Category — General

James Montier’s bible on behavioural finance, Behavioural investing, points out two recent discoveries by neuroscientists that have relevance to allinvestors:

1) We are hard-wired to think short-term, not long-term
2) We also seem to be hard-wired to conform to the herd mentality

A particularly intriguing experiment used by Montier to illustrate these points relates to our tendency towards ‘anchoring’.

In his words, anchoring is ‘our tendency to grab hold of irrelevant and often subliminal inputs in the face of uncertainty.‘

Feel free to follow the experiment yourself:

1. Write down the last four digits of your telephone number.
2. Is the number of physicians in London higher or lower than this number?
3. What is your best guess as to the number of physicians in London?

The idea of this experiment is to see whether respondents are influenced by their phone number while estimating the number of doctors in London. The results of the experiment can be seen below: [Read more →]

[Ed Note]: Yesterday Dave Gonigam reported to you on the roundabout journey 3-D printing expert Chris Anderson took in order to become a leader of the Maker Movement.

Today, he shows you how droves of ‘Makers’ are taking similar paths – in Silicon Valley and around the world.]

‘The first generation of Silicon Valley giants got their start in a garage,’ Anderson writes in Makers,‘but they took decades to get big. Now companies start in dorm rooms and get big before their founders can graduate.’

That’s impressive progress…but it all takes place in the realm of ‘bits’. Social media, music, videos – it’s all digital.

‘Now the same is happening with physical stuff,‘ he writes. ‘Despite our fascination with screens, we still live in the real world. It’s the food we eat, our homes, the clothes we wear and the cars we drive. Our cities and gardens, our offices and our backyards. That’s all atoms, not bits.‘

You can have a great idea and design it on your own laptop using computer-assisted design, or CAD, software. Some of the software, like Google SketchUp, is free. [Read more →]

It’s a Saturday, and Chris Anderson’s daughters want to redecorate their dollhouse. They ask him to buy them new furniture.
‘I went online,’ he says, ‘and quickly realized three things: (1) dollhouse furniture is expensive; (2) there is surprisingly little variety; and (3) the stuff your kids like is invariably the wrong size for your dollhouse.’

So with a little help from Dad, the girls then turn to making their own dollhouse furniture in only minutes, using a 3-D printer at home. ‘We may never buy dollhouse furniture again,’ Anderson writes. ‘If you’re a toy company,’ he adds with drama, ‘this story should give you chills.’

For the last 18 months, we’ve been wrestling with a conundrum: How is it that the US energy industry is unlocking vast new stores of oil and gas…and the US biotech industry is discovering how to turn back our biological clocks…at the same time Washington is setting new debt records and Wall Street is back to its old pre-2008 tricks?

Months ago, we made this ‘Tale of Two Americas’ the central theme of the 2013 Agora Financial Investment Symposium, scheduled for this July in Vancouver. [Read more →]

‘Number one, cash is king…number two, communicate…number three, buy or bury the competition.’ - Jack Welch, former Chairman of General Electric

Jack Welch knows a thing or two about running a successful business. In the twenty years that he ran GE, the share price increased forty-fold.

Welch’s number one rule was: ‘cash is king’.

Today, cash is more important than ever.

Checking a company’s kitty will not only help avoid a disaster, but it will also help you identify the better stocks on the market… [Read more →]

Share prices around the world are on a tear.

Most developed markets are near five-year highs. The US is now at fresh all-time highs.

Yet, there seems little to justify this good mood. Corporate profits are stagnant by and large, as are underlying economies.

What’s going on? And for how long can it continue?

So what rising share prices suggest is that investors are willing to pay more for a given level of earnings. ‘Price/earnings multiples have gone from 12 to 16 in the process.‘

In the jargon, this is known as a ‘re-rating’. It suggests that investors are feeling upbeat about the future, and that they expect earnings growth to improve (because otherwise you wouldn’t be willing to pay an apparently high price for today’s earnings). [Read more →]

Find the best bull markets in the world. Get in early. Buy the best assets. Ignore the volatility. And enjoy the ride.

That was the basic formula Harris Kupperman, CEO of Mongolia Growth Group, presented at the Value Investing Congress in Las Vegas.

Below are some notes from his inspiring presentation…

In 2004, Harris saw a big opportunity in farmland. The outline of the idea was simple and seems obvious now, but at the time it was often overlooked. There were four main parts. First, rapidly growing and industrializing emerging markets raised the demand for food.

Second, existing stockpiles were tight. Third, prices for agricultural goods were low versus inflation. And finally, mandated ethanol usage almost guaranteed corn prices would go up. This would have a spillover effect on many other crops. [Read more →]

George Soros or not, the Aussie dollar has been the talk of the financial markets this week.

This morning the Aussie dollar is trading around USD$0.99.

That’s it. It’s all over. The Aussie dollar and the Aussie miracle economy have finally gotten their come-uppance after four years of bravado.

Not so fast.

We can’t tell for sure. But before the bears get too excited, we offer one note of caution – a strong currency and strong stock market don’t always go hand-in-hand…

The story now is that because the Aussie dollar has hit the skids, we can expect the Aussie stock market to follow suit.

And maybe it will. Yesterday it fell by 26 points. We’ll admit that like anyone else all we can do is take an educated guess on what will happen in the future. But like anyone else’s guess we’ve got just as much chance of being right as being wrong.

So far, we reckon we’ve got the broad trend just about right. The market has gone up…then down…then up…then down…then up. [Read more →]

The fall of the Berlin Wall was a public declaration that the communist experiment had failed.

The utopian concept of equality in an unequal world was flawed from the start. However, the resolve of the State to alter the laws of human nature meant sceptics had to wait 70 years to be proved correct.

The Soviet experiment taught us major trends in large economies can take decades to reveal the truth.

Nixon’s closure of the ‘gold window’ in 1971 was another key moment in economic history. Free from the remaining shackle of financial responsibility, governments began an experiment to create wealth out of thin air.

When Nixon abolished the gold standard he said:

‘…if you are among the overwhelming majority of Americans who buy American-made products in America, your dollar will be worth just as much tomorrow as it is today.‘

The American public bought this propaganda hook, line and sinker. [Read more →]

One thing you can guarantee never receiving with a Port Phillip Publishing subscription is a consensus view. Each editor is free to do his own thinking and form his own strategy. But if there is a bit of theme between them right now, we could probably boil it down to this:

Cash is king in this market.

There’s two sectors of the market where this key asset can often be in scarce supply – small capsand junior miners.

In other words, right where Diggers & Drillers and Australian Small-Cup Investigator go hunting for outsized gains.

So today’s Money Weekend will show you how editors Dr Alex Cowie and Kris Sayce see things across the board, and the strategy to use… [Read more →]

The continuing collapse in the Japanese Yen and rapid increase in Japanese bond yields is the most interesting development in the financial markets over the past few months.

From a low yield of around 35bps, after the Kuroda bombshell announcement that they were going to print their way back to prosperity, the JGB’s have sold off sharply to a yield of over 90bps.

The bond market was shut down twice this week due to circuit breakers based on volatility. It escaped being shut down a third time by 1 basis point.

In other words the market is no longer orderly. Investors are trying to get out in droves and there is a chance we could see the volatility increase even further from here.

I wonder how comfortable the government will be once yields start shooting above 1%? To put things in perspective, every 1% rise in bond yields takes another 25% of government revenue. There has to be a few nervous nellies eyeing the bond market and praying that the sell-off is contained.

Now that the US dollar has busted up through the psychologically important 100 level against the Yen there is very little stopping the ongoing collapse in the Yen. I believe you’ll see the US/Yen heading above 105 and towards 110 before long. [Read more →]