Closer to home is another standout example from his broking days, Nick Train of Lindsell Train, someone Smith considers “a very good client”.“I’d say having had a broker relationship with these great investors and being able to draw from them all is certainly unusual for a fund manager,”Smith notes.
As a committed stockpicker, Smith does not put a huge amount of weight on macro issues, with the occasional exception. “I take the view that I am trying to invest in great companies and that great companies should deliver over the long term almost irrespective of the macro environment,”he says.
“Having said that, something which is interesting at the moment is a view I’ve held for a while that is gaining ground: that quantitative easing and zero-interest rates cause deflation.“It is ironic given they are supposed to support inflation but I think low interest rates are causing companies to make bad decisions on capital allocation and productive capacity. If you build more capacity than is required you get price deflation,” he says. Smith also has strong views on perhaps the biggest macro issue for the UK, its relationship with the EU. “I am in the camp that thinks if the UK leaves the EU it will be fine,” he says.“I think it’s highly unlikely that if we did leave we would stop trading with the rest of Europe. A lot of the people who are saying leaving theEU would be the end of the world are the same ones who said things wouldbe terrible if we didn’t join the euro,”Smith notes. He says that putting up tariffs would actually hurt Europe more than the UK.“Look at the number of Audis and BMWs on British roads. Can you imagine Germany wanting a £10,000 tariff on car sales into the UK? I’m not necessarily saying I would like to see the UK leave, it’s just that I am not worried about it either way.“I’m not particularly concerned about Greece, although in the back of my mind there is the thought that when the authorities are telling you there’s nothing to worry about, it’s not always true,” Smith continues.“If there was a major secondary effect resulting from a Greek default, I would not be surprised. There could be political problems that crop updown the road, such as elections in Spain or Le Pen and the National Front in France.”
