] but it was nice to have something that went the other way.”
Having seen the value gold brings to a diversified portfolio Morris’ interest grew until, in 2011, with gold at record prices, he was invited to address the London Bullion Market Association (LBMA). “In thinking ‘what the hell does one tell the LBMA about gold that they don’t already know?’ I went away and thought about it very hard and came up with a lot of the Atlas Pulse models,” he says.
In doing so Morris believes he’s developed a gauge for defining a gold bull market, identifying three essential criteria: easy money, gold price strength and gold beating the stock market; “the reason that’s important is when these are fulfilled, equity investors have no problem piling in”.
With only the first two criteria currently met he says he’s neutral on gold, his strict assessment method keeping him relatively objective in a space too often prey to ‘goldbug’ narratives weighing the metal with fatalistic argument. “I’m fascinated by gold but I’m not bullish all the time,” he says. “I own it because it’s going up — if there’s a nuclear war, then baked beans and guns will be more valuable.”
So just an investment hedge then? He reiterates he holds it because he believes it does have a yield as a (no-interest) “non-coupon bond” before taking aim at more zero-sum approaches. “One of the fashionable things to say in goldbug circles, which is all part of the spin behind why everyone should always own lots of gold, is ‘buy gold and hope it goes down because that means life is great!’. That’s slightly absurd, it never happens that way.”
“There’s fear of a biblical event but really it’s a financial biblical event. Although, in 2008 gold did go down — not very much but it did drop — but it did make sense to hold it at that time because everything was sideways, and hence, after the crisis, it doubled. That’s not saying ‘I predicted the credit crisis’, it’s saying ‘the conditions were right for gold to behave well and there was a credit crisis’.”
Given the gold price almost trebled between 2008 and 2012 while equities took a tailspin before slowly recovering, does he believe holding gold is inherently a bet against growth? “Slightly. It’s not quite true gold is the opposite of growth but there are different types of growth — if you’ve got overheated, inflation-led growth which is all about the consumption of commodities, then gold doesn’t mind that environment too much. But if you’ve got proper growth as in productivity and innovation then gold doesn’t work too well in that environment. ‘Dirty growth’: concrete, buildings everywhere and infrastructure — gold likes that environment.” This scenario is part of an investment environment paradigm Morris has created that identifies ‘deserts’ (gold), ‘ice-caps’ (bonds), ‘grasslands’ (equities) and ‘jungles’ (commodities).
Beyond the varying fecundity of ‘dirty’ and ‘clean’ growth does he see any real threats to gold? “The economy is like the tide, it goes up and down and there’s always going to be another recession, there’s always going to be another financial crisis, there’s always going to be another country with high-inflation.” It’s these variables that put him off a mooted return to the gold standard: “It’s like the Eurozone — you’d be closing off all the pressure valves, you’re always going to get a Greece and a Germany. That’s what happened when we had the gold standard, gold is always trying to get to the country where it’s most welcome and away from the country where it is most needed. It is [the same in] the Eurozone, I think that’s an awful idea and I think the gold standard is an awful idea.”
Although it wasn’t an awful idea in the “pre-computing, Dark Ages”, he says. Gold value worked as a “brilliant” social technology in a world without mass communication before technology put paid to the need for such a physical monetary gauge.
Though sceptical of gold being used as money he does remain convinced of its role as a liquid asset in 2017: “Money means something that’s going to lose all its value; I think gold is going to retain all its value. I like the idea of a hi-tech way of transferring this asset around; it’ll help people sleep at night knowing they’ve got a few thousand or million dollars of gold. If you get kicked out of your country and lose your home, lose everything and suddenly you find yourself on the French Riviera with your gold-bar credit card — great! Life carries on — it’s pretty good insurance,” he laughs.
Our conversation coincides with a record bitcoin price, a boon for Morris who has never been shy of championing the potential of cryptocurrencies. So, given a current good run for both gold and bitcoin, what does he make of the future? “I can see a world where you have digital assets as a New School version of gold which is very credible, robust and secure and you have a Old School version which is actual gold — and what a great trading relationship there will be between the two! There will be surges where digital assets will go up several times and then there will be a bubble when a genius would switch to gold. We’re on the cusp of it.”
Morris’ emphasis of digital empowerment takes a metaphorical meander into a Parisian restaurant: “Say I’ve just looked at the gold price in euros and realised the euro has gone down against the pound by 1% and the gold price is looking perky and I say ‘do you know what, I think today I’ll buy my lunch in gold’. Having these choices as a consumer is quite fun don’t you think?”
Alex Matchett is editor of Glint