Trying to hear what's not being said
May 29, 2015 Leave a comment
The circled area is where the October 1987 stock market crash occurred.
I don’t know why long term investors subscribe to fear so much. The S&P 500 has tripled from its March 2009 low in what is a most un-loved bull market and on the way up, bear market fear-mongers continue their campaign of selling newsletter and subscriptions and somehow think they are still correct.
March 22, 2015 Leave a comment
The genius of James Packer continues.
Crown Resorts is a BBB rated company and they have raised $600 million in debt through the public markets at 4% above the bank bill rate, which means currently the total coupon will be 6.27% range.
The paper matures in 2075 but Crown can redeem them in 2021. Lenders own debt which is subordinated. They will rank below preference share holders and other capital market debt but above ordinary shareholders. The money is going to be used to finance projects within Crown Sydney & Crown Towers Perth.
So what they have achieved is to reap a stack of long dated capital at a cheap price without the onerous banking liens and it was raised easily because investors are simply chasing any yield.
Investors should consider not whether they are being “paid” enough to take this risk as a lender but whether they have considered the risk/return (even the risk of underperformance) of owning the shares of Crown Resorts rather than its debt would a better proposition. I’m not writing about Crown’s risk or ability to pay its coupon or return your capital but whether the herd has simply filed into another hybrid income product without thinking about it.
Think of it in terms of the return shareholders may receive as a rate of return over the cost of the capital once they complete the expansion of the various casino projects?
I forgot to say that James Packer’s family company, Consolidated Press Holdings (CPH), also bought $50 million of this debt. I’m sure this gave the new debt investors added confidence that he has backing it personally.
That’s fine, but CPH also owns at least $4 billion of Crown Resort shares.
Sometimes analysis is difficult and sometimes it can be simple.
March 22, 2015 Leave a comment
I’m not writing this to convince or prove a case to readers, but experience and instinct tells me equity markets are still going to higher.
That’s not such a bold prediction in light of the fact that the general price of listed equities have risen for over a century, but in the window of the past and next 5 years, my view is that we haven’t seen the end of the advance which commenced in March 2009.
We are seeing lower capital inflows to equities, lower overall volume and low retail investor participation. Media commentators are screaming “crash” louder and cite many “problems” which includes trying to identify “bubbles”.
and yet many market indices are hitting new highs.
February 19, 2015 Leave a comment
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February 15, 2015 Leave a comment
I’ve been advising and managing the equity portfolios for individuals for 20 years. My business is to analyse investment opportunities and the various probabilities of certain things occurring in the future so to position my clients and their money can benefit from my views.
Those views are formulated by me, the investment advisor, using a host of information and sources so it can be dispensed specifically to fit an investors situation.
One problem that I face and I’m sure for many investment professionals who deal directly with their clients do, is to continually diffuse and deflect the opinions and influence that media commentators and “experts” create.
There is often little merit or evidence to their claims that they predicted an event or “saw it coming”. It is equally concerning when the “noise” created about a recent occurrence is structured to suggest that the recent past or the present is now destined to look like the future.
Which brings me to the current flux of the Crude Oil price.
I find it difficult to believe that so many people have suddenly predicted the 50% fall in the oil price. I don’t recall reading or hearing such predictions, yet now these media prophets are receiving adequate air-time for their supposed foresight.
What happens next is that private client investors takes this information as gospel and call their financial professional panting about the analytical revelation they have just heard or read.
Four messages to financial media personalities:
1) Your statements do not help anybody, other than trick people into thinking you are an authority on a subject.
2) Telling me what has happened is useless. It has already happened.
3) The markets have already reacted to the facts.
4)Prices have discounted this news.
My advice to investors is to dismiss this stuff because often the “expert” isn’t a financial professional, nor are they an investor or a participant in the market, let alone licensed or regulated to provide such advice. I’d be interested to ask anyone of them if they have ever put any of their own money at risk behind any of their comments.
It is important to analyse what has occurred in order to educate yourself so to understand history and circumstances which led to an event, but from there on, especially when investing, ice hockey legend, Wayne Gretsky’s quote seems quite relevant, “I skate to where the puck is going to be, not where it has been”.
If you choose to listen or absorb the news and comments about the capital markets, be discerning about who the person is, what their background is, what are their motivations are and whether they have any “skin in the game”.
I think that there is too much energy spent talking about historical facts and masking them as if the preacher had predicted it. Just observe the recent events involving earthquakes, rising property prices, shark attacks, plane crashes and terrorist rampages. Everybody is an expert after the fact and they love telling me how they “told me so”.
The next time that you choose to act on an investment idea or comment that you’ve heard on TV, then I suggest that you periodically and continually call that journalist or “guest expert” and continue to ask them for advice about how the investment is working out and have them explain why its not looking so wonderful at any point in time.
Don’t let other people’s “noise” become part of your investing process.
January 31, 2015 Leave a comment
Once upon a time mining companies were making a lot of money by extracting ore from Australia’s crust.
Soon after, the government needed some money to pay for the debts they incurred as a result of the spending promises they made to the Australian public, in their attempt to remain elected to power.
They thought that they could invent a tax which charged mining companies for how much resources that they dig up and sell.
The tax was created. Some were happy and others weren’t. They was lobbying, protests, crying and demanding. The tax had a short life. The new government had mates in the mining sector. The tax was no longer alive.
It was OK ’cause the government still earned some sort of money from whatever businesses the large mining companies conducted, providing that they didn’t cleverly use their offshore subsidiaries to move around and book profits into.
The price of coal had already fallen, but nobody likes them anyway ’cause their industry is a visibly polluting one.
But oh oh – recently the price of Iron Ore has fallen.
This is how I see it,
Government let off the iron ore miners off the hook with the mining tax, less money for the government, then global demand slowed, the giants continued to increase supply, the price of iron ore fell, the companies made less profit but them increasing supply (coupled with falling commodity prices) also pressured the smaller miners, thus the giants are growing their market share, but government still needs more cash, there is no capital gains tax being paid of share profits because the stock prices of the major iron ore companies are the same as 5 years ago, thus shareholder return is poor, but hundreds of employees are making more than $400,000 per year.
It’s important to keep the gravy train going by any means you can, whether you manage to dupe government, the economy or shareholders.
Yet they still are on the look out for federal government help to assist them with their plight of iron ore prices being below their cost of production.
WTF?
December 1, 2014 Leave a comment
The first link points you to a video of Howard Marks speaking at the CFA Institute about his memo titled, Dare To Be Great II
http://new.livestream.com/livecfa/marks2014
This next link to a lecture that Seth Klarman gave at Columbia University in 2010.
https://www.youtube.com/watchv=DUvOPD_8icg&index=12&list=FLeTsH9e9cEV8Nv82H8SowVA
November 12, 2014 Leave a comment
UBS, Citigroup, JPMorgan, HSBC and Barclays have been fined a collective $3.3 billion for rigging the FX market.
This is not the first of such reprimands.
After nearly a decade of impropriety, investors still employ various banks to look after their money.
Help you to help yourself. Godspeed!
November 9, 2014 Leave a comment
I’m not going to write too much trying to convince or prove things in this post, but just summarise what I think.
With all the bad news around ISIS, Ukraine/Russia and assumptions about the Fed reversing its interest rate stance, to how oil, gold and currencies are reacting, equity markets should be tanking, but they are not. Instead, it looks very bullish.
Ebola and any other reason was behind markets falling 10-12% recently but alas they rebounded soon after, and to new highs. Geez, it looks bullish.
Bears were recently rejoicing again with many still calling for bubbles and crashes but got caught being short again. Yep, it still looks bullish.
But, don’t back up the truck as any rise in these equity markets won’t be rooted from a base of cheap valuations but it’ll be based on capital flows, momentum and on those who have missed out and need to catch up.
This market could rise sharply for a couple more years and the S&P 500 may not get close to testing 1,800 in that period.
So there!
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