Your Quarterly E-Zine
Edition 11 • December 2019

This website contains the latest edition of Forsyth Barr Focus, a quarterly on-line magazine written by senior members of Forsyth Barr's investment team.

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BERT’S BASCULE BRAVERY

‘Bascule’ is the French word for a balance-scale – a tool used to determine the weight of one object compared to the known mass of another. In the world of investment, where the relative value of investment assets is a key consideration for investors, the concept of balancing the merits of one asset against another, as part of determining an optimal asset allocation, is well understood.

The word bascule is also applied to drawbridges of the type which cross the River Thames at Tower Bridge in London. On the 30th of December 1952, Albert Gunter, 46, of Theberton Street, Islington was driving the 9.6 litre number 78 Routemaster double-decker bus, carrying 20 passengers from Nunhead towards Shoreditch across the bridge when (as he recounted to the Daily Mirror), “the roadway in front of me suddenly seemed to start falling away”, exposing the turbid Thames below.

Normally, when the bridge was being opened, warning was provided by red traffic lights and the ringing of a handbell by the bridge operator. Either Gunter had failed to heed the warning signal that the bridge was being raised to allow the passage of a vessel below, or the signal was not provided. Gunter maintained that the traffic lights were green as he drove across the bridge. He did not see or hear any danger signal. Whatever the truth of the matter, the signal was missed and Gunter and his passengers faced immediate peril.

Gunter was confronted with a decision based on the balance of risk. As he recalled “I stopped on the stationary bascule. But then I realised that if the bridge was opening that one might go up too. So I drove on. I had to keep going or we should have gone into the water.”

In the current investment environment, some financial market commentators have noted that “after 30 years of falling interest rates and almost a decade of rising stock markets a correction will certainly happen1.” Various signals are cited from rising interest rates in the United States, to elevated valuations in some global sharemarket sectors.

Should any of these signals prove prescient, investors will have done well to heed them. However, history also shows that regardless of signals, investors are seldom able to time the precise moment that a change in market sentiment occurs, meaning a continual assessment of the balance of risk in an investment portfolio is required, in much the same way that Albert Gunter considered the danger posed by the moving bascules. For investors, a figurative “dunking in the Thames” can be avoided by ensuring that their portfolio asset allocation continues to be suitable for their investment objectives, taking account of current market conditions.

In the case of the number 78 bus, Gunter gunned the Routemaster across the yawning gap on that late December evening, with the bus falling about three or four feet, from one half of the bridge to the other. Landing on all four wheels, the bus was found to have a bent chassis, a broken spring and seats thrown from their frames. Of the 20 people on board, 13 were injured and 3 “detained in Guy’s Hospital”, including the bus conductor who suffered a broken leg. No lives were lost. The Corporation of London eventually accepted responsibility for the accident and Gunter received a reward of 10 pounds (equivalent to around a week’s wages) from London Transport.

While investors are unlikely to experience a perilous situation akin to the Shoreditch-bound passengers of 1952, there is no doubt that a clear head and steady hand at the wheel of their investment portfolio can be reassuring when danger looms. Investors should also remember that calmly considering investment risk is a day-to-day part of receiving good investment advice. It’s said that when Gunter eventually arrived home to Theberton Street later that that day and nonchalantly told his wife "you’ll never guess what happened to me today", she just said "that's just typical of you" and carried on ironing.

1 Eriksens Master Trust Survey - Quarter to 30 June 2018

Gordon Noble-Campbell 
Director, Private Client Services

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