rob zdravevski's blog

Less Hubris = Economic Recovery

When it comes to investing and providing advice to my clients, living in the country offers many benefits.

It allows me to eliminate the noise of unimportant information and news. The slower lifestyle trains you to step back and observe from afar.

One of the highlights is travelling from regional Australia into metropolis Australia to meet with clients, watch crowd behaviour and spot some trends.

This week, I have seen the economy on Queensland’s Gold Coast still in the doldrums. Bank lending is low to non-existant, house prices are wallowing (many below replacement costs), vehicles are being repossessed, restaurants are empty and tourist numbers are down.

In contrast, I see the economy in Melbourne improving.

The difference between the two cities is that people on the Gold Coast seem to have such a high level of confidence and opinion of their economy, that they are in denial of their existing situation as long as their credit cards are still able to fund the charade.

People smile at you but you can tell it’s under duress.

In Melbourne, however, they’ve got their “heads down and bum up” and are getting on with it. They have absorbed the economic pain of the past couple years and are beavering away at their work and businesses.

When they lift their head and smile, you know it’s genuine.

Overconfidence can be dangerous to your financial health!

Global Pasta Consumption – Room for growth

The table below is the result of a 2011 survey from the Int’l Pasta Organisation. Notably, Greece’s consumption of pasta increased from the previous year, as the country’s financial woes increased.

It was interesting to see such a low consumption from countries such as Australia and the United Kingdom.

C’mon Team GB, you can at least try to eat as much pasta as the French!

Rising food prices could mean cheaper pasta fills the hunger gap. This would be bullish for wheat farmers.

Source: Int’l Pasta Organisation

Jeremy Grantham’s Top 10 Investing Rules

1. Believe in history

“All bubbles break; all investment frenzies pass. The market is gloriously inefficient and wanders far from fair price, but eventually, after breaking your heart and your patience … it will go back to fair value. Your task is to survive until that happens.”

2. ‘Neither a lender nor a borrower be’

“Leverage reduces the investor’s critical asset: patience. It encourages financial aggressiveness, recklessness and greed.”

3. Don’t put all of your treasure in one boat

“The more investments you have and the more different they are, the more likely you are to survive those critical periods when your big bets move against you.”

4. Be patient and focus on the long term

“Wait for the good cards this will be your margin of safety.”

5. Recognize your advantages over the professionals

“The individual is far better positioned to wait patiently for the right pitch while paying no regard to what others are doing.”

6. Try to contain natural optimism

“Optimism is a lousy investment strategy”

7. On rare occasions, try hard to be brave

“If the numbers tell you it’s a real outlier of a mispriced market, grit your teeth and go for it.”

8. Resist the crowd; cherish numbers only

“Ignore especially the short-term news. The ebb and flow of economic and political news is irrelevant. Do your own simple measurements of value or find a reliable source.”

9. In the end it’s quite simple. really

“[GMO] estimates are not about nuances or Ph.D.s. They are about ignoring the crowd, working out simple ratios and being patient.”

10. ‘This above all: To thine own self be true’

“It is utterly imperative that you know your limitations as well as your strengths and weaknesses. You must know your pain and patience thresholds accurately and not play over your head. If you cannot resist temptation, you absolutely must not manage your own money.”