Aberdeen fund manager slams central bank ‘stupidity’

Bruce Stout

The manager of Aberdeen Asset Management’s £1.5 billion closed-end fund the Murray International Trust launched a scathing attack on the “discredited stupidity” of central bankers and their financial market cheerleaders in the trust’s annual financial report.

Murray International fund manager Bruce Stout accused central bankers of “monetary vandalism” and “hideous distortion” and of taking actions that were “beyond contempt.”

Stout wrote: “Should future generations ever search for the seminal moment in economic history where so many supposedly intelligent people masquerading as central bankers and their financial market cheerleaders descended to the depths of discredited stupidity then 13 July 2016 will be as good as any.

“For on this day Germany issued a ten year Bund with no coupon. An income investment with no income. 

“To emphasise this particular hideous distortion from numerous others which have polluted financial markets over the past five years is not an attempt to rank its significance. 

“It serves only to highlight just how incredibly far the world has shifted from economic orthodoxy when savers expected, and were entitled to, a return on their savings. 

“The tangled web woven around spiralling debts, insolvent banks, unsustainable deficits, mis-allocated capital and erosion of real wealth exists only to distort and deceive. 

“When such disrespect of real capital value exists, in what can we trust?”

In the year to December 31, Murray International said its net asset value (NAV) posted a total return of 40.3% compared with the total return of 25.8% from its benchmark (40% FTSE World UK Index and 60% FTSE World ex UK Index). 

Over the period, the investment trust company’s share price posted a total return of 50.5%, reflecting a move from a discount to a premium to NAV. 

Murray International said the most significant influence on the NAV outperformance of the benchmark was the 15% depreciation in the value of trade weighted sterling over the year.  

But the fund’s manager Stout reserved his most interesting comments for the world’s central banks and their cheerleaders.

” … the single most influential global development over the past 12 months was the dramatic devaluation of trust …” wrote Stout.

“As central banks, the political elite, academia and the media were seen increasingly to be out of touch with public opinion and detached from the disconnect between policy and reality, respect for them tangibly eroded …

Credibility loss was most pronounced towards central bank policymakers. 

“Four consecutive years of grossly inaccurate economic forecasting condemned the Federal Reserve in the United States to making increasingly hollow-sounding policy predictions. 

“Domestic interest rates were nudged up slightly, but widespread scepticism prevailed. 

“Similar doubt and indecision accompanied policy directives in the UK. 

“The Bank of England’s fragile veneer of respectability was shattered following Britain’s vote to leave the European Union. 

“Hostage to unsustainable fiscal and current account deficits, the Brexit Referendum result delivered the long expected devaluation of sterling as international capital took fright. 

“In the ensuing temporary panic, policy discipline was abandoned. 

“Displaying infinitely more consistency in futile policy implementation, the European Central Bank and the Bank of Japan kept on printing banknotes. 

“Creating farce and fallacy whilst simultaneously destroying hard earned savings, such actions were beyond contempt. 

“Yet oblivious to public derision, global central bank policymakers ploughed on regardless, in denial of the painfully obvious — issuing more debt to solve a debt crisis simply doesn’t work.

 “Accompanying withering trust in establishment orthodoxy was escalating anxiety over economic performance. 

“The predominant mood of influence early in the period had been one of deflation. 

“Declining global growth forecasts, combined with extreme commodity price weakness, had politicians and policymakers paralysed from persistent macro-economic disappointment. 

“Impotent to influence evolving events, they watched as global bond yields plunged to historic lows. 

“When Germany issued a ten year bond yielding zero in the summer, the monetary vandalism descended to new depths. 

“Such actions proved not just offensively ironic but also the ultimate insult to savers.”