Refer: https://twitter.com/cullenroche/status/327874531551232000/photo/1
The interesting thing is that it has been a fairly mixed bag quarter to quarter.
If I had to eyeball trends, I'd say that Gross Private Investment has been the dominant factor lifting us out of the 2009 pit, with nice support from Personal Consumption. Strong mean reversion.
Govt is now dragging on the economy and I would expect that to continue into the future, but normalcy is returning.
Friday, April 26, 2013
Systematic Mistakes aka Bad Wiring
I am prone to the same mistake on different sides of the cycle.
When markets are trending up, I am reluctant to chase and look for a pullback to make an entry (but it either never is enough or I move the goalposts when it comes my direction).
When markets are trending down, I am reluctant to cut and run and look for a bounce to sell into (but it is either not enough or I move the goalposts...does that sound familiar).
If I could get those two elements out of my software, it would improve my decision making and results enormously.
The problem is that I am wired as a natural contrarian, and both mistakes imply a lack of conviction.
When markets are trending up, I am reluctant to chase and look for a pullback to make an entry (but it either never is enough or I move the goalposts when it comes my direction).
When markets are trending down, I am reluctant to cut and run and look for a bounce to sell into (but it is either not enough or I move the goalposts...does that sound familiar).
If I could get those two elements out of my software, it would improve my decision making and results enormously.
The problem is that I am wired as a natural contrarian, and both mistakes imply a lack of conviction.
Monday, April 22, 2013
Salt, Sugar & Fat = Money, Sex & Violence
The food industry knows what we like to eat and how to get us to eat. Salt, sugar & fat are the holy trinity of food sales.
Similarly our society and culture has its own irresistible fantasy based upon its own holy trinity of insatiable desires - money, sex & violence.
The facilitator is tv, movies, and videogames, and the enabler is the entertainment industry.
Similarly our society and culture has its own irresistible fantasy based upon its own holy trinity of insatiable desires - money, sex & violence.
The facilitator is tv, movies, and videogames, and the enabler is the entertainment industry.
Wednesday, April 17, 2013
A Philosophy on Investing
I look for good companies with attractive stock prices.
Some may call it growth at a reasonable price. I don't like to think of it this way. First, because it is jingoistic and fails to take account of the nuances in my approach. And second, because a good company may not necessarily have great growth prospects per se, but still have a very attractive stock price (from a long term equity ownership perspective). The beauty of a good company is that it has products, a market footprint and market opportunity that is sufficiently attractive (could be large market, could be niche positioning, could be something else) and competent enough management to continue to steer the firm along a productive path.
Now there are two other associated perspectives that are worth bearing in mind. The first is that I don't want to invest in a good company with an unattractive stock price. This would be the case where the market has bid up the price of the stock (ie. it trades at a substantial premium to a reasonable estimate of its long term intrinsic value) to the point where there is little margin for safety. The second perspective is that I am leary of investing in lousy companies with what appear to be highly attractive stock prices, ie. value traps.
There are two other areas where you can make a lot of money. The first is in buying cyclical stocks at the bottom of the cycle. The second is in identifying what were previously lousy companies that are turning into good companies and have a highly discounted stock price. Those are attractive investment opportunities also. If you fish in either of those areas, then you need a framework to understand and analyze the dynamics of both of those situations.
Major unwritten rules underlying investing are patience, structure, discipline and courage.
Some may call it growth at a reasonable price. I don't like to think of it this way. First, because it is jingoistic and fails to take account of the nuances in my approach. And second, because a good company may not necessarily have great growth prospects per se, but still have a very attractive stock price (from a long term equity ownership perspective). The beauty of a good company is that it has products, a market footprint and market opportunity that is sufficiently attractive (could be large market, could be niche positioning, could be something else) and competent enough management to continue to steer the firm along a productive path.
Now there are two other associated perspectives that are worth bearing in mind. The first is that I don't want to invest in a good company with an unattractive stock price. This would be the case where the market has bid up the price of the stock (ie. it trades at a substantial premium to a reasonable estimate of its long term intrinsic value) to the point where there is little margin for safety. The second perspective is that I am leary of investing in lousy companies with what appear to be highly attractive stock prices, ie. value traps.
There are two other areas where you can make a lot of money. The first is in buying cyclical stocks at the bottom of the cycle. The second is in identifying what were previously lousy companies that are turning into good companies and have a highly discounted stock price. Those are attractive investment opportunities also. If you fish in either of those areas, then you need a framework to understand and analyze the dynamics of both of those situations.
Major unwritten rules underlying investing are patience, structure, discipline and courage.
Speed Bumps or Speed Wobbles
Are we hitting speed bumps or getting speed wobbles.
I would hazard that the current volatility is more like speed wobbles.
The market has risen substantially and really without much correction for more than 9 months. That is a long time in market years. The first inkling toward an arresting of that trend were speed bumps. Signs of a deceleration in market trajectory. We have been climbing the wall of worry, accumulating worrisome baggage even as the market reached higher levels. The previous all time high seemed like a talisman, calling us forward. The problem with a wall of worry is that worry eventually has an effect. Markets can live with self-delusion for quite a while.
It looks to me that we are now entering the next phase of correction. How big will it be? 10% 20%. Calling those things is a mugs game, but with full central bank support, I expect some kind of official response once we get down around 10%.
I would hazard that the current volatility is more like speed wobbles.
The market has risen substantially and really without much correction for more than 9 months. That is a long time in market years. The first inkling toward an arresting of that trend were speed bumps. Signs of a deceleration in market trajectory. We have been climbing the wall of worry, accumulating worrisome baggage even as the market reached higher levels. The previous all time high seemed like a talisman, calling us forward. The problem with a wall of worry is that worry eventually has an effect. Markets can live with self-delusion for quite a while.
It looks to me that we are now entering the next phase of correction. How big will it be? 10% 20%. Calling those things is a mugs game, but with full central bank support, I expect some kind of official response once we get down around 10%.
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