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  1. #81
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    For those that really want to get technical. Good especially if you are starting out
    "It's a market of stocks rather than a stock market"
    https://seekingalpha.com/article/445...erm=must_reads

  2. #82
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    Quote Originally Posted by kiora View Post
    https://www.livewiremarkets.com/wire...amish-douglass
    "Money makes money: 10 investing tips from Hamish Douglass
    Matt Buchanan
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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."
    Good read.

  3. #83
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    Quote Originally Posted by kiora View Post
    For those that really want to get technical. Good especially if you are starting out
    "It's a market of stocks rather than a stock market"
    https://seekingalpha.com/article/445...erm=must_reads
    Great read. Thank you for that.

  4. #84
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    It seems to be that if your portfolio hasn't doubled in value since the low of March 2020 then it has underperformed

    From Simply Wall Street.
    "Pt 3: Inflation: Why the monetary support comes with a hidden cost


    Unprecedented health pandemic
    =
    Unprecedented monetary response
    The economic support provided globally by governments and central banks in response to the pandemic has been nothing short of extraordinary (in terms of scale, that is).

    That’s because the scale at which shutdowns impacted global economic activity, in the form of business closures, event cancellations and travel restrictions, is one of the greatest endured during any global crisis.

    While much of the support has been crucial in helping economies, businesses and people to transition through the abnormal conditions, there’s no such thing as a free lunch.

    All of this support comes at a cost.

    Some are direct costs, such as the fact that the fiscal support provided by most governments is from borrowed money (that they’ll have to eventually pay back), and others are more indirect costs.

    We want to focus on these indirect costs because they can impact our portfolios in many different ways. By the end, we also want to outline what we as investors can do to make sure our portfolios and stocks within them are able to navigate these challenges.

    An increase in the money supply
    For starters, it’s worth touching on the money supply. As a result of huge financial support over the last 18 months, many economies around the world have increased the amount of their respective currencies in circulation in order to stimulate their economies and encourage spending. The US is one of the best known and widely discussed examples of this.

    The most commonly referenced figure for a gauge of a country’s money supply is called M2, and it is a combination of liquid monies like cash and short term bank accounts, plus savings accounts, longer term deposits, and money market funds.

    This M2 figure reached $20.5 trillion dollars in July of 2021. To put that in perspective, back in January 2020, that figure was $15.4 trillion, meaning 25% of all USD in existence has been created in the last 18 months alone.

    Figure 1: M2 Money supply 1960 to 2021 - FRED Economic Data
    In a very simplistic way of looking at it and all else being equal, when you increase the supply of something, its value typically goes down since it isn’t as scarce as it was before. But in this case, the (nominal) value of a dollar is constant by definition, so when the money supply increases, a dollar buys fewer of the same goods and services now than it did a year ago.

    What’s interesting is that we are already seeing signs of inflation, it just depends on the basket of goods you’re looking at.
    An increase in the money supply
    If you’ve recently been to the grocery store, you might have noticed some items like meat and some produce are slightly more expensive. Whereas other more everyday items haven’t changed too much. That’s because unlike some meats and produce, most of those goods haven’t had the same sort of supply/demand shocks (discussed in Part 1).

    However from what we’re seeing in the data, there are signs of above average inflation. Below is a chart showing the last 25 years worth of CPI (Consumer Price Index - explained below) data in the United States. You can see that from the lows of 2020, rates of annual inflation have been around 5% for the last few months, which is above the Federal Reserve’s goal of a 2% average rate (over the long term).

    Figure 2: Monthly CPI Inflation from 1997 to 2021 - Trading Economics
    The CPI basket includes goods such as food and beverages, tobacco, gasoline, furniture, shelter, transportation, etc. The Federal Reserve is reportedly satisfied with this level of higher inflation at the moment because historically inflation has been below their 2% target for quite some time.
    You may have heard the phrase “it’s transitory inflation” thrown around, and that simply refers to the fact the Federal Reserve believes this higher inflation is simply temporary, and will reduce to normal levels as supply and demand pressures normalise. Time will tell if this is the case...

    Now, while those inflation figures above may not appear to be too high (though some claim the inflation figures are actually understated), it hasn’t been as high as what we’ve seen occur in other asset classes. That’s why it’s useful to look at both CPI data, and asset price data.

    A cocktail of huge increases in the money supply, ultra low interest rates, limited supply and higher than usual demand have helped drive the prices of other more scarce asset classes upwards.

    Whether it be equity markets, real estate, some commodities or cryptocurrencies, many asset classes outside of the CPI basket of goods have experienced much higher “inflation” over the past 18 months.

    For example, if you look at the average price of a home in the US, it has risen to a high of $363,000 in June this year, up 23% from 12 months prior (now back at $356k). Plenty of other real estate markets around the world have experienced similar price appreciation.

    If you look at the US stock market (S&P 500), it has risen 35% in the last 12 months alone, and is up 92% from the lows during March 2020. We can see from the SWS chart below, that from January 1st 2020, the increase in market capitalization (roughly 50%) appears to be slightly outpacing underlying earnings growth (roughly 23%).

    Figure 2: U.S Market Valuation and Performance - Simply Wall St Market Page (currently in Beta and being rolled out)
    That either means that investors have higher expectations for the future earnings growth, OR they’re allocating their funds to the asset class of “equities” simply because it is perceived to have a better risk/reward profile than other asset classes, like cash or bonds.

    This second possibility stems from the idea of opportunity cost, that is, an investor’s decision of where is best to allocate their personal funds.

    It’s clear that while we might not be seeing as much inflation in the CPI basket of goods (at least not yet), we are certainly seeing it in other areas and asset classes.

    If the money printing is set to continue, then it appears that the opportunity cost of holding a non-scarce asset like cash over more scarce assets like equities, becomes even more clear.
    So what can we as investors do?
    You may have heard the saying “Cash is trash”, and that’s simply referring to the fact that in the current financial system, it doesn’t have the best track record of performance.

    To stress that point, $1 USD back in 1913 had the same purchasing power as $26 in 2020. Most fiat currencies around the world (money issued by central banks or governments) have followed a similar trajectory, or worse.

    Figure 4: Purchasing Power of the US Dollar from 1913 to 2020 - Created by Visual Capitalist - April 2021
    Now just to be clear, we’re not saying holding cash over short periods of time is bad. In fact it’s great to always have some cash on the sidelines, because it allows you to deploy funds during rare opportunities when assets go on sale. (This is referring to cash for your investments which is separate to cash for an emergency fund).

    If you held cash over the long term though, historically speaking it’s been a horrible investment. It’s slowly deteriorated in value thanks to the invisible hand of inflation as the money supply has grown.

    So as mentioned, if the trend of money printing is set to continue long term, then allocating funds to scarcer assets (like equities) rather than holding cash seems like the better alternative.

    If we do then decide to allocate our capital to stocks, this then raises some follow-on questions: What stocks should we buy? How can we assess their strength? Do they have any weaknesses? What are their future prospects like? Will they be able to handle an inflationary environment?

    You might know that our philosophy at Simply Wall St is to not try to predict where the market is going or what will happen next in the macro environment. Instead we’d do well to continue following some core investment principles that have stood the test of time. One of them is:
    Buy high-quality businesses with good long term prospects at a price below their intrinsic value.
    Here’s some questions, a checklist of sorts, that can be useful to ask ourselves when looking at a stock (and how Simply Wall St can help in some areas):
    1. Is the company a high-quality business that generates high returns on capital?
    “Quality” businesses are those that have a sustainable competitive advantage over their competitors. Think of things like brand power (Apple NASDAQ:AAPL), economies of scale (Costco - NASDAQ:COST), or network effects (Facebook - NASDAQ:FB).

    In terms of determining the company’s return on capital (how much it makes per dollar invested), you can check out the Simply Wall St Past Performance section within each company’s report to see how well the company allocates money. Here’s an example of Apple’s returns.

    2. Does the company have good future prospects?
    As mentioned in Part 2, it’s much easier to invest in industries with tailwinds rather than headwinds. If the company has good growth prospects with more room left in its Total Addressable Market (TAM) to serve, then it’s got room to grow. On Simply Wall St you can check out the Future Growth section, here’s Amazon (NASDAQ:AMZN) for example.

    3. Is the business capital intensive?
    If the business requires a lot of upfront capital invested to generate its product or service (think manufacturing or construction), then it can be vulnerable to inflation pressures if the cost of its inputs increase. However if it’s a capital light business model (think software), then it’s less vulnerable to having its margins eaten away by inflation (that is if its costs increase but it can’t increase its prices equally). Here again, for example, we can see Apple’s operating expenses remaining flat while revenues have increased, which have helped drive profit margins higher.

    4. Can the business raise its prices at or above the rate of inflation?
    Think about it this way, does the business provide enough value to customers where they are happy to pay up if prices increase? Or would they go to the cheaper alternatives? Is the business in a market where consumers are simply looking for the cheapest product, or does the company have a business or status where it can afford to raise its prices and not lose any customers?
    5. Is the business able to afford its debt? (if it has any)
    Given the current low interest rate and inflationary environment, taking on debt is actually quite an appealing source of capital. So utilizing debt effectively can help a company increase its profitability. The key here is to assess if the debt is affordable, especially if interest rates were to rise. Within the Financial Health section, we run checks on the affordability and absolute level of debt, so you can get a quick understanding of both how leveraged a company is, and how affordable that debt is.

    6. Is the business in a growing industry?
    As mentioned before, investing with tailwinds is easier than investing in an industry facing headwinds. You may know of industries that are growing and that you want to invest in, but not be aware of the particular companies within it. We’ve got a screener to help with that.

    If you want to look at the Renewable energy sector for example, which we know is growing, you can start by checking out the Global Renewable energy screener we’ve developed, then drilling down from there depending on what country you want to look at.

    6. Is the company trading at a discount or premium to its intrinsic value?
    We could do a whole email series on the nuances of valuation, so we won’t go into depth here but just keep this in mind. A high quality business can become a bad investment if you pay too much.

    If now isn’t the right time to buy, be patient. If the company still ticks all the other boxes for you, it’s worth putting it on your Watchlist within SWS because the market can fluctuate and give you an opportunity to buy at a better price. From there, you can monitor all its developments, set your own fair value and we’ll keep you up to date on all the important updates.

    This list is by no means all-encompassing, but by simply following this short checklist and other timeless investment principles (which we’ve covered in our 3-part election series last year), we can position ourselves to:
    Better withstand whatever macro-environment we face
    Make more informed investment decisions
    Avoid succumbing to FOMO
    Be confident in the portfolio of high-quality stocks that we own
    Take advantage of structural growth opportunities
    Not overpay for businesses, no matter how good they are"
    Last edited by kiora; 29-09-2021 at 05:22 AM.

  5. #85
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    https://www.interest.co.nz/rural-new...inue-outmuscle
    "The message I am getting from the field is that almost all sheep and beef farms currently coming on to the market are being snapped up by current and prospective foresters. This week I have been informed of very steep North Island country, distant from a port, selling for $15,000 per plantable hectare, with the investors coming from overseas. This must be close to double last year’s market value, perhaps more."


    "Is owning farmland a good investment?
    Not only is farmland a good investment in an inflationary environment — farmland also provides robust average annual returns. Between 1992 and 2020, farmland provided average annual returns of nearly 11%, including income and price appreciation.17/06/2021"
    https://www.cnbc.com/2021/08/20/here...-farmland.html

  6. #86
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    "Ignoring intangible assets in company capital bases creates the very real possibility that suboptimal decisions are being made by investors, companies - and countries"
    https://www.interest.co.nz/business/...al-possibility

  7. #87
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    Quote Originally Posted by kiora View Post
    https://www.interest.co.nz/rural-new...inue-outmuscle
    "The message I am getting from the field is that almost all sheep and beef farms currently coming on to the market are being snapped up by current and prospective foresters. This week I have been informed of very steep North Island country, distant from a port, selling for $15,000 per plantable hectare, with the investors coming from overseas. This must be close to double last year’s market value, perhaps more."
    https://www.cnbc.com/2021/08/20/here...-farmland.html
    I think they are looking more at carbon credits rather than harvesting the timber, although eventually they will need to harvest the trees I guess. Potentially the price of carbon credits could explode as we continue in a consumption and growth driven economic model. Planting NZ out in pine trees will produce a lot of carbon credits to sell to industry in Asia, America and Europe etc so they can keep pumping out product.

    The farmers might have it right with their concerns about productive land being turned into carbon sinks. Worse that it is pine trees so little real benefit to the NZ environment. Might bring the price of wood down for building houses in another 20-25 years, so we can fit more people in to help GDP and business growth.

  8. #88
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    Quote Originally Posted by Aaron View Post
    I think they are looking more at carbon credits rather than harvesting the timber, although eventually they will need to harvest the trees I guess. Potentially the price of carbon credits could explode as we continue in a consumption and growth driven economic model. Planting NZ out in pine trees will produce a lot of carbon credits to sell to industry in Asia, America and Europe etc so they can keep pumping out product.

    The farmers might have it right with their concerns about productive land being turned into carbon sinks. Worse that it is pine trees so little real benefit to the NZ environment. Might bring the price of wood down for building houses in another 20-25 years, so we can fit more people in to help GDP and business growth.
    The nation that can produce the product for the lowest cost wins (ie China). Unfortunately carbon credits are not a solution to a thriving economy. NZ is a low productivity / low GDP nation compared to the larger OECDs, and will continue to be (or may get worse as our standard of living keeps eroding).

    So in the realm of investment rules. The rules are not universal around the world. That is NZ's strict environment, or carbon emissions scheme etc. simply do not apply to places like China. So the products that attract a high carbon footprint are no longer made in NZ and instead, the environmental cost is shifted to another country like China.

  9. #89
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    Quote Originally Posted by SBQ View Post
    The nation that can produce the product for the lowest cost wins (ie China). Unfortunately carbon credits are not a solution to a thriving economy. NZ is a low productivity / low GDP nation compared to the larger OECDs, and will continue to be (or may get worse as our standard of living keeps eroding).
    Should unite with australia long term. so many world challenges that only regional unity can somewhat protect against.

    Maybe after the govt there is changed there can be incremental improvements (including better climate adaption policies for their own good as they're actually being hit hard with multiple droughts and bushfires but doing almost nothing about it).
    Last edited by Panda-NZ-; 14-12-2021 at 03:58 PM.

  10. #90
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    Focus on the experience the customer receives, not the price paid
    https://www.youtube.com/watch?v=h89uOvUDVO4

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