Trying to hear what's not being said
April 19, 2013 Leave a comment
Increasingly over the past year or so, more and more media attention has been paid to the financial forecasting opinions of the likes of the IMF, the Bank of England, the Federal Reserve and the ECB.
Why do the opinions of these bodies economic teams suddenly hold merit?
After all, none of them told us about financial crisis that was looming in 2007.
So why believe them now?
March 27, 2013 Leave a comment
This is a stock price chart for Spain’s largest bank, Santander covering the past 11 years.
It’s a simple picture that tells me that – There are times when to buy and There are times when to sell.
Santander Stock Price
March 26, 2013 Leave a comment
Over the weekend, the European Central Bank (ECB) decided to steal up to 40% of the bank deposits held in the Cypriot banks above EUR 100,000.
This will specifically affect a large amount of Russian owned deposits. Moreover, the Russian government was humiliated over the weekends decision for they were not consulted after having been courted earlier in the week.
Furthermore, when banks re-open, capital controls will most likely exist to prevent the free flow of money out of Cyprus.
I think Europe themselves needs to prepare for a different type of freeze.
Come this winter (December 2013-Feb 2014) I would expect Russia to re-coup some of “their” money by turning off the gas pipelines to Europe.
Energy prices will rise, utilities will be affected and the consumers pockets will be hit.
A population doesn’t like being hungry and especially freezing cold. Watch out for any growing social backlash against Europe’s politicians.
March 22, 2013 Leave a comment
Something that I have difficulty explaining tells me that the Cyprus situation can’t end well. This feeling is biased by the complacency exhibited by European politicians.
Loosely, there is an assumption it will be fixed by somebody. Almost a similar feeling that permeated prior to Lehman Brothers collapsing. There is also a distancing by Germany, that someone else will save Cyprus.
Keep in mind that Angela Merkel has an election in September 2013. Why would she use German money to save Cyprus following the backlash she experienced in Greece.
But here come the Russians.
I have read that $40 or $50 billion of private Russian deposits sit within Cyprus’ offshore banking haven.
Here is how you would do a sovereign bailout deal.
For a $10 billion bailout, Russia gets to protect its citizens deposits in Cyprus, take over a huge slice of Cypriot debt (which they’ll eventually make a profit from, as it’s currently trading at 65 cents in the dollar) and take ownership or security over Cyprus’ Aphrodite gas field.
The Aphrodite gas field has natural gas reserves of about 7 trillion cubic feet (tcf) worth around $45 billion. That is enough gas to meet the energy needs of 7 million households for 20 years. Cyprus only has a population of 1 million people.
Incidentally, Aphrodite sits next to Israel’s larger Leviathan (16 tcf) and Tamar (8 tcf) fields.
It possibly makes for some interesting scenarios involving the politics of Israel, Lebanon, Turkey, Syria, Iran & Russia????
February 6, 2013 Enter your password to view comments.
February 5, 2013 Leave a comment
Legacy of Benjamin Graham: The Original Adjunct Professor.
This film, brought to you by the Heilbrunn Center for Graham and Dodd Investing, Columbia Business School, premiered on February 1, 2013 at the 16th Annual Columbia Student Investment Management Association conference.
February 1, 2013 1 Comment
What a contrast.
Generally, retail investors didn’t seem too interested buying equities in September or October 2012. After all, with all of the world’s looming problems….
Today, anecdotally, investors are chasing stocks at higher prices even after seeing an advance of approximiate 13% in many indices and individual stocks.
Why do investors feel more comfortable buying when prices are much higher?
Is is because there is less risk in equity markets today?
Are they “technical” traders and feel better buying on the “break-out”?
They feel more “comfortable” if the herd is doing the same?
Or perhaps they have a Fear Of Missing Out (FOMO)?
At the beginning of February 2013, the market capitalisation for Commonwealth Bank of Australia (CBA) nears that of Bank of America.
CBA has one-quarter of the revenues while domiciled in a country with one-fifth’s of Bank of America’s home turf. Hmm, not sure if this is deserved.
I think investors in Australia are not only worrying about the FOMO but also upset that they are “only” earning 3.5% on their cash savings.
They are starting to exhibit “needs-based investing”.
Ever heard of anyone being a “forced buyer”?
This is where an investor “needs” to invest because they feel aggrieved by their paltry bank interest returns.
Recently, I have had conversations with investors who wish to buy CBA’s stock (even though it has risen 14% in the past 3 months and 165% in past 4 years) because it’s paying a 7% dividend. They are happy to buy assets that present a headline dividend yield for the sake of yield alone, without any regard for any capital risk that they may be taking.
The sadness for Australians who only invest in Aussie shares, is that they have a lack of quality companies from which to populate their portfolios with.
This is not a post about CBA’s valuation but rather behaviour. I am encouraging retail investors to observe the biases that they may have when making decisions.
It seems every investor is armed with the same defence.
Many say, “I’ll only own blue-chips”. And they do, often without any regard for valuation, because if you call a stock “blue-chip”, then you are apparently safe and immune from losing any money.
If you’re an Australian whose equity portfolio only consists of domestic shares, ask your friends to describe their portfolio to you.
You should find that they will start by bragging about their “blue chips” and amazingly, you’ll probably own the same 12 stocks.
3 out of the 4 banks, BHP, Rio Tinto, Telstra, Wesfarmers, Woolworths (they’ll usually say something like “’cause everybody has to eat” after mentioning this one), Westfield, maybe an insurance company, some other sort of mining company that they think is blue-chip ’cause of the mining boom and CSL. Some investors still hold a pearler such as Qantas or Toll Holdings for they are confident that they will “come good” sooner or later.
Investing behaviour never ceases to amaze me.
January 29, 2013 Leave a comment
Below is a chart of the daily volume of shares traded on the New York Stock Exchange since the March 2009 S&P 500 low of 666 points until today, where the S&P 500 sits at 1,500 points.
A market that has advanced on declining volume. Just saying….
So what happens next?
If the market has risen handsomely in the face of so much worry (remember Greece, Portugal, Arab Spring, Chinese slowdowns, Japanese Debt, Iranian & North Korea nuclear threats, The Fiscal Cliff, Debt Ceiling’s etc etc.) on so little volume, then what happens if “normal” volume actually returns to this market.
Logic may not help you figure this out.
If notable, sustained volume returns to this market, it may not resemble selling pressure as you would logically assume. Logic may led you to believe that the market rose on declining volume thus it MUST fall when volume returns to normal or at least rises.
Imagine if increased volume was a new wave of buying volume? Those who sat on the sidelines citing every doomsday pundit for the past 4 years to justify their position, may suddenly have a Fear Of Missing Out (FOMO).
The FOMO effect could see markets rise swiftly leaving the “unadjusted” hanging when a change in trend does occur.
Markets are cruel, so my read is the equity markets see a small decline in the near term, only to get the bears excited followed by a surge in prices into June-August 2013, which should be fun to watch. Many investors are very good at buying high and selling low.
Bring back the volume – where are they High Frequency Traders, when you need them!
January 28, 2013 Leave a comment
Australian union backed retirement funds along with the Australian Institute of Superannuation Trustees are proposing government limit the lump sums of money that an individual can withdrawal from their pension pool.
Whether or not this strengthens the case for more people participating in Self Managed Super Funds (SMSF’s) or developing cost effective SMSF’s for individuals whose retirement balances aren’t large enough for the traditional format, I urge readers to simply listen to the “What’s Not Being Said”.
If this proposal becomes legislation, please tell me how such a restriction on a retirees own savings, if a good thing??
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