Never, ever again – or not?
Hains and now his sons, Stephen, Richard and Michael (daughter Cathy is a thoroughbred breeder and son Paul publishes the Aeon magazine), have always managed PHG on a fundamental principle of preserving capital and eschewing leverage. That has meant a mixture between equities and fixed interest investments – which becomes more challenging in the current global interest rate environment.
“I can remember being in London and seeing framed copies of certificates for consuls paid just 2 per cent per annum and I thought, well, we will never, ever see that in my day because that was when we were sitting at around 6 to 8 per cent. But we have and I think that’s surprised everyone,” he says.
While fears of a return to high inflation are growing, the prevailing view remains interest rates will be lower for longer with implications for expected returns and the cost of capital.
Hains concedes for the moment that means being prepared to pay a higher price for yield but he demurs on giving a view on how long that will last.
“If interest rates stay where they are forever I guess it's alright to buy a stock for investment based on 3 per cent return. I'm no economist. I don't understand the relationship between interest rates and future rates and so forth. They're a mystery to me. Stephen, for example, does understand it, but I certainly don't,” he concedes.
Taking a position
From his long years as a manager and a direct investor in companies, Hains has developed a clear eye for corporate culture and market psychology. And with that comes the perspective of age – and indeed perspective about age. Rather than criticise the recklessness of youth he points out it is up to the younger generation to take more risk.
“Young people have a different starting point and obviously a totally different view,” he says. “They are looking from the bottom of the hill upwards and I'm looking from the top, looking down. And the view we get is quite different. If you want traders in financial markets, they've got to be younger because otherwise they've seen too many periods of extreme problems and they won't have the courage to take positions.”
But that’s not reckless: “I wouldn't say it's reckless because they think it through and it makes sense – it’s only when you look back, when you’re older. If you're old and you take risks, you don't have time to recover if you make a major mistake.”
Hains extends that perspective to new asset classes and is a strong adherent to the adage of not investing in what you don’t understand – and that applies crypto assets.
“I don't understand them. It’s too complicated, I’ve had these currencies and blockchain explained to me and I still don’t understand. But I think most people don’t understand it either and that’s the risk when investing.”
Maintaining human contact
Having interviewed Hains quite a few times now, what separates him – and many other investment greats – is that willingness to accept he doesn’t understand everything. His three quarters of a century in business are a living embodiment of “only invest in what you think you know”. “Hindsight is always better but not available to me,” he adds.
Hains is missing the office for the human contact and the informal and spontaneous interactions and is looking forward to his routine. Obviously he is very well set up at home and spends lockdowns at his property, the renowned Kingston Park on the Mornington Peninsula, but he doesn’t believe work places will be healthy if the human contact isn’t maintained.
“Working from home has been thrust upon us and, in many cases, it's being used as a better way to do things. And that may be true for certain types of businesses. The need to come into the office is certainly much lower for some people,” he accepts. “But I think you miss the communication between people, when they're having a coffee or when you can just stop by their desk and say ‘OK, I want to talk to you’ about something.
“Having a cup of coffee with your work colleagues and tossing around some ideas, that’s lost. And I think that's a pity. I wouldn’t like it. For some industries it might be fun but I think there will be a loss of communication and contact and also of culture – and that is the critical thing for any business.”