Your Noise Is My Noise

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.

Alaska Might Be Next ?

It’s quite simple.

Starting a war is generally good for the economy of the aggressor. Just think of how World War II mobilised the American economy. Putin needs a war to keep his people occupied and distracted from their ailing economy. Putin and his government have talked of a “New Russia”. I think it’ll be Russia who decides whether to start a war, not the United States.

What is more complicated to understand is how and when countries go to war when you consider their debt position, electoral cycle, policies and the effect on their economies.

Sanctions:

I’m not sure that sanctions will work on a country with a relatively large population, land mass and economy (or in Russia’s case, possessing vast commodity resources). Funnily, I find it interesting that the United States government is much more involved in the Russia, Ukrainian & Crimea story that it was or has been in the Syrian civil war.

Oil & Gas Prices Will Rise:

If America places heavy sanctions on Russia, the price of oil will go up. If Europe is not happy with Russia’s territorial expansion, then the price of gas will rise too.

The U.S. Dollar Will Rise:

Money is leaving Russia and it won’t be converted into Euros, especially with it trading around the 1.38 mark. You may see the Swiss Franc and British Pound rise, but Billions of Rubles will be converted into US Dollars by global money managers. A rising USD will disrupt the currently sweetened competitive position of U.S. products in the global markets. War with Russia won’t help an indebted United States especially given that they have been financing military exercises for the past 12 years.

Please Consider The Neighbours:

Picking a war on Russia will somehow involve China, North Korea & Iran. This will test the various Asian Pacific relationships that the U.S. has been nurturing. Indirectly, it will involve Venezuela too, who will add to the pressure on the oil price. Russia will have little trouble financing a war.

Russia may be pursuing an old imperial model of domination by land acquisition.

As investors, we need to understand the effect on various assets and which ones to own if a scenario of war develops, ’cause China may not choose to buy anymore U.S. government debt and even elect to sell its current holdings.

Imagine if China sold a lot of their Treasuries thus placing pressure on bond prices, which would send U.S. interest rates higher. Consider this in tandem with a rising U.S. Dollar and coupled with rising oil prices. Now that would be interesting.

As a closing tidbit, the U.S. acquired Alaska in 1867 for $7.2 million which is equivalent to 2 cents per acre. Alaska has no naval base and has barely 20,000 U.S. military personnel.

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