City Eye: Look into their eyes before you commit your cash

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The Independent Online

It's that time of year again. The markets are fairly bowling along after all that nastiness in the summer. It's even more difficult than usual to move around London, partly because of the sheer weight of traffic taking people to meetings.

There's a mood of confidence and optimism in a market that has the memory span of a goldfish. The injection of liquidity is translating nicely into liquid lunches.

All of which makes you wonder where you'll find value ahead of the next bout of panic, fear and loathing, which I believe is waiting for us in the spring. You can go for the scientific route involving sectoral analysis, "ebitda" and other types of beard stroking to do with earnings ratios. Or you can opt for the art of making personal assessments.

The latter method involves following the jockey rather than the horse. It's far from infallible, but can be very useful as a qualitative overlay– to borrow a horrible synthetic piece of language from boffin land. The great and soon-to-be-ex fund manager Anthony Bolton will not invest in a company – however impressive the idea, the sector prospects and the figures – without looking into the eyes of the managers. Carl Stick of Rathbone Unit Trust Management is another who requires a bit of serious face-to-face before committing any cash. When Mr Stick is good,the high-income fund he manages is very, very good.

But performance in the income sector generally has been somewhat patchy of late. Which means the quality of the management is even more important. Chris Macdonald, managing director of quoted independent financial adviser Brooks Macdonald, is another now looking for value on a case-by-case basis.

Mr Macdonald cut his financial teeth in the mid 1980s, before the 1987crash, and reckons he knows where we are in the cycle."It's all flabby," he says, rather pithily. He subscribes to the view that the world is divided into those who know nothing and those who know that they know nothing. On this basis, Mr Macdonald is prepared to opine that something unpleasant is headed the way of the equity markets before the end of the year. Unless it doesn't happen, in which case we have an indefinite reprieve, apparently.

So in the interests of rigorous research and a bit of certainty, I had a lunch – long but moist rather than liquid – with John Bowmer, the co-chairman of employment agency Berkeley Scott. Mr Bowmer is a doughty chap, competitive to the point of near-obsession. He makes his wife play golf, and will spend up to 10 minutes looking for a lost ball (I did say this was art, not science). He has a plan to become a global provider of mid-range skills (senior IT people, human resources folk and the like), and the market seemed to like it in January when Mr Bowmer and his partner, Tony Reeves, took over in January. The shares went from 17.5p to 43p on the news.

Mr Bowmer agrees with me, by the way, that the markets are going to look again at their structural problems some time in the first half of next year.