"Equally there are not going to be people not buying anything at Woolworths as a result of the Greek stalemate (and not stale mate as a friend pointed out, that is your partner that you are tired of he said) or the Fed raising interest rates. Markets go up and down as a function of where the mood is right now."
To market to market to buy a fat pig. The Group of 7 leaders met in a picturesque Bavarian setting near the Austrian border on Sunday and yesterday, there is of course no Russia, which made up the G8. This was the 41st such summit between the economic powerhouses, collectively the wealth of these countries is around two-thirds of all that in the world. I guess the views of the elected leaders account for something, most especially when they are representing the views of two-thirds of the wealth of the planet. It is not a closed meeting, there are also other countries invited, as well as the United Nations.
There are all sorts of interesting graphs and figures in the G7 in figures, download the .pdf there on the left hand side. You can also read via a portal the Leaders' Declaration: G7 Summit. I guess these people do all need to be on the same table, it would be nice if the group was expanded to include India and China, they are in the broader G20 however, as is South Africa. What ever comes of these meetings and their noble proposals, I guess there is "more of the same page" discussions. Next meeting in Japan, onwards and forwards.
Markets globally continue to be held sway by one topic specifically and then another at the fringes, the Greece situation tends to also be front and centre. I can tell you that I deal with phone calls on a daily basis to try and explain what is happening here, when it will end and what we should expect. The short answer is that nobody knows when either the Fed are going to be compelled to raise interest rates as a result of improving data or inflation picking up, or when a deal is going to be reached to provide the Greek financial system and government more liquidity. These are generally beyond the control of market participants, at least of our kind, in the equity markets. The volatility of local markets, and specifically the Rand is something that many tend to see inwards looking, searching for details of how local economic or political factors can impact the currency.
For the time being the Rand will be battered by the stronger Dollar, the outlook for a rate hike sooner has improved in the US with better employment data. Staring at a chart, the yield curve and measuring that against the equities market is all very good and well, the incoming data will determine that. And does it matter as an equity investor whether or not the Fed raises rates sooner rather than later? I suspect not. What may happen is that the Fed are compelled to go slower at the beginning, i.e. as time progresses they have the ability to raise later in the cycle with more frequency. I am thinking that too much time is spent on worrying about this rather than worrying what the quality of your investments are, that is something that is in our control.
Lastly we are here to act as shock absorbers for worried individuals. We deal with ordinary (mostly extraordinary!) clients with differing life circumstance. Each investment is as important as the last to each single investor, we certainly do get that. No two peoples needs are the same. Sometimes we need to reassure people that whilst there are ructions in the marketplace in the share prices of the specific businesses that each and every individual holds, the businesses go on operating. Mediclinic is not going to perform fewer operations today, or turn patients away as a result of their share price being down nearly 19 percent from their recent highs in April. No. That is not going to happen. Obviously the recent results have caused the market to reevaluate the current share price, it is however not as if the business itself has changed. Their expansion plans are well known to the market. However the broader market sell off has also impacted the stock.
Equally there are not going to be people not buying anything at Woolworths as a result of the Greek stalemate (and not stale mate as a friend pointed out, that is your partner that you are tired of he said) or the Fed raising interest rates. Markets go up and down as a function of where the mood is right now. I have no way of knowing what is going to happen in the very short term. There, I said it. We do not purport to know what is going to happen 6 or 12 months hence. Heck, we do not purport to know what is going to happen far into the future, the same could be said of many people. Our one and only aim is to try and identify businesses that will outperform their peers, businesses that are placed in the sectors of the global economy that are likely to grow at above global economic growth rates. That is our strength. Equally we try and identify businesses that we must avoid, mostly in sectors of the market that we think do not have significant opportunities for unit growth.
As you know, investing is not a perfect science, neither is economics, that is why economists have multiple hands. On this and that hand. We are never going to time the market perfectly, I believe that the skill of market entry in and out is for very few in the same way that skilled individuals in their respective fields exist. Yet there are so many adverts, trading programs that suggest that you can be good at this if you use X or Y software/platform. You know the stats, there are few who get it right. John Paulson got the US housing market very right, Kyle Bass did the same. Jim Chanos nailed Enron. Paul Tudor Jones crushed it with the 1987 crash. Much earlier, when markets had fewer participants and there was less liquidity Jesse Livermore shorted the whole market in 1929 and made more money than anyone could imagine at the time. George Soros nailed it when he beat the Bank of England, shorted the Pound and made over 1 billion Dollars.
What you do not hear is that Livermore lost his fortune twice, according to Wikipedia, if he had just stuck with the Dow Industrials and reinvested the dividends, that money would be worth 125 billion Dollars. All these guys are hugely successful in their own rights, specific events that they identified contributed to enormous gains. As Michael pointed out two weeks ago in the linkfest, via this Josh Brown article in The Billion Dollar Club, it matters how long you have been doing it for. What matters most to your longer dated returns is consistency.
Fact of the day Accounting. Accountancy. The definition of an excited accountant is one that stares at your feet. That is mean, I have many friends and clients who are accountants, they are wonderful and in a very noble profession. Where does their art come from? I mean, how long has the science of accountancy been around? The interpretation of business activities made openly available in the most transparent manner. Of course accounting is a very broad and wide field, there are specialists in many fields, including tax (different for different juristictions), auditing, management accounting (to make better business decisions) and of course the one that we pay most attention to, financial accounting. To be, or not to be asks Hamlet in his time of need, GAAP or IFRS asks the accountant.
The "father" of accountancy as we know it is an Italian mathematician by the name of Fra Luca Bartolomeo de Pacioli or simply, Luca Pacioli. He was born and died in the little commune of Sansepolcro in Tuscany, the place is also home to the Italian pasta brand Buitoni, which is in turn owned by Nestle. The town looks beautiful, I am sure that the pasta tastes great too. So what makes Luca Pacioli the pioneer of accounting and bookkeeping? He was the first guy to publish a description about the double-entry bookkeeping system.
There are earlier recorded account systems, traced back to Florence and to a merchant by the name of Amatino Manucci. Now the word bankrupt comes from the Italian two words banca (bench/bank) and rompere (break), literally it means broken bench. As far as I can understand it from readings on the inter-webs, when merchants/traders were unable to pay their debts, their trading positions on the fabled bridge the Ponte Vecchio, which spans the Arno river in Florence, were dealt a blow.
A blow of actual breaking their trading desks, which were trashed by the authorities and cast into the river. I am guessing this was long before chapter 7,11 and chapter 13, the US bankruptcy codes. 7/11, now there is a different story. As ever, accountancy continues to evolve rapidly, with the upholders of the standards responding to scandals in the same way that any other authorities respond, closing loopholes. It is a great career choice with many possibilities for graduates, as ever, you need the passion to enjoy the job.
Linkfest, lap it up
What are your views on climate change? It can be an emotive subject given our own biases and the vast amounts of data and statistics out there - The global warming 'hiatus' never actually happened, study says. I think that there is no doubt that temperatures are rising but what percentage of the change is man made and what percentage is just a natural shift. I have read reports that claim cow dung and the gas trapped below swamps, add as much greenhouse gasses as do humans.
The conventional wisdom is to follow your passion but I am seeing more and more people say that is not the way to go - Why one of Silicon Valley's top investors says 'don't follow your passion'. If you are good at something it normally leads to a passion of sorts because we get positive signals from society. Passion coming out of skill as opposed to skill coming out of passion; when we look at successful people it is hard to tell which lead to what.
As the globe becomes more efficient with our resources and moves to more specialisation, we are going to need more specialised people in the workforce - College dropout Bill Gates: 'America is facing a shortage of college graduates'. "By 2025, two thirds of all jobs in the US will require education beyond high school"
Considering how much I sit on a daily basis, these numbers are concerning - Why not even exercise will undo the harm of sitting all day and what you can do about it. I have seen a number of articles written on how bad prolonged sitting is for you. Over the last few days I have tried to stand during the day, I found it quite hard to keep up.
Home again Oh dear, markets are lower here today again. I am guessing that we are going to have to live with a certain amount of volatility until the rate hike actually happens and then the consensus might well be that this is not the end of the world, it is part of a natural progression of equities. They go up and down, in the long run equity still outperforms.
Special request time!
Michael is doing his maiden Momentum 94.7 Cycle Challenge in November, poor form that it has taken him this long to do it but at least he is doing his maiden race for charity. If the Kruger Park and the fight against Rhino poaching is a place where you see yourself donating some funds, please then click on the link, donate and help him reach his target: Mike's 94.7 Cycle Challenge for SANParks 2015. It is quick and easy. (From your donation, the webpage charges 7% for administrative charges and there are credit card fees of 2.5%).
Sent to you by the Vestacters, Sasha, Michael, Byron and Paul.
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