January - March 2013 articles archive home
Focusing Illusion
The mismatch in the allocation of attention between thinking about a life condition and actually living it is the cause of the focusing illusion.
Thursday, March 28, 2013 ... more
Post Cyprus
One ‘unmeasurable’ increasingly occupying us here at Edelweiss is that upon which all economic activity is based: trust. Trust between individuals, between strangers, between organizations ... trust in what people read, and even their trust in themselves.
Wednesday, March 27, 2013 ... more
A Bizspeak Blacklist
It's mission-critical to be plain-spoken, whether you're trying to be best-of-breed at outside-the-box thinking or simply incentivizing colleagues to achieve a paradigm shift in core-performance value-adds.
Tuesday, March 26, 2013 ... more
There are few things that are so unpardonably neglected in our country as poker. The upper class knows very little about it. Now and then you find ambassadors who have sort of a general knowledge of the game, but the ignorance of the people is fearful.
Monday, March 25, 2013 ... more
The Financial Times celebrates its 125th anniversary this month. To commemorate the occasion it took a look back at what else was invented in 1888. Turns out, it was a pretty good year, full of splendid achievements and dazzling innovations. Not least amongst them, the humble drinking straw.
Friday, March 22, 2013 ... more
Conference calls
The evidence clearly shows that conference calls impart useful information to investors. The important question for managers is how to enhance their effectiveness.
Wednesday, March 20, 2013 ... more
How Jesse did it
Jesse Livermore’s fortune would have amounted to about $1.5bn in today’s money - a remarkable feat for a self-made stock and commodities trader whose speculations basically relied on a few tactics.
Tuesday, March 19, 2013 ... more
Better not …
… take a dog on the space shuttle, because if he sticks his head out when you're coming home his face might burn up.
Monday, March 18, 2013 ... more
Perhaps there is no feasible excuse for what we are, for what we have made of ourselves ... we think up our own destinies, and so in a sense deserve whatever happens to us, for not having had the wit to imagine something better.
Friday, March 15, 2013 ... more
Emotional Dow
The Dow Jones closed at a record high last week, leaving investors both richer and further perplexed by a market that continues to exhibit textbook signs of bipolar personality disorder, wrote Dan Zevin in the New York Times last weekend.
Thursday, March 14, 2013 ... more
A lesson in derivatives
In the late 1990s, an ad agency creative director bought several hundred shares of Apple at $60 apiece. Last fall, at age 42, he found himself out of work and increasingly dependent on the value of those shares to make ends meet.
Wednesday, March 13, 2013 ... more
Selling winners
In his book, Thinking Fast and Slow, Daniel Kahneman reminds us that there is often a price to pay for feeling good in the stock market.
Tuesday, March 12, 2013 ... more
Looking good isn’t enough.
Even as markets hit all-time highs it isn’t hard to find undervalued companies - trading below the average p/e for their sector. Question is, why? The simple answer will come from adherents of the efficient market theory, who will say there must be a good reason for it, and to leave it at that. But, there may be another reason, one that better-suits value investors, which is that value is being overlooked – and price should eventually benefit from a re-rating.
Monday, March 11, 2013 ... more
Email’s “wants” …
… are among the most important factors shaping our lives. Seen from a certain angle, many working days can look and feel like little more than tending the insatiable needs of an inbox.
Friday, March 8, 2013 ... more
There are a lot of smart people in the financial industry. Some have long list of titles added to their names. If you ask them about a certain Finance theory, they will happily discuss them to you. In fact, some give actual example on how to apply those theories.
Thursday, March 7, 2013 ... more
Who cares, after all, if your windbag uncle believes he has beaten the market for 10 years running by a wide margin, despite the ridiculousness of such a claim? If he wants to kid himself and anyone who’ll listen, what’s the problem?
Wednesday, March 6, 2013 ... more
Unshakable faith
A thought for my fellow CEOs: Of course, the immediate future is uncertain; America has faced the unknown since 1776. It’s just that sometimes people focus on the myriad of uncertainties that always exist while at other times they ignore them.
Tuesday, March 5, 2013 ... more
A defence strategy
Absa and other research houses have been talking to a correction in the South African market for some time now. “It hasn’t happened yet,” says Ryan Sydow, Head of Retail Distribution at Absa’s corporate and investment banking division, “but the fundamentals behind the South African market don’t really stack up for continued long term growth."
Monday, March 4, 2013 ... more
Never enough
Don’t have enough? Here’s a solution, live the faux life. Pretend you’ve got a big bank balance – so what if you haven’t? Use your expense account for private entertainment, date bankers, and sneak into snazzy parties without an invitation. Haven’t got the wardrobe for it? No matter.
Friday, March 1, 2013 ... more
There’s one legitimate and recurring criticism of capitalism – that it lets us get carried away with a good idea, at which point it becomes very difficult to spot what is the right amount and what is too much because we are all reaping the benefits of it.
Thursday, February 28, 2013 ... more
March of the algorithms
“The march of the algorithms is potentially one of the most profound and dramatic changes to have overtaken the fund management business,” says Jonathan Davis in The Financial Times.
Wednesday, February 27, 2013 ... more
The three things we focus on …
… we think of them as the three legs of a stool and three legs are sturdier than four, they present a steady surface on all kinds of uneven ground.
Tuesday, February 26, 2013 ... more
The future’s so bright, shareholders need sunglasses
If the future was more predictable, historical performance wouldn’t matter. But, since it isn’t, we have to rely on the past to give credence to what CEOs have to say about the outlook for their companies. On that score, two listed entities whose shareholders will be keen to believe that the future will be at least as bright as the recent past, are ARB Holdings and Blue Label Telecoms.
Monday, February 25, 2013 ... more
There can be no compromise between a property owner and a burglar; offering the burglar a single teaspoon of one's silverware would not be a compromise, but a total surrender - the recognition of his right to one's property.
Friday, February 22, 2013 ... more
Shareholders don’t get it
Chris Malloy and his colleagues mapped 30 years of U.S. corporations’ R&D expenditures against their sales revenues, ability to generate patents, patent citations, and new product launches. They found a simple pattern: Companies that had large R&D budgets as well as a history of converting innovation into growth were likely to continue that strong performance.
Thursday, February 21, 2013 ... more
It is the firm’s culture…
… and senior executives’ complete commitment to that culture, which makes these mechanisms successful. 360-Degree review systems, 24-hour response voice mail, and rotation of bankers through different departments only work when senior managers refuse to make exceptions to the rules.
Wednesday, February 20, 2013 ... more
Country Profile
The Credit Suisse Global Investment Returns Yearbook 2013 covers 22 countries, including the US and 15 European countries, with an index series that start in 1900. The country profile for South Africa reads as follows ...
Tuesday, February 19, 2013 ... more
Lessons from the Yearbook
Credit Suisse have released their Global Investment Returns Yearbook 2013 in which Elroy Dimson, Paul Marsh and Mike Staunton from the London Business School examine data spanning 113 years across 25 countries to help guide investors as to what they might expect from markets in the coming years.
Monday, February 18, 2013 ... more
And make no mistake about it …
… you are dumb. You’re a group of incredibly well-educated dumb people. We all were there. You’re barely functional. There are some screw-ups headed your way. I wish I could tell you that there was a trick to avoiding the screw-ups, but the screw-ups, they’re a-coming for ya ...
Friday, February 15, 2013 ... more
"Basically you have about ten million homes that need to convert from analogue to digital,” says Ellies CEO Wayne Samson when asked about the potential contribution of the digital terrestrial roll-out to the business.
Thursday, February 14, 2013 ... more
Knowing isn't enough
As long as no one cares there is no trend. Would you be short Nasdaq in 1999? You can’t be short just because you think fundamentally something is overpriced … all you can do is wait until people start to care.
Wednesday, February 13, 2013 ... more
Since nothing’s certain
“The test of a first rate intelligence is the ability to hold two opposed ideas in the mind at the same time and still retain the ability to function.” - Robert Fitzgerald
Tuesday, February 12, 2013 ... more
Hudaco: A Buffett perpective.
“Hudaco had a year of two parts in 2012,” says Stephen Connelly the Chief Executive, “the first part of the year was quite strong, but the second part was affected by the strikes in the mining industry, in particular the platinum mines which are a big customer, so all in all we’re quite pleased with a 5% growth in earnings per share.”
Monday, February 11, 2013 ... more
What you think you know
Despite living in a time of dazzling science and technology, much of what is “common knowledge” is still wrong. This includes such well known facts as sugar makes kids go bonkers.
Friday, February 8, 2013 ... more
An excess of optimism …
… is the normal human condition,” says Charlie Munger. “And it is not at all difficult to understand how this tendency drives not just stock markets but the entire world of finance and economics. Why otherwise would we have booms and bubbles with such amazing regularity?
Thursday, February 7, 2013 ... more
Quick, wrong answer
Unfortunately, professional’s intuitions do not all arise from true expertise. Daniel Kahneman attests to this in his book, Thinking Fast and Slow, where he tells of a meeting with the chief investment officer or a large financial firm who tells him that he has just invested tens of millions in the stock of Ford Motor Company.
Wednesday, February 6, 2013 ... more
Observations …
… from Peter Lynch: You can find good reasons to scuttle your equities every morning paper and on every broadcast of the nightly news. The key to making money in stocks is not to get scared out of them.
Tuesday, February 5, 2013 ... more
An innate need for value?
This time last year Foneworx was one of the most overlooked counters on the JSE, trading on a P:E of 6.3 at 90c a share, with roughly 63c in cash. Since then the share price has more than doubled and despite decent figures for the year to June the company now trades on a P:E of about 12 at around R2 a share.
Monday, February 4, 2013 ... more
Value of a good degree
Consider the situation of a hiring decision maker at a large firm. She reads through a lot of resumés and interviews candidates. She develops hunches about who is and isn’t good. Our decision maker has real ability: the people she thinks are good are, on average, substantially better than the people she thinks are not so good. But there is huge uncertainty surrounding hiring outcomes.
Friday, February 1, 2013 ... more
Wrong beliefs
Market models and theories of investment are often based on mathematical convenience rather than empirical evidence. A whole edifice of investment theory has been built on the assumption that market prices are normally distributed. The normal distribution is very handy for analysts because it allows for precise probability-based assumptions.
Thursday, January 31, 2013 ... more
What regulates risk.
Often, the most important variable in having a successful investment and managing risk is the price paid for a security.
Wednesday, January 30, 2013 ... more
When to sell
“Only sell to buy a security that is a third cheaper than the stock you currently own.” - Benjamin Graham
Tuesday, January 29, 2013 ... more
Nedbank's top picks for 2013
Missing the 10 stock picks that Nedbank Private Wealth Stockbroking recommend to their clients at the end of every year is a pity. Because, had you invested in the companies included in the 2011 Xmas Stocking, for example, you would have been rewarded with a return in excess of 34% last year.
Monday, January 28, 2013 ... more
We don't need to be 100% sure ...
... that the worst fears of climate scientists are correct in order to act. All we need to think about are the consequences of being wrong.
Friday, January 25, 2013 ... more
The institutional imperative
I was given no hint of the imperative's existence and I did not intuitively understand it when I entered the business world. I thought then that decent, intelligent, and experienced managers would automatically make rational business decisions.
Thursday, January 24, 2013 ... more
Circle of Competence
The selection process differs between investor because it reflects the circle of interest, which becomes a circle of increasing competence with the accumulation of experience, by the individual investor.
Wednesday, January 23, 2013 ... more
Why PE’s don’t tell you anything
Once upon a time, there were 50 companies that stood apart from the rest. Investors who wanted to sleep easily bought their shares; nicknamed the Nifty Fifty, the companies were so strong and powerful that their shares commanded 30 or even 40 times earnings.
Tuesday, January 22, 2013 ... more
A third option
For the first time, our technologies are not so much aimed outward at modifying our environment in the fashion of fire, clothes, agriculture, cities and space travel. Instead, they are increasingly aimed inward at modifying our minds, memories, metabolisms, personalities and progeny.
Friday, January 18, 2013 ... more
The difference; A quick reminder
People who are not investors often think investors are the high-strung, fast-paced people in the New York Stock Exchange pits, or those that stare at stock charts all day long to catch a quick profit.
Wednesday, January 16, 2013 ... more
5 stock market myths
Investing in shares is like gambling. Only ‘insiders’ make money. What comes down goes back up - eventually. What goes up must come down. A little knowledge is better than none.
Monday, January 14, 2013 ... more
Third option
For the first time, our technologies are not so much aimed outward at modifying our environment in the fashion of fire, clothes, agriculture, cities and space travel. Instead, they are increasingly aimed inward at modifying our minds, memories, metabolisms, personalities and progeny.
Friday, January 11, 2013 ... more
If you bought Bowie albums …
… in the ‘70s, instead of squirreling away your money for a ‘rainy day’, you probably did the right thing. Young people who spending money on stuff they really enjoy are probably behaving more rationally than the so-called experts claim.
Thursday, January 10, 2013 ... more
It‘s hard to imagine being truly confident in your decisions without a structured method of trading – one that’s been tried-and-tested.
Wednesday, January 9, 2013 ... more
Investing 101
The results-oriented investor seldom talks with others about his investment results. He is too busy trying to improve on his results. He’s never too proud to buy a stock that is making new highs, realizing that those who are buying the stock most likely know far more than he does - and a winning company is more likely to keep on winning than a losing company is.
Tuesday, January 8, 2013 ... more
Is a way to keep track of the financial outcomes of a firm’s true activity, which is conducting business. It is passive, it is backward looking, and properly used under normal circumstances it drives none of the important business decisions or activities which firm executives pursue.
Monday, January 7, 2013 ... more
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