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January 30, 2013

Jonathan Ruffer on Beating the Recession, Quantitative Easing and Musical Westerns

By Spear's

Jonathan Ruffer, the founder of Ruffer and maverick of the investment management world, is a man with a love of metaphors, Mark Nayler finds out

JONATHAN RUFFER, THE founder of Ruffer, maverick of the investment management world and philanthropist, is a man with a love of metaphors, as I found out when I went to interview him for the forthcoming Spear’s wealth management Index.

The firm’s legendary performance in 2008 and 2009, in which they returned 14 per cent while the FTSE fell 31 per cent was, he says, one of the six or seven easy calls he has made in his life. Interestingly, he is more proud of catching the rebound in 2009 than posting growth in 2008: ‘It was like looking at a pile of turd and thinking, “Gosh, do we really want to put more risk on the table?” We hadn’t had risk on the table in 2008, and therefore we just followed that thought process. It wasn’t that difficult.’

He attributes this prescience to a focus on human behaviour rather than pure numbers: ‘Economics has gone wrong. The mathematics is difficult, and you have to be able to understand that. But it’s basically about how people respond to events. If you see events setting off in a direction which are only going to stop for exogenous reasons, then you have to say to yourself, “That’s what will happen, so how will people respond to that?”‘

Read more: Jonathan Ruffer wins the Spear’s Lifetime Achievement Award, plus a video of his speech

Or, to put it in Ruffer-speak: ‘There’s a fantastically awful B-movie, a musical Western film, and there’s a bit where the handsome hero comes back to his ranch and finds his wife murdered and his children carried off, and the ranch burnt down.

He puts his knuckles to his forehead and has a cry of anguish about it, and finishes by saying, “I’ll get those critters who’ve done this. But first, folks, I’m going to sing you a little song.”’
Wondering where this is going? The metaphor is soon explained: ‘And 2009 was “But first, folks, I’m going to sing you a little song.” Here we are in 2013, and what happened in 2008 still hasn’t been resolved, and it will be resolved horribly.’
RUFFER, A MAN who says he spent his twenties being useless at everything he did, prefers to demonstrate other points more practically. He argues that it is mistaken to think of quantitative easing as the printing of money.

‘Funnily enough,’ he quickly adds by way of illustration, ‘in my pocket I have five thousand quid.’ He produces two plastic orange bags stuffed with £50 notes, and drops them on the table with a satisfying thud.

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Read more: Jonathan Ruffer donates £15m to save paintings for nation

‘I’ve no idea how thick a bunch of £50 notes would be to get to £5,000,’ he explains, playing with the bags of notes. ‘If you had a roomful of notes, how many millions would that be? If you think of money in those terms, saying ‘He’s just printed a cathedral full of money’ would resonate. But we don’t think of money like that. It’s basically a cheque being written. If I gave you a cheque for £2 billion, you’d think, “How rich is Jonathan Ruffer?” But they key is, will my bank honour the cheque? And if they will, you don’t have to take a view on me.’

I did take a view on Jonathan Ruffer after the interview though: charming, clearly fascinated by economics and human behaviour, and a colourful and engaging conversationalist. I can’t say I’m tempted to dig out that musical Western he mentioned though.

Read more from Wealth Wednesday

Read more from Mark Nayler

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