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  1. #71
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    I agree - currency exposure is a big deal and in the past 2 decades, we've seen huge swings in currencies. It's not really that complicated. To the investor all that matters is how much gain they make WHEN the distributions are brought back to NZ (exchanged to NZD) to be spent.

  2. #72
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    Protecting against future potential inflation
    "“Though we expect the recent rise in inflation to ease, the outlook for inflation remains uncertain and therefore building inflation protection into portfolios is an appropriate step for investors to be taking now. This includes investing in commodities, private market infrastructure, and stocks with pricing power, as these areas tend to perform better in an inflationary environment and will help to preserve purchasing power over the long term," said UBS Americas and co-president of UBS Wealth Management Tom Naratil."
    https://finance.yahoo.com/news/heres...184847675.html

  3. #73
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    Quote Originally Posted by kiora View Post
    Protecting against future potential inflation
    "“Though we expect the recent rise in inflation to ease, the outlook for inflation remains uncertain and therefore building inflation protection into portfolios is an appropriate step for investors to be taking now. This includes investing in commodities, private market infrastructure, and stocks with pricing power, as these areas tend to perform better in an inflationary environment and will help to preserve purchasing power over the long term," said UBS Americas and co-president of UBS Wealth Management Tom Naratil."
    https://finance.yahoo.com/news/heres...184847675.html
    Interesting kiora. I read a similar article somewhere in NZ media recently, where they also talked about companies with "pricing power" being the way to go. But much to my surprise, they specifically said gentailers were not such companies. I think due to concerns about Government intervention.
    But then I thought, well what industry can avoid Government intervention, such as minimum wage increases, landlords tax changes,extra holidays, OSH regulations, shipping costs, border closures. The list is endless. I have no idea what they mean with "pricing power" and I doubt anyone else knows either
    Last edited by iceman; 23-07-2021 at 07:23 PM.

  4. #74
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    Quote Originally Posted by iceman View Post
    Interesting kiora. I read a similar article somewhere in NZ media recently, where they also talked about companies with "pricing power" being the way to go. But much to my surprise, they specifically said gentailers were not such companies. I think due to concerns about Government intervention.
    But then I thought, well what industry can avoid Government intervention, such as minimum wage increases, landlords tax changes,extra holidays, OSH regulations, shipping costs, border closures. The list is endless. I have no idea what they mean with "pricing power" and I doubt anyone else knows either
    It's simple. Basically a company that has the commanding power to change the price of their product UP, without losing a significant market share where their products are sold. So we're looking at inelastic goods & services here. I would say Apple would be one company that fits in that category as they rarely discount (nor can any individual haggle discount on their products sold at the shops) and there seems to be no shortage of people upgrading to buy what they have new.

    If you're really worried about inflation and not looking for a significant return, just buy physical gold.

  5. #75
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    Quote Originally Posted by iceman View Post
    Interesting kiora. I read a similar article somewhere in NZ media recently, where they also talked about companies with "pricing power" being the way to go. But much to my surprise, they specifically said gentailers were not such companies. I think due to concerns about Government intervention.
    But then I thought, well what industry can avoid Government intervention, such as minimum wage increases, landlords tax changes,extra holidays, OSH regulations, shipping costs, border closures. The list is endless. I have no idea what they mean with "pricing power" and I doubt anyone else knows either
    I regard 'pricing power' as the ability to increase your net profit margins at above the rate of inflation. It is not difficult to calculate what the net profit margin for a company is over successive years ( Normalised NPAT / Sales ).

    As you have noted Iceman, there are many potential things that can stop a company raising prices at any particular time, and you have listed many of them. But if they are 'one off' shocks', then you should look through those. Think of a one off shock as helping hand to acquire an otherwise very good company at a discount. The fact that a company can raise prices in excess pf inflation, more often than not, is what you are looking for. Ultimately the good years will more than cancel out any downward profit wobbles.

    SNOOPY
    Industry shorthand sees BNZ employees still called 'bankers' but ANZ employees now called 'anchors'. Westpac has opted out of banking industry shorthand...

  6. #76
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    "While alternatives exist, Neilson believes they often display fewer of the "seven powers" when compared to the tech giants. These "seven powers" can be described as:

    Holding a cornered resource
    Enjoying economies of scale
    Benefitting from network effects
    Offering a product that has high costs of switching
    Is a powerful brand, enhancing its ‘spread’ above costs
    Having a persistent process enhancement path
    Nurturing innovative opportunism
    https://www.livewiremarkets.com/wire...on-invests-now

  7. #77
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    Quote Originally Posted by kiora View Post
    "While alternatives exist, Neilson believes they often display fewer of the "seven powers" when compared to the tech giants. These "seven powers" can be described as:

    Holding a cornered resource
    Enjoying economies of scale
    Benefitting from network effects
    Offering a product that has high costs of switching
    Is a powerful brand, enhancing its ‘spread’ above costs
    Having a persistent process enhancement path
    Nurturing innovative opportunism
    https://www.livewiremarkets.com/wire...on-invests-now
    Thats a great article - thanks kiora. Interesting as there was a recent podcast from the Economist that talked about Flutter also and interviewed their CEO. They have a great story and seem to be leading in relatively new markets. Shame they are only on the London stock exchange - not one that I can access, otherwise would be worth a consideration. Its interesting when certain companies come recommended through different sources

  8. #78
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    As an investor I believe that is important to keep things simple, so IÂ’ll give one rule that should be considered before any money is either made or lost.

    1: Always remember that personal development will yield greater returns than any monetary investment.

    Life is about character building and inspiring others to do better and be better.

  9. #79
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    Quote Originally Posted by surfnturf View Post
    As an investor I believe that is important to keep things simple, so IÂ’ll give one rule that should be considered before any money is either made or lost.

    1: Always remember that personal development will yield greater returns than any monetary investment.

    Life is about character building and inspiring others to do better and be better.
    Hallelujah brother!

  10. #80
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    https://www.livewiremarkets.com/wire...amish-douglass
    "Money makes money: 10 investing tips from Hamish Douglass
    Matt Buchanan
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    BUCHANAN

    Livewire Markets


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    In the recent 100th episode of his podcast Inside The Rope, David Clark was joined by special guest and long-time supporter, Hamish Douglass of Magellan (Douglass first appeared in the second episode of ITR in 2017.)

    In it, Douglass, who was then in London conducting business, was asked for his take on COVID, the reopening, Crypto, Robin Hood stocks, inflation, and the ongoing regulatory crackdown in China (all the more interesting given Magellan's well-known stake in Alibaba).

    He also offered a short-term macroeconomic outlook.

    However, the bulk of the podcast was given over to the investment lessons Douglass has gleaned from the great investors over the course of his singular career, among them Warren Buffett, Benjamin Graham, Phil Fisher, Peter Lynch, and Richard Thaler (under whom he studied at Harvard).

    In this wire, I have cherry-picked 10 key investment tips that sprang from Clark's one simple but elegant question:

    What behaviours through your career have you learnt or studied from others that have made you a better investor?

    HAMISH DOUGLASS: It's a very good question, David. I spent a lot of time studying the great investors of the world, whether it's Phil Fisher, Ben Graham, Warren Buffett, or Peter Lynch asking how have they created these incredible track records.

    And you pick up different things from different people, but also in your own experiences, you have to understand that you never stop learning in this game.

    And if you think you know everything, that is the point where you really don't know anything. It’s about trying to understand some very complex issues.

    You try to predict the future in a future that has rhymes of the past, but always can be different in the future.
    There are tools of the trade that I've picked up from people in my own lessons over time that, that I think are important for anyone in investing.

    And I'm not sure these are in order of the most important things, but I think they're all important.

    #1 The importance of a margin of safety
    One, I would say I learned from Ben Graham and his great book Security Analysis was the proposition of a margin of safety. You want to buy assets at less than you think that they're worth in order to incorporate some room for error as things go wrong. And when things go wrong, you want to have a margin of safety.

    If you're designing a bridge that can take a hundred thousand tonnes you don't want to set the safety limit at 99,999.
    You'd probably want to set the limit materially below the maximum capacity of the bridge to make sure you're never testing that. And that's the same thing in investing.

    You want to make sure that you incorporate some room for error in your analysis. And that, that was a very important lesson from Ben Graham.

    #2 The circle of competence
    I think this is really an important lesson from Warren Buffett and that's something he calls his circle of competence. You don't want to pretend to be an expert in everything because you become a know-nothing investor.

    I describe our approach as an inch wide mile deep and very, very clearly defined areas in which we have expertise.
    For example, we don't invest in biotech. There can be some great biotech investments, but I would say it's largely outside my area of competence or expertise. I'm not a trained scientist in that area. And we, we want to invest in areas where we really think we have some knowledge and some edge and things we can understand.

    I also believe that it comes down to an issue of focus as well.
    We're very, very clear at what we do at Magellan. We're very focused on very high-quality companies. High-quality companies aren't going to perform the best every single day of every single month of every single quarter. But, over time, they've got tremendous advantages because they have much lower failure rates.

    #3 You have to be prepared to just throw something in the bin
    Another thing I learned, and this comes to heuristic biases that a lot of people suffer, is you need to be prepared to walk away from investments.

    That's really hard because often you spend an enormous amount of time and effort researching, or you can be in investments that go wrong, and then you start to convince yourself “oh, well, I can make my money back”.
    You've got loss-aversion bias, you've got the cost of time, and you really have to be prepared to just throw something in the bin

    #4 You have to be prepared to change your mind when the facts change.
    You don't want to start refitting an investment case to a new set of facts and believing or convincing yourself nothing has changed.

    So, when something's changed, don't be afraid to admit that you're wrong. And that's happened to us numerous times over my career that we've had to face reality and deal with it.

    And I find it very therapeutic to actually admit not only to yourself, which is the first one, but to admit publicly that you've made an error.
    The nature of the game is to not get focused on that one investment that can go wrong, but to focus on what I call the batting average of the portfolio.

    It's easy to focus on, well - Alibaba had a bad year that year, but it's small in the context of the overall portfolio. What you don't want is a whole series of investments that go wrong.

    And the batting average is all about having a very consistent win rate and minimising the error rate.

    # 5 A medium-term investment horizon
    It's really important. It's really easy to say. It's really hard for people to do, to genuinely see out three to five years in the future and not to get caught up in the short term noise about how you're performing relative to the market - or what other people are saying. It's all about being able to see where the ball is headed and to back your judgement over time.

    # 6 The power of compound interest
    In our view, probably one of the most important lessons is the power of compound interest.

    What you want to do is to be able to put your money into investments and effectively let those great investments work for you over time.

    You don't care whether Microsoft is underperforming the index in the next six months. It is irrelevant. What is relevant is whether those investments can compound for you over five years, 10 years into the future.
    What that rate of return is not about is one-off price changes, what you think the price can do in the next six months or 12 months. It's about whether investments can compound for you.

    A quote I often give people is a quote from one of the founding fathers of the United States, Benjamin Franklin, and he said:

    “Money makes money. And the money that money makes, makes more money.”
    And if you think about it, that's what investing is all about.
    It's about taking a longer-term view, backing the right businesses that effectively can compound their earnings at a very, very satisfactory, rate.

    We've made many investments we’ve held for over 10 years. And many of these, if we take Microsoft, which is still our largest investment, we invested in 2014. So seven years ago, we took our major position, $28 a share. We have made 10 times our money.

    This concept of time and compound interest is at the centre of what we do. You want your money to work for you. And we set ourselves an absolute hurdle over the long-term. After all fees, 9% per annum is our hurdle. The strategy has done better than that over time.
    You just keep learning more things all the time by reading and looking and hopefully being very honest yourself, what you get right, and what you get wrong.

    # 7 Emotional detachment: What Richard Thaler taught me at Harvard
    I actually went to a course at Harvard, that Richard was teaching so I had some firsthand experience with Richard. He's written some wonderful materials on heuristic biases, one of them is emotional attachment.

    Some people have the right temperament for investing. And one of the things in the great investors like Buffett and others of the world, they're just very emotionally detached from their decision-making, it's just incredibly objective.

    I'm lucky I'm fairly emotionally detached from things, and very driven by the analytics.

    Buffet often says that the stocks don't know that you own them, and that's largely the case. And the way to think is that these stocks don't know whether you own them, or you don't own them, so don't get emotional about it.
    I'm lucky I'm not that emotional. Maybe that's why I'm an oddball, slightly, here.

    # 8 Don’t pick up coins in front of a steam roller: On Robin Hood stocks
    Robin Hood-style investments are crowd-driven investments, and really for people who don't do their own work and analysis. To me, this is just crowd speculation rather than investing.

    You know, some of these investments may be incredibly good investments and some may be absolutely terrible investments. And it's really a lottery, investing in that. I think investing is all about doing your own analysis, and it's not about what the crowd thinks.

    So when, when the crowd is all moving in a direction, they all think they're heroes because everybody's just piling in, of course, as you put more people into a single investment, the price goes up.

    That doesn't mean that the investment’s worth more money just because its price is going up. That's just more people are buying the investment.
    But if that crowd changes direction, you could get murdered.
    And to be in that investment, it's a bit like as Warren Buffett says: “These people go, oh, I know that, but don't worry, I know I'll get out of the investment.”

    But the problem is it's like being Cinderella at the ball, you know, all these Robin Hood investors are in these investments, all thinking that they're smart, that they can exit the party at one minute to midnight. The problem is, the clocks have no hands at this party. And if you wait till it strikes midnight, everything turns to pumpkin and mice.

    So, I regard it as fairly high risk. When things are all rosy, it looks like an easy way to make money, but you could be picking up coins in front of a steam roller,

    # 9 Crypto is a mass delusion, headed to zero ...
    The latest investor letter I wrote was on crypto and Bitcoin. I was just trying to point out that, that the lack of any substance behind something like Bitcoin, and it's really a study in human psychology. And I referred to it as a mass delusion. There is no intrinsic value underpinning, something like that.

    The technology of the blockchain is incredible in terms of a distributed ledger, the proof, the concept is, is very smart.
    Psychologically, it's playing on people's fear of central banks printing money. And the fact that there's a limited supply

    And I think it is inevitable that most of these digital forms of cryptocurrencies. that have no backing by government, or no tangible backing underneath them of any substance, will inevitably go to zero in the future.
    I can't tell you whether that's in 12 months or two.

    #10 … But we are headed to digital currencies
    The emergence of digital currencies in the world on the blockchain is real.

    We are going to move away from paper-based currencies of the world to digital currencies in the world. We are most likely going to have central bank digital currencies. Whether people have a direct account with the central bank on their ledger, or they're going to use the banking system to effectively stand between. It is a very important regulatory issue, but I think we will take paper, money out of society and we'll digitalize it on the blockchain."

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