Stop complaining Australia!

In answer to the "Is the glass half empty...

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I can’t help observe the pessimism that is permeating into the conversations and attitudes of Australians, more so than I have noticed over the the past 20 years. It’s easy to blame economies around the world, bank and politicians. Perhaps using the choices available and also taking responsibility for one’s actions is the obvious answer to effecting the change that a person needs?

Maybe we can re-think this unconscious or expectant idea of deservedness. Why do people have the notion that the world, your local community, the capital markets or government for that matter, are required to present them with a continual ‘fair & equitable’ existence.

Is the glass half-empty or half-full?

It seems as if we are losing the ability to “get on with it”. Obviously negativity and defeatism is an easier condition to accept. This may be understandable when we are bombarded with news stories that range from continual personal and corporate failures, increased family stress, xenophobic immigration, terrorism threats and rising nationalism.

I’ve probably got you shaking in your boots? Ready to sell your retirement portfolio and buy a hut by a river, buy a gun, learn to fish and bake bread? It’s a free country!

We happen to live in a wonderful country blessed with many benefits and indeed privileges, yet Australians are complaining.

Recent news stories that I have read include towns complaining about the influx of “fly in-fly out” miners who don’t spend money in the area whilst working there, calls for more indigenous, minority and women workers to feature prevalently in medium to high-end jobs OR complaints how a solar panel industry operator will suffer due to the government’s subsidy ceases to ‘back-stop’ their business.

Do you want democracy, free-markets and capitalism OR socialism?

If you prefer the former, then what about being competitive? How about offering an excellent, friendly service or developing a competency and tenacity that puts you in a position to compete for a terrific job (and rely on discrimination law if it’s applicable).

I have spoken to numerous friends in the United States over the past month. They too, are aware that the ‘world’ is telling them that the ‘sky is falling’, yet they are all trying like heck to be positive, get back to doing business, working hard and trying to spend their way out of out of recession.

Restaurants in San Francisco, plastic surgeons in Dallas and cruise ship operators in Miami are doing quite well.

Australia – let’s get on with it!

I’ll leave you with an adaptation of an old story about a hot dog vendor and psychology.

A Man lived by the side of the road…and sold hot dogs.

He was hard of hearing, so he had no radio. He had trouble with his eyes, so he had no newspaper. But he sold good hot dogs.

He put up a sign on the highway, telling how good they were. He stood by the side of the road and cried, “Buy a hot dog, mister!” And People bought.

He increased his meat and bun order, and he bought a bigger stove to take care of his trade. He got his son home from college to help him. But then something happened. His son said, “Father, haven’t you been listening to the radio? There’s a big Depression on. The international situation is terrible, and the domestic situation is even worse.”

Whereupon the father thought, “Well, my son has gone to college. He listens to the radio and reads the newspaper, so he ought to know.” So, the father cut down on the bun order, took down his advertising sign, and no longer bothered to stand on the highway to sell hot dogs.

His hot dog sales fell almost overnight. “You were right, son”, the father said to the boy. “We are certainly in the middle of a Great Depression.”

Is News Corp this year’s BP?

The politicians are after them, the public despises them and any reference about News Corp’s activities comes with the preface, “Rupert Murdoch’s News Corp………..”.

When an oil rig exploded and sunk last year in the Gulf of Mexico, BP and Transocean’s stock prices fell 50%.

I thought News Corp stock was already cheap and we like buying bargains.

So far, News Corp’s stock price has fallen 20% and may keep falling for another week or three but there should be a moment when the stock price’s decline has discounted the fiscal damage that this scandal along with the possibility of News not buying 100% of BSkyB, may equate to.

Just like BP, analysing this opportunity doesn’t have to be difficult.

If you believe that the world of business and politics is about being “fair and equitable”, then don’t read any further.

News Corp employs 50,000 people, is a huge political donor and Prince Alwaleed owns 7% of the company.

The Murdoch family owns nearly 12% of it and control over 38% of the voting stock. That’s a big stake, to not exert influence or favours.

Heard around the traps…

1) When assets are being priced on macro concerns, it’s time to look at the micro (i.e. individual stocks)

2) When the majority are looking from the “top down”, start looking from the ‘bottom up”.

3) “The world seldom ends when everyone is telling me so. When many start becoming short sellers, it may actually be a buy signal”.

Aquaculture – An alternative to feeding the world

On a recent plane trip, I was seated next to a veterinary undergraduate student named John.

On the flight, John was consumed with specific reading about the feed to protein conversion ratio of fish, when compared to other sources of animal protein.

He explained to me the science behind how many kilograms of grain or feed an animal needs to consume in order to convert it into a kilogram of live weight or protein flesh.

The feed conversion ratio (FCR) is a measure of an animals efficiency in converting feed mass into increased body mass.

Sheep and cattle require 7kg-8kg of feed to put on 1kg of live weight. Pigs have an FCR of 3.5. Poultry has an average FCR of 3 while Atlantic Salmon is 1.2 and other mass farmed fish such as Tilapia is around 1.7.

Currently, there are a few listed fish farming businesses around the world with the Nordic countries leading the way.

The agriculture theme ranges far and wide but it seems that aquaculture fades into the background. We all can understand the food supply and demand story coupled with yearning for protein as developing countries become richer. I am interested in exploring a cost effective, low cost method of producing protein sources other than soy, not to mention the Omega-3 health benefits.

 

 

Inefficient markets offering opportunity in gold equities?

Currently, it seems investors are “throwing away” their shares of selected gold “explorers”, without any consideration that perhaps owning the equity in these companies, when considering the value of their reserves of gold (accounting for various costs) is cheaper than buying bullion itself.

When owning equity in gold companies, I understand there are pro’s and con’s of operational leverage versus failure and the results of decisions made by management, however it’s often advisable for a junior explorer to leave the gold in the ground rather than spend money to become a “producer”, in order to “extract” the value.

The world wants a lower AUD before buying up Australia

In Australian equities, the occurrence of planned joint ventures, mergers and takeovers being re-considered or aborted and profit downgrades by companies and analysts are increasingly being associated with the strength in the Australian Dollar.

The opportunity will lie when and as these equity prices fall coupled with a correction in the AUD, that then, on a global basis, Australian equities and other assets will be “on sale”.

Accepting a loss is tough

A prospective client once asked me if I had lost money while investing or trading?. The answer is an obvious “yes”.

I have learnt that the greatest of investors and traders spend proportionately more time understanding the risk to their money versus amount they will make.

If their view about an investment changes, they easily cut their loss or reduce their exposure. They don’t feel that an asset “owes” them a certain price; let alone an obligation or privilege to “break-even”.

They don’t have an aversion to taking a loss.

Whether it’s a bad investment or a romantic relationship that didn’t spark, accepting the loss is an important step to take before “moving on”.

Observing extremes

It seems that commodity prices, currencies and certain assets can only move in the existing “straight line”, or so the herd believes.

There is probably merit in developing some well founded contrarian views.

I am hearing that “this time it’s different” but all I can say is that assets that are cyclical, are always cyclical.

Some short-term trends have swung

S&P lowers U.S. government long-term credit rating to negative and the US Dollar rallies….

Not all market reactions seem logical.

US Dollar Index, Euro, VIX, S&P 500, Copper, US Transports, Nasdaq, CRB Index & Philly Gold/Silver Index – have all reversed their recent short-term trends.

Existing trends in spot Gold, Silver & Oil are still intact.

Who wants to be a crop farmer?

Not many young folks want to be farmers, especially wheat farmers.

Although susceptible to the ebbs and flows of markets, livestock and grain prices have been rising lately and the positive case (especially for soft commodities) remains intact with the simple understanding that food demand is rising while supply flounders.

There is another supply and demand story – the world is not producing as many farmers as it once did, yet we probably need more farmers than ever before. Kids don’t grow up wishing to herd cattle or harvest fields.

Instead of opening a retail shop, paying $100,000 of rent, hiring 4 staff members, spending money on branding and websites and then buying $40,000 of inventory (I hope it’s not perishable) and try to sell your wares amongst the competition of the other 40 shops on your strip – For a similar amount, you could buy seed, fertiliser, lease a 3,000 acre (avg. plot is about 20,000 acres) wheat farm and some equipment and reap larger margins!!

If your average yield is 1.3 tons of wheat per acre, you reap 4,000 tons of wheat from your farm – selling price is $330 per ton less sowing, harvesting and labour costs of $180 per ton = $150 * 4,000 tons = $600,000.

There is always a market for your product or alternatively you can hedge your crop with a future delivery contract or store it in a silo to be sold at a later date.

Unlike ugg boots, stretch jeans or the Collingwood Football Club – Wheat never goes out of style.