Friday, August 3, 2012

There must be a record

There must be a record for most time between posts. This is nearly a solid 10 months, so I must be up there.

So what to update?
1: Take Coalworks off the recommendation list. I said it was good at 25 cents. It sold for $1. Who made 4x their money?
2: Replace Coalworks with Cockatoo Coal. I'll have to do a write up on it later.
3: Re-Commit to posting regularly
4: Make more pithy recommendations.

Monday, September 26, 2011

The World Teeters

At some stage there will be a default in Greece. There are a number of ways this could happen. The most likely of these will involve a Greek retreat from the Euro, the reintegration of a local currency and the element of surprise (sort-of). Whatever the case, it will send another wave of shocks around the banking world and make consumers even more cautious, but more importantly, it will become a model for those who follow (the rest of the PIIGS).
The most interesting thing (for those who don’t have their capital tied up in these countries and who have limited exposure) is the practical day-to-day of what a default looks like. If Greece reinvents its currency overnight, it will make deposits in Euros in Greece worthless. Canny Greeks will have their hard earned stashed away in cash (or will be in the process of withdrawing it from the bank) and will be looking to physically take this cash somewhere else to deposit or exchange.
For an historical perspective take a look at the Hungarian hyperinflation of the pengő in 1946 and the Argentineans in 1999

Tuesday, April 5, 2011

AUDUSD - The Risk is on the Downside

This image is borrowed from IG Markets.

The AUD continues its remarkable run against the USD and seems unstoppable. There is a lot of good news for the AUD, relatively high interest rates, low inflation, a strong economy and near full employment. What will stop the AUD and what will see it repeat the precipitous plunge in mid-2008?

It's pretty simple and it all involves China.
1) A collapse in commodity prices
2) Popping of the Chinese Property Bubble
3) A slow down in the Chinese economy
4) Anything else really bad happening in China...

The fall from grace won't be a slow steady progression like the recent rise has been, it will be a drop much like the last one as all the carry traders unwind their positions and all the AUD bulls back out and run back to the good old USD.

Monday, March 21, 2011

Number of Deaths per TWh

This is the source

These are the facts.

Energy Source Death Rate (deaths per TWh)

Coal – world average 161 (26% of world energy, 50% of electricity)
Coal – China 278
Coal – USA 15
Oil 36 (36% of world energy)
Natural Gas 4 (21% of world energy)
Biofuel/Biomass 12
Peat 12
Solar (rooftop) 0.44 (less than 0.1% of world energy)
Wind 0.15 (less than 1% of world energy)
Hydro 0.10 (europe death rate, 2.2% of world energy)
Hydro - world including Banqiao) 1.4 (about 2500 TWh/yr and 171,000 Banqiao dead)
Nuclear 0.04 (5.9% of world energy)

Tuesday, March 15, 2011

Things go up and things go down

Investing is allocating risk. Investors look for a situation in which the risk outweighs the reward. That is the only sensible basis for making decisions.

No one can predict things like this or things like this and there's no point trying. Investor simply need to allocate their capital in a way that minimises the potential exposure to those types of events.

Apologies for the long break. I'll be back, I promise.

Monday, July 26, 2010

Choco-Tastic- Cornering the Market sort of works - sort of

Anthony Ward is buying Chocolate, a lot of it and well might he do so. Last time he did it he cleaned up 10s of millions of dollars. There will be a few shrill chocophiles distraught at the notion that their Yorkie bars will get more expensive but there's nothing to get too concerned about. Cornering a market is very difficult, not to mention illegal. John Ward is simply making an informed bet on the movement of a market and his purchases will do nothing to slow down Nestle, Frito-Lay and anyone else who presumably has long term off-takes for mega-tonnes of Cocoa from all over the globe.
The great fallacy with cornering a market is that you are hoovering up all the supply and can therefore cause a price rise and benefit from the abnormal price action. If your buying causes a shortfall, then so too will your selling cause an oversupply. There will be volatility along the way, but unless the supply-demand equilibrium as somehow fundamentally shifted (all chocophiles switch to rhubarb) then buying up of a large number of futures simply causes a short time blip in volatility and a long term nothing.
Every time someone has genuinely tried to corner the market they've done their dough.
Copper - Sumitomo
Silver - Hunt Brothers
You know it makes sense.

Monday, May 3, 2010

House Prices in Australia

Nearly every day in the Australian print media (Murdoch or Fairfax, the only 2 flavours) there will be an article claiming either 'House prices to go up 10% per annum forever' or 'house price crash imminent.' Presumably both of these statements are designed to attract the highest number of user comments as passionate home owners, property flippers and career renters weigh into the debate. Neither of these blitheringly stupid statements are correct. There are definitely parts of Australia where property prices could crash massively. Look at some of the resource towns, where prices are underpinned by one large mine/project. A shut of the mine will remove 90% of the reasons for living there (Ravensthorpe is a good example). New apartments in regional areas, massive MacMansions 50kms from Sydney, Melbourne, Brisbane selling for $1,000,000 are all vulnerable. Sensible investing in property is not as prone to correction. Good quality housing, close to public transports and major sources of stable employment or social utility (Hospitals, Universities etc) will not drop 40% because there will also be a demand for housing in these areas (both rental and purchase). If I own a house near a University that is currently renting for $600 a week (which I believe is worth about $600k based on the rental yield), I'm going to take some serious convincing that I should sell it for 40% less.
The value of any asset is not the possibility to sell it to someone else (capital gain) it is it's ability to produce income. Anything other than income based assessment of investment opportunities is speculating, which is very different to investing. At its worst speculating is like playing roulette or betting on horses, at its best it is like counting cards. Good for a while, if you're smart.