Markets: Christian ethos behind investment fundamentals

Credit Suisse's Australia strategist, Damien Boey, leans on his past experience with the Reserve Bank to perfect his investment model. His analysis suggests the Australian market is fully valued.

Damien Boey says stock market investors are “chasing their own tails”.

“We’re all following the same signals, trying to think four to five steps ahead,” says the Credit Suisse Australia strategist. “That’s dangerous as at the end of the day you end up following momentum and that’s not going to work.”

Australia, says Boey, is in a quagmire.

Instead of seeking to develop policies and spending plans to boost economic growth, the government is hamstrung by an ideology of fiscal austerity that may prove disastrous, he says. Boey’s former employer, the Reserve Bank of Australia, is keeping interest rates low, he adds, partly to keep house prices artificially high to provide an increasingly nervous public at least a modicum of financial stability.

“Markets have failed to allocate resources efficiently, yet no one trusts governments to allocate resources adequately,” says Boey. 

The short, stocky 35-year old Boey looks less a stockbroker and more a guy who works in IT as he is shod in loafers, black trousers and a pale blue open neck shirt that rides crookedly underneath a black pea coat that he refuses to take off, even indoors. 

But don’t let his nondescript appearance fool you. Since 2006 Boey has survived the wave of firings that global investment banks undertook in the wake of Lehman Brothers’ bankruptcy in 2008. Adnan Kucukalic, Credit Suisse’s head of equity research in Australia, and Nick Selvaratnam, head of equities, recognised that when they hired Boey from the RBA they had a somewhat unique talent.

Charged with merging the macro modeling of the central bank with Credit Suisse’s quantitative modeling to build a superior stock picking framework, Boey reckons the intellectual property he has helped develop can pick with reasonable accuracy, on any given month or quarter, which investing styles will work – be they value, momentum, quality or growth.

Initially Boey was not convinced he should leave the RBA. He had been working at the central bank for three and a half years, first under Chris Becker in foreign exchange analysis, then Darren Flood in the international department and finally Michael Andersen in reserve management and harboured ambitions to be posted to New York. 

A headhunter called and asked him if he would take a meeting with Credit Suisse. Boey, who has a young family and responsibilities associated with his church, took the job after Credit Suisse assured him they would be flexible about his hours.

The Adelaide born Boey is the product of Malay Chinese parents. His father ran a McDonald’s franchise in Camden Park that one day during the early 1990s recession had a turnover of just $200 compared to the usual daily take of $3000 to $4000.

Boey’s memories of the city of churches are not happy.

Bullied violently by Immanuel College "racists", he was relieved that in his final year of high school his parents moved to Sydney. At the closest private high school to his house, a Seventh Day Adventist College in Strathfield, Boey became interested in economics and decided to give up earlier ambitions of becoming a medical doctor.

He entered Sydney University’s law and commerce course, staying six years to complete an honors degree. He converted during that time to Christianity. Offered a job at the RBA, he knocked them back to keep his promise to work for Accenture as a consultant as they were the ones who offered him work first. But after working a year and a half, sometimes from 8am to 3.30am, he left to work at the central bank as part of a graduate hiring program.  

Boey likes his Credit Suisse colleagues saying they are the reason he has stayed put at their offices that overlook Sydney’s Circular Quay. He effusive in his praise of his boss Kucukalic, saying of him “next to Glenn Stevens, the smartest guy I know as he can solve almost any problem from first principle”.

Boey is wary of the Australian stock market’s current valuation, credit creation and investor’s obsession with bank shares.

“Banks have been bid up on assumptions they were defensive because they were exposed to housing and employment and the government and RBA would never allow a recession to take place,” he says. “So banks are defensive because they are not defensive.” 

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